S.S.

JAIN SUBODH LAW COLLEGE

UNDUE INFLUENCE UNDER CONTRACT LAW

2017-2018

CONTRACT-I

SUBMITTED BY : SUBMITTED TO :

NAME : GAURAV KUMAR SHARMA Prof. MS. ANUSHA TOMAR

CLASS : B.A. L.L.B. IInd yr. IIIrd semester

SECTION : B

ROLL NO : 9
 UNDUE

INFLUENCE

UNDER

CONTRACT

LAW

DECLARATION
I, Gaurav kumar Sharma, do hereby declare that, this dissertation titled " UNDUE INFLUENCE UNDER
CONTRACT LAW" is an outcome of the research conducted by me under the guidance of Prof.
MS. ANUSHA TOMAR (Asst. Prof. of law) at S.S. Jain Subodh Law College in fulfillment for the award of
the degree of B.A.L.L.B. at the University of Rajasthan .

I also declare that, this work is original , except where assistance from other sources has been taken and
necessary acknowledgements for the same have been made at appropriate places. I further declare that, this
work has not been submitted either in whole or in part , for any degree or equivalent in any other institution.

Date: 13-01-2018

Place: Jaipur

Name of Student: Gaurav kumar Sharma

(i)

ACKNOWLEDGEMENT
I acknowledge with profundity, my obligation to almighty god and my parents for giving me the grace to
accomplish my work, without which this project would not have been possible.

I express my heartfelt gratitude to my respected faculty, Prof. MS. ANUSHA TOMAR (asst. prof. of law)
for providing me with valuable suggestions to complete this dissertation.

I am especially grateful to all my faculty members at SS Jain Subodh Law College who have helped me
imbibe the basic research and writing skills.

Lastly, I take upon myself, the drawbacks and limitations of this study, if any.

Date: 13-01-2018

Place: Jaipur

Name of Student: Gaurav kumar Sharma

(ii)

CERTIFICATE
Certified that the project work on the topic “UNDUE INFLUENCE UNDER CONTRACT LAW”
submitted by GAURAV KUMAR SHARMA for the partial fulfillment of the degree B.A. L.L.B IIInd
semester offered by the S.S. Jain Subodh Law College during the academic year 2016-2017 is an original
work carried out by the student under my supervision and this work has not formed the basis for the award
of any degree, diploma, or such other titles.

Prof. MS. ANUSHA TOMAR

Asst. prof. of law

S.S. Jain Subodh Law College

(iii)

TABLE OF CONTENTS
SR. NO. TOPIC

1. Introduction

2. Acceptance

3. Legal consideration

4. Free consent

5. Undue Influence

6. Introduction to coercion and fraud

(iv)

INTRODUCTION
The Indian Contract Act, 1872 prescribes the law relating to contracts in India. The Act was passed by British
India and is based on the principles of English Common Law. It is applicable to all the states of India except the
state of Jammu and Kashmir. It determines the circumstances in which promises made by the parties to a
contract shall be legally binding and the enforcement of these rights and duties.

The Act as enacted originally had 266 Sections, it had wide scope and included.

 General Principles of Law of Contract- Sections 01 to 75

 Contract relating to Sale of Goods- Sections 76 to 123
 Special Contracts- Indemnity, Guarantee, Bailment & Pledge- Sections 124 to 238
 Contracts relating to Partnership- Sections 239 to 266
Indian Contract Act embodied the simple and elementary rules relating to Sale of goods and Partnership. The
developments of modern business world found the provisions contained in the Indian Contract Act inadequate to
deal with the new regulations or give effect to the new principles. Subsequently, the provisions relating to the
Sale of Goods and Partnership contained in the Indian Contract Act were repealed respectively in the year 1930
and 1932 and new enactments namely Sale of Goods and Movables Act 1930 and Indian Partnership act
1932 were re-enacted.
At present the Indian Contract Act may be divided into two parts

