Page 54 - DMGT102_MERCANTILE_LAWS_I

Mercantile Laws-I

Notes 4.3 Meaning of Undue Influence (S. 16)

Undue influence consists in the improper exercise of power over the mind of one of the contracting

parties by the other. 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 dominate the will
of the other and uses that position to obtain an unfair advantage over the other.

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 infl uence.

Presumption of undue influence as regards persons in particular relationships. After reciting the
general principle of undue influence, s.16 lays down rules of presumption as regards persons

in particular relations. It reads: A person is deemed to be in a position to dominate the will of
another: (i) where he holds a real or apparent authority over the other or where he stands in
a fiduciary relation to the other or (ii) 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
stress. Some of the relationships which raise a presumption of undue influence are: (a) parent and

child; (b) guardian and ward; (c) doctor and patient; (d) spiritual guru and disciple; (e) lawyer
and client; (f) trustee and beneficiary. However, the presumption of undue influence can be

rebutted by showing that the party said to have been influenced had independent legal advice of
one who had full knowledge of the relevant facts.

Example: A Hindu, well advanced in age, with the object of securing benefits to his soul
in the next world, gave away his whole property to his spiritual guru. Undue infl uence was
presumed.
There is no presumption of undue influence in the relationships between (i) husband and wife;

(ii) master and servant; (iii) creditor and debtor; (iv) landlord and tenant.
Party on whom lies the burden of proving that the contract (i) was or (ii) was not induced
by undue infl uence [s.16(3)]. The burden of proving that the contract is not induced by undue

influence lies on the party who is in a position to dominate the will of the other. Thus, in cases

(above given) where undue influence is presumed the onus of proof lies on parent, guardian,
doctor, spiritual guru, lawyer, trustee. On the other hand, in relationships where undue infl uence
is not presumed the party alleging undue influence must prove that it existed.

Consequences of undue infl uence (s.19A). An agreement caused by undue influence is voidable

at the option of the party whose consent was obtained by undue influence. However, 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 then upon such terms and condition as the court deems fi t.

Example: A, a money lender, advanced ` 1,000 to B, a household lady, and by undue

influence induced B to execute a bond with interest at 8 percent per month then the court may set
the bond aside ordering B to repay ` 1,000 with such interest as the court may deem just.
Extra precautions to be taken while entering into contract with a pardanashin woman.
A pardanashin woman is one, who according to the custom of her community, observes complete
seclusion. The courts in India regard such women as being especially open to undue infl uence.
When therefore an illiterate pardanashin woman is alleged to have dealt with her property and to

have executed a deed, the burden of proving that there was no undue influence was on the party
setting up the deed. The law demands that the person who deals with a pardanashin lady must

show affirmatively and conclusively that the deed was not only executed by, but was explained
to and was really understood by the lady.

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