WHAT IS UNDUE INFLUENCE?
A
contract is said to be induced by undue influence where:
1. one
of the parties is in a position to dominate
the will of the other and
2. he
uses the position to obtain an unfair advantage
over the other Sec. 16(1).
Section
16(2) provides that a person is deemed
to be in a position to dominate the will of another where:
a. Where
he holds a real or apparent authority over the other (For ex- master &
servant, ITO & Assessee)
b. Where
he stands in a fiduciary relationship
to the other. Fiduciary relationship means a relationship of mutual trust and
confidence. Such a relationship is supposed to exist in the following cases -
father and son; guardian and ward; solicitor and client; doctor and patient;
preceptor and disciple; trustee and beneficiary etc.
c. Where
a party makes a contract with a person whose mental capacity is temporarily or permanently affected by reason of
age, illness, or mental or bodily distress.
d. Where
the contract is apparently unconscionable (i.e. unfair). Ex.: an unfair money
lending transaction.
The
following relationships usually raise a presumption of undue influence, viz:
(ii)
Parent and child, (ii) guardian and ward, (iii) trustee and beneficiary, (iv)
doctor and patient, (v) lawyer and client, (vi) spiritual guru and disciple.
This list, however, is not exhaustive.
There
is no presumption of existence of a power to dominate the will of another in
the following cases: (a) Landlord and tenant, (b) Creditor and debtor, (c)
Husband and wife. It has been held by judicial decisions that in all these
cases, the party alleging undue influence must prove that undue influence
existed.
Example I: A, a man enfeebled by disease of 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 has employed undue
influence.
Example II: A, being in debt to B, the
money-lender of his village, contracts a fresh loan on terms which appear to be
unconscionable. It lies on B prove that the contract was not induced by undue
influence.
Example III: A applies to a
banker for a loan at a time when there is stringency in the money market. The
banker declines to make the loan except at an unusually high rate of interest.
A accepts the loan on these terms. This is a transaction in the ordinary course
of business, and the contract is not induced by undue influence.