 Part 1:deals with the General Principles of Law of Contract Sections 1 to 75

 Part 2:deals with Special kinds of Contracts such as

(1)Contract of Indemnity and Guarantee

(2)Contract of Bailment and Pledge
(3)Contract of Agency

1. Offer 2(a):- When one person signifies to another his willingness to do or to abstain from doing anything,
with a view to obtaining the assent of that other to such act or abstinence, he is said to make a proposal.
2. Acceptance 2(b):- When the person to whom the proposal is made, signifies his assent there to, the
proposal is said to be accepted.
3. Promise 2(b) :- A Proposal when accepted becomes a promise. In simple words, when an offer is
accepted it becomes promise.
4. Promisor and promisee 2(c) :- When the proposal is accepted, the person making the proposal is called
as promisor and the person accepting the proposal is called as promisee.
5. Consideration 2(d):- When at the desire of the promisor, the promisee or any other person has done or
abstained from doing or does or abstains from doing or promises to do or to abstain from doing something
such act or abstinence or promise is called a consideration for the promise. Price paid by one party for the
promise of the other Technical word meaning QUID-PRO-QUO i.e. something in return.
6. Agreement 2(e) :- Every promise and set of promises forming the consideration for each other. In
short,
7. Contract 2(h) :- An agreement enforceable by Law is a contract.
Therefore, there must be an agreement and it should be enforceable by law.
8. Reciprocal Promises 2(f):- Promises which form the consideration or part of the consideration for each
other are called 'reciprocal promises'.
9. Void agreement 2(g):- An agreement not enforceable by law is void.
10. Voidable contract 2(i):- An agreement is a voidable contract if it is enforceable by Law at the option of
one or more of the parties there to (i.e. the aggrieved party), and it is not enforceable by Law at the option of
the other or others.
11. Void contract 2(j) :- A contract which ceases to be enforceable by Law becomes void when it ceases to
be enforceable.

ACCEPTANCE
According to Section 2(b), "When the person to whom the proposal is made, signifies his assent thereto, the
proposal is said to be accepted. A proposal, when accepted, becomes a promise."
Rules:

1. Acceptance should be absolute and unqualified. If the parties are not in ad idem on all matters
concerning the offer and acceptance, there is no valid contract. For example, "A" says to "B" "I offer to
sell my car for Rs.50,000/-. "B" replies "I will purchase it for Rs.45,000/-". This is not acceptance and
hence it amounts to a counter offer.
2. It should be Communicated to the offeror. To conclude a contract between parties, the acceptance must
be communicated in some prescribed form. A mere mental determination on the part of offeree to
accept an offer does not amount to valid acceptance.
3. Acceptance must be in the mode prescribed. If the acceptance is not according to the mode prescribed
or some usual and reasonable mode(where no mode is prescribed) the offeror may intimate to the
offeree within a reasonable time that acceptance is not according to the mode prescribed and may insist
that the offer be accepted in the prescribed mode only. If he does not inform the offeree, he is deemed
to have accepted the offer. For example, "A" makes an offer to "B" says to "B" that "if you accept the
offer, reply by voice. "B" sends reply by post. It will be a valid acceptance, unless "A" informs "B" that the
acceptance is not according to the prescribed mode.
4. Acceptance must be given within a reasonable time before the offer lapses. If any time limit is specified,
the acceptance must be given within the time, if no time limit is specified it must be given within a
reasonable time.
5. It cannot precede an offer. If the acceptance precedes an offer it is not a valid acceptance and does not
result in contract. For example, in a company shares were allotted to a person who had not applied for
them. Subsequently, when he applied for shares, he was un aware of the previous allotment . The
allotment of share previous to the application is not valid.
6. Acceptance by the way of conduct.
7. Mere silence is no acceptance.
Silence does not per-se amounts to communication- Bank of India Ltd. Vs. Rustom Cowasjee- AIR 1955
Bom. 419 at P. 430; 57 Bom. L.R. 850- Mere silence cannot amount to any assent. It does not even amount to
any representation on which any plea of estoppel may be found, unless there is a duty to make some statement
or to do some act free and offer er must be consent

1. Acceptance must be unambiguous and definite.

2. Acceptance cannot be given before communication of an offer.

LEGAL CONSIDERATION
According to Section 2(d), Consideration is defined as: "When at the desire of the promisor, the promisee or any
other person has done or abstained from doing, or does or abstains from doing, or promises to do or abstain
from doing something, such act or abstinence or promise is called consideration for the promise". Consideration
means 'something in return'.
In short, Consideration means quid pro quo i.e. something in return.
An agreement must be supported by a lawful consideration on both sides. Essentials of valid considerations are

 It must move at the desire of the promisor. An act constituting consideration must have been done at the
desire or request of the promiser. If it is done at the instance of a third party or without the desire of the
promisor, it will not be good consideration. For example, "A" saves "B"'s goods from fire without being ask
him to do so. "A" cannot demand payment for his service.
 Consideration may move from the promisee or any other person. Under Indian law, consideration may
be from the promisee of any other person i.e., even a stranger. This means that as long as there is
consideration for the promisee, it is immaterial, who has furnished it.
 Consideration must be an act, abstinence or forebearance or a returned promise.
 Consideration may be past, present or future. Past consideration is not consideration according to
English law. However it is a consideration as per Indian law. Example of past consideration is, "A" renders
some service to "B" at latter's desire. After a month "B" promises to compensate "A" for service rendered to
him earlier. When consideration is given simultaneously with promise, it is said to be present consideration ..
For example, "A" receives Rs.50/- in return for which he promises to deliver certain goods to "B". The money
"A" receives is the present consideration. When consideration to one party to other is to pass subsequently
to the maker of the contract, is said to be future consideration. For example. "A" promises to deliver certain
goods to "B" after a week. "B" promises to pay the price after a fortnight, such consideration is future.
 Consideration must be real. Consideration must be real, competent and having some value in the eyes
of law. For example, "A" promises to put life to "B"'s dead wife, if "B" pay him Rs.1000/-. "A"'s promise is
physically impossible of performance hence there is no real consideration.
 Consideration must be something which the promiser is not already bound to do. A promise to do
something what one is already bound to do, either by law, is not a good consideration., since it adds nothing
to the previous existing legal consideration.
 Consideration need not be adequate. Consideration need not be necessarily be equal to value to
something given. So long as consideration exists, the courts are not concerned as to adequacy, provided it
is for some value.
The consideration or object of an agreement is lawful, unless and until it is:

1. forbidden by law: If the object or the consideration of an agreement is for doing an act forbidden by law,
such agreement are void. for example,"A" promises "B" to obtain an employment in public service and
"B" promises to pay Rs one lakh to "A". The agreement is void as the procuring government job through
unlawful means is prohibited.
2. If it involves injury to a person or property of another: For example, "A" borrowed rs.100/- from"B" and
executed a bond to work for "B" without pay for a period of 2 years. In case of default, "A" owes to pay
the principal sum at once and huge amount of interest. This contract was held void as it involved injury
to the person.
3. If courts regards it as immoral:An agreement in which consideration ir object of which is immoral is void.
For example, An agreement between husband and wife for future separation is void.
4. Is of such nature that, if permitted, it would defeat the provisions of any law:
5. is fraudulent, or involves or implies injury to the person or property of another, or
6. Is opposed to public policy. An agreement which tends to be injurious to the public or against the public
good is void. For example, agreements of trading with foreign enemy, agreement to commit crime,
agreements which interfere with the administration of justice, agreements which interfere with the course
of justice, stifling prosecution, maintenance and champerty.
7. Agreements in restrained of legal proceedings: This deals with two category. One is, agreements
restraining enforcement of rights and the other deals with agreements curtailing period of limitation.
8. Trafficking in public offices and titles: agreements for sale or transfer of public offices and title or for
procurement of a public recognition like Padma Vibhushan or Padma Shri etc. for monetary
consideration is unlawful, being opposed to public policy.
9. Agreements restricting personal liberty: agreements which unduly restricts the personal liberty of parties
to it are void as being opposed by public policy.
10. Marriage brokerage contact:Agreements to procure marriages for rewards are void under the ground that
marriage ought to proceed with free and voluntary decisions of parties.
 11. Agreements interfering marital duties: Any agreement which interfere with performance of marital duty is
void being opposed to public policy. An agreement between husband and wife that the wife will never
leave her parental house.
12. consideration may take in any form-money,goods, services, a promise to marry, a promise to forbear etc.
Contract Opposed to Public Policy can be Repudiated by the Court of law even if that contract is beneficial for all
of the parties to the contract- What considerations and objects are lawful and what not-Newar Marble Industries
Pvt. Ltd. Vs. Rajasthan State Electricity Board, Jaipur, 1993 Cr. L.J. 1191 at 1197, 1198 [Raj.]- Agreement of
which object or consideration was opposed to public policy, unlawful and void- – What better and what more can
be an admission of the fact that the consideration or object of the compounding agreement was abstention by
the board from criminally prosecuting the petitioner-company from offense under Section 39 of the act and that
the Board has converted the crime into a source of profit or benefit to itself. This consideration or object is clearly
opposed to public policy and hence the compounding agreement is unlawful and void under Section 23 of the
Act. It is unenforceable as against the Petitioner-Company.

FREE CONSENT
One of the essentials of a valid contract mentioned in Section 10 is that the parties should enter into
contract with free consent. According to Section 14, Consent is said to be free when it is not caused by –

1. coercion, as defined in Section 15, or

2. undue influence, as defined in section16, or
3. fraud, as defined in Section 17, or
4. misrepresentation as defined in Section 18, or
5. mistake, subject to the provisions of Section 20, 21 and 22.

Consent is said to be caused when it would not have been given but for the existence of such coercion,
undue influence, fraud, misrepresentation or mistake.

If the consent of one of the parties is not free consent, i.e., it has been caused by one or other of the above
stated factors the contract is not a valid one. When consent to an agreement is caused by fraud, coercion,
misrepresentation or undue influence, the agreement is a contract voidable at the option of the party whose
consent was so caused. If, however, the consent is caused by mistake the agreement is void.

COERCION

According to Section 15, “Coercion” is the committing, or threatening to commit, any act forbidden by the
Indian Penal Code, or the unlawful detaining, or threatening to detain, any property, to the prejudice of any
person whatever with the intention of causing any person to enter into an agreement.

Coercion is said to be there when the consent of a person has been caused either by

(i)committing, or threatening to commit any act forbidden by the Indian Penal Code, or by
(ii)unlawful detaining, or threatening to detain any property, to the prejudice of any person whatever.

Act forbidden by the Indian Penal Code

It has been noted that if a person commits or threatens to commit an act forbidden by the Indian Penal Code
with a view to obtain the consent of the other person to some agreement, the consent in such case is deemed
to have been obtained by coercion. For instance, A threatens to shoot B if B does not agree to sell his
property to A at a stated price, B’s consent in this case has been obtained by coercion.

For coercion to be there it is not necessary that the Indian Penal Code should be applicable at the place
where the consent has been so caused. Explanation to section 15 makes it clear that to constitute coercion,
“it is immaterial whether the Indian Penal Code is or is not in force in the place where the coercion is
employed.” The following illustration would explain the point :

A, on board an English ship on the high seas, causes B to enter into an agreement by act amounting to
criminal intimidation under the Indian Penal Code. A afterwards sues B for breach of Contract at Calcutta.
A has employed coercion, although his act is not an offence by the law of England, and although section
506 of the Indian Penal Code was not in force at the time when, or at the place where, the act was done.

In Ranganayakamma Vs. Alwar Setti (1889) the question before the Madras High Court was regarding
the validity of the adoption of a boy by a widow, aged 13 years. On the death of her husband, the husband’s
dead body was not allowed to be removed from her house by the relatives of the adopted boy until she
adopted the boy. It was held that the adoption was not binding on the widow.

In Chikkam Ammiraju Vs. Chikkam Seshama (1918) the question before the Madras High Court was
that whether coercion could be caused by a threat to commit suicide. In this case a Hindu by a threat of
suicide induced his wife and son to execute a release deed in favour of his brother in respect of certain
properties claimed as their own by the wife and the son. The question before the court was whether a threat
to commit suicide could be considered to be an act forbidden by the Indian Penal Code. It was held by
Wallis, C.J. and Seshagiri Ayyar, J. that a threat to commit suicide amounted to coercion within the
meaning of Section 15 of the Indian Contract Act and therefore the release deed was voidable.

Unlawful detaining of property

According to Section 15 coercion could also be caused by unlawful detaining, or threatening to detain, any
property, to the prejudice of any person whatever, with the intention of causing any per to enter into an
agreement. For example, if an outgoing agent refuses to handover the accounts books to the new agent until
the principal executes release in his favour, it is coercion. ( Muthiah Chettiar Vs. Karupan (1927) If
the detention of property is not unlawful there is no coercion. Thus, if a mortgagee refuses to convey the
equity of redemption except on the terms dictated by him, there is nothing unlawful in it and, therefore, no
coercion is caused in this case. (Bengal Stone Co. Ltd. Vs. Joseph Hyam (1918)

To the prejudice of a person

Section 15 requires that there is committing or threatening to commit, any act forbidden by the Indian Penal
Code, or the unlawful detaining, or threatening to detain, any property, to the prejudice of any person
whatever, with an intention of any person to enter into an agreement.

It means that the act causing coercion should not necessarily be directed against the contracting party, it is
enough that the act is to the prejudice of any person whatever, and with the intention of any person to enter
into an agreement. If, for example, A unlawfully detains B’s friend C, in order to coerce B to enter into
agreement, the case would be covered within this section.

Threat to strike is no coercion

In Workmen of Appin Tea Estate Vs. Industrial Tribunal (1966) the demand of the workers for bonus
was accepted after a threat of strike. The question which had arisen was, whether such a decision between
the Union of the workers and the Indian Tea Association could be declared void on the ground that there
was coercion. It was held that because of the doctrine of collective bargaining under the Industrial Dispute
Act the demand of the workers could be backed by a threat of strike. Such a threat was neither a threat to
commit an offence under the Indian Penal Code, nor was it unlawful detaining or threatening to detain any
property and hence it did not amount to coercion, and as such the agreement was valid.

Statutory Compulsion is no coercion

When a Statue requires a contract to be entered into the consent in such a case is not deemed to be caused by
coercion, undue influence, fraud, misrepresentation or mistake. In Andhra Sugars Ltd. Vs. State of A.P.
(1968) if any cane grower offered to sell his sugarcane to a factory in a certain zone, the factory was bound
to accept the offer under the Andhra Pradesh Sugarcane (Regulation of Supply and Purchase) Act, 1961,
and accordingly the agreement was entered into. It was held that in such a case even though there was a
legal compulsion for the factory to make the agreement, the agreement could not be said to be entered into
by lack of free consent, and there was no coercion either.

“Duress” under English law

Under common law duress consists in actual violence or threat of violence to a person. It only includes
fear of loss to life or bodily harm including imprisonment, but not a threat of damage to goods. The threat
must be to do something illegal, i.e., to commit a tort or a crime. The duress must be directed against a party
to the contract, or his wife, child, parent or other near relative, and also caused by the party to the contract,
or within his knowledge. It has been noted above that the common law recognises only a threat to a man’s
person, and not to his goods to constitute duress. It may be noted that Indian law also recognises an action
for the recovery of money paid or goods delivered under coercion, through the provision contained in
section 72,Indian Contract Act. The provision is as under :

“ A person to whom money has been paid. Or anything delivered, by mistake or undue coercion, must repay
or return it “

For example, a railway company refuses to deliver up certain goods to the consignee, except upon the
payment of an illegal charge for carriage. The consignee pays the sum charged in order to obtain the goods.
He is entitled to recover so much of the charge as was illegally excessive.

Difference between Coercion and Duress

1.Coercion in India means committing or threatening to commit an act forbidden by the Indian Penal Code,
or unlawful detaining or threatening to detain the property. Thus it may be an act or threat directed against a
person or his property. In England duress is constituted only by acts or threats against the person of a man
and not against his property.

2.In India coercion may proceed from a person who is not a party to the contract, and it may also be
directed against a person who, again, may be a stranger to the contract. In England duress should proceed
from a party to the contract and is also directed against the party to the contract himself, or his wife, parent,
child, or other near relative.

UNDUE INFLUENCE
If the consent of a party to the contract has been obtained by undue influence the consent is not free consent
which is needed for the validity of a contract and if the consent has been caused by undue influence, the
contract is voidable at the option of the party whose consent had been so obtained. Section 16 defines undue
influence as under :

“16. “Undue influence” defined.—(1) A contract is said to be induced by “undue influence” where the
relations subsisting between the parties are such that one of the parties is In a position to obtain an unfair
advantage over the other.

(2) In particular and without prejudice to the generality of the foregoing principle, a person is deemed to be
in a position to dominate the will of another—

(a) where he holds a real or apparent authority over the other ; or where he stands in a fiduciary relation to
the other ; or

(b) where he makes a contract with a person whose mental capacity is temporarily or permanently affected
by reason of age, illness, or mental or bodily distress.

(3) Where a person who is in a position to dominate the will of another, enters into contract with him, and
the transaction appears, on the face of it or on the evidence adduced, to be unconscionable, the burden of
proving that such contract was not induced by undue influence shall lie upon the person in a position to
dominate the will of the other.

Nothing in this sub-section shall affect the provisions of Section 111 of the Indian Evidence Act, 1872.”

Explaining the nature of the provisions contained in section 16, Indian Contract Act and the adoption of
English law in India, our Supreme Court has observed in the case of Ladli Parshad Vs. Karnal
Distillery Co., (1963)

“The doctrine of undue influence under the common law was evolved by the courts in England for granting
protection against transactions procured by exercise of insidious forms of influence spiritual and temporal.
The doctrine applies to acts of bounty as well as to other transactions in which one party by exercising his
position of dominance obtains an unfair advantage over another. The Indian enactment is founded
substantially on the rules of English Common law. The first Sub-section of Section 16 lays down the
principle in general terms. By sub-section (2) a presumption arises that a person shall be deemed to be in a
position to dominate the will of another if the conditions set out therein are fulfilled. Sub-section (3) lays
down the conditions for raising a rebut table presumption that a transaction is procured by the exercise of
undue influence. The reason for the rule in the third sub-section is that a person who has obtained an
advantage over another by dominating his will, may also remain in a position to suppress the requisite
evidence in support of the plea of undue influence.”

Effect of undue influence

Section 19-A declares that when consent to an agreement is caused by undue influence, the agreement is a
contract voidable at the option of the party whose consent was so caused. For example, A’s son has forged
B’s name to a promissory note. B, under threat of prosecuting A’s son, obtains a bond from A, for the
amount of the forged note. If B sues on this bond, the court may set the bond aside.

Because of undue influence one party to the contract may take an undue advantage under the contract, or the
party entitled to avoid the contract may have already received some benefit under the contract. The court in
cases has been empowered to set aside the contract either absolutely or upon such terms and conditions as
the Court may deem just. Second para to Section 19-A incorporates the following provision in this regard :

“Any such contract may be set aside either absolutely, or, if the party who was entitled to avoid it has
received any benefit there under, upon such terms and conditions as to the Court may seem just”

For example, a , a money-lender, advances Rs. 100 to B, an agriculturalist, and, by undue influence,
induces B to execute a bond for Rs. 200 with interest at 6 per cent per month. The court may set the bond
aside, ordering B to repay Rs.100 with interest as may seem just.

Essentials of undue influence

In order to constitute undue influence it is necessary that :

(1) the relations subsisting between the parties are such that one of        the parties is in a position to
dominate the will of the other , and.

(2) such a person uses his dominant position to obtain an unfair        advantage over the other.

It is manifest that both the conditions have ordinarily to be established by the person seeking to avoid the
transaction : he has to prove that the other party to the transaction was in a position to dominate his will and
that the other party had obtained an unfair advantage by using that position.

Person in dominant position and obtaining of unfair advantage

Sometimes one of the parties to the contract may be in such a dominant position in relation to the other
that he has peculiar opportunity of exercising that position to the prejudice of the other party. If the
dominant party takes an undue advantage of his position in procuring a contract to the detriment of the other
contracting party, the contract is voidable at the option of the party whose will is so dominated.

In the following cases a person is deemed to be in a position to dominate the will of another –

(1) where he holds a real or apparent authority over the other, or,

(2) where he stands in a fiduciary relation to the other, or,

(3) where he makes a contract with a person whose mental capacity        is temporarily or permanently
affected by reason of age, illness, or        mental or bodily distress.

(1) Real or apparent authority

If a person has an authority over the other contracting party it is expected that he would not abuse that
authority to gain an undue advantage from the other. An employer may be deemed to be having authority
over his employee, an income-tax authority over the assessee, a police or a judicial officer over the accused,
or a licensing authority over the licence.

(2) Fiduciary relation

Fiduciary relationship means a relationship of confidence and trust. When a person reposes confidence in
the other, it is expected that he will not be betrayed. If a person betrays the confidence and trust reposed in
him and gains an unfair advantage over the other party in any contract, the suffering party has an option to
avoid the contract. The principle of undue influence applies to every case, where influence is acquired and
abused, where confidence is reposed and betrayed.

Examples of fiduciary relationship are solicitor and client, spiritual advisor and devotee, medical attendant
and patient, parent and child, husband and wife, master and servant, creditor and debtor, principal and agent,
land lord and tenant, lover and beloved, guardian and ward.

For example, A,, having advanced money to his son b, during his minority, upon B’s coming of age
obtains, by misuse of parental influence, a bond from B for a greater amount than the sum due in respect of
the advance. A employs undue influence.
In MannuSingh Vs. Umadat Pande, (1890) the plaintiff, an aged person executed a deed of gift in respect
of whole of his property in favour of the defendant, who was plaintiff’s guru or spiritual adviser.

The only reason for the gift was his desire to secure benefits to his soul in the next world and also in view of
the plaintiff having heard recitation of the holy book, Bhagwat. Soon after the execution of the said deed the
plaintiff applied for the cancellation of the same by a suit brought by him under section 39 of the specific
relief Act, 1877.

Section 111, Indian Evidence Act, 1872 was applied to this situation, according to which in case of a person
being in a position of active confidence, the burden of proof lies on such a person who enjoys such a
confidence. It was held that because of the fiduciary relationship between the parties, and the absurdity of
the reason given by the plaintiff in the gift deed for executing the gift deed, and in view of the provision
contained in section 111, Indian Evidence Act, the defendant must prove the absence of undue influence.
And since he failed to prove the same the plaintiff is entitled to obtain the cancellation of the deed.

Similarly in Diala Ram Vs Sarga (1927) where there was a debtor-creditor relationship between the
parties and the defendant signed a bond agreeing to pay exorbitant rate of interest on the loan taken from the
plaintiff, who was a money lender of his village, the presumption of undue influence was raised.

Person in mental or bodily distress

A person is deemed to be in a position to dominate the will of another also in a situation, where he makes a
contract with a person whose mental capacity is temporarily or permanently affected by reason of age,
illness, or mental or bodily distress. A person’s mental capacity may have been affected on account of his
old age, illness, or mental or bodily distress, and there is every possibility that such a person’s position may
be exploited and unfair advantage taken in such a situation. The law tries to afford protection to such
persons also. If a contract is made to the prejudice of such a person, there is deemed to be undue influence
in such a case. For example. A, a man enfeebled by disease or age, is induced, by B’s influence over him
as his medical attendant, to agree to pay B an unreasonable sum for his professional services, B employs
undue influence.

Presumption of undue influence in Unconscionable Bargains

In cases of unconscionable bargain between the parties on an unequal footing the law raises a presumption
of undue influence. Where a person who is in a position to dominate the will of another, enters into a
contract with him, and the transaction appears, on the face of it or on the evidence adduced, to be
unconscionable, the burden of proving that such contract was not induced by undue influence shall lie upon
the person in a position to dominate the will of the other.

When---

1.. One of the parties who has obtained the benefit of a transaction is in a position to dominate the will of
the other, and

2. The transaction between the parties appears to be unconscionable, the law raises a presumption of undue
influence.
It is, in such a case, for the dominant party to rebut the presumption of undue influence. If a party has got
exorbitant gain at the cost of the other party, it is for him to prove that this advantage had not been gained by
undue influence.

For example, A being in debt to B , a money lender of his village, contracts a fresh loan on terms which
appear to be unconscionable. It lies on B to prove that the contract was not induced by undue influence.

In Diala Ram Vs. Sarga, (1927) the defendant, who was already indebted to the plaintiff, a village
money lender, took a fresh loan from the plaintiff and executed a bond, wherein he agreed to pay interest up
to 371/2 %, per annum, and also to deliver some bhoosa (wheat husk) in addition thereto. It was held that
the position in this case was similar to that in illustration © to Section 16,the contract was unconscionable
and, therefore, the burden of proof was on the plaintiff to show that there was no undue influence in this
case.

In Wajid Khan Vs. Raja Ewaz Ali Khan (1891) an old, illiterate, pardanashin lady, who was herself
incapable of transacting any business, conferred a grant of her substantial property without any valuable
consideration in favour of her confidential managing agent. The Privy Council held that it was incumbent
on the grantee to show that he had made proper use of confidence reposed by the lady in him and there was
no undue influence.
FRAUD

When the consent of a party to the contract has been obtained by fraud, the consent is not free consent,
which is necessary for the formation of a valid contract. In such a case the contract is voidable at the option
of the party whose consent has been so obtained. Fraud or deceit is also9 tort, for which an action for
damages can also lie. Section 17 defines fraud as follows :

“Fraud” means and includes any of the following acts committed by a party to a contract, or with his
connivance, or by his agent, with intent to deceive another party thereto or his agent , or to induce him, to
enter into the contract---

(1) the suggestion, as a fact, of that which is not true by one who does       not believe it to be true :

(2) the active concealment of a fact by one having knowledge or belief       of the fact :

(3) a promise made without any intention of performing it :

(4) any other act fitted to deceive :

(5) any such act or omission as the law specially declares to be       fraudulent.

Explanation :-- Mere silence as to facts likely to affect the willingness of a person to enter into a contract is
not fraud, unless the circumstances of the case are such that, regard being had to them, it is the duty of the
person keeping silence to speak, or unless his silence is, in itself, equivalent to speech.
 BIBLIOGRAPHY

 www.meritnation.com
 www.iasbaba.com
 www.legalserviceindia.com

  Pandia – Principles of Mercantile Law, 8th edition, by Ramkrishna R.Vyas.

 Singh, Avtar.  Textbook on Law of Contract and Specific Relief (2016 ed.). Eastern Book Company.
p. 488.  ISBN  9789351453482.

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