What is Undue Influence?
Undue Influence is when the relations between the two parties are of the nature that one party is in a position to dominate the decision-making of the other party and the party in the dominant position uses his influence to obtain an unfair and unjust advantage over the other party, such influence is called Undue Influence. It is to be noted that in any case where consent is affected by influence and there is any reposition or betrayal of confidence, the principle of equity shall be applied.
Section 16(1) of the Indian Contract Act 1872 defines the term ‘Undue Influence’ as follows: “A contract is said to be induced by undue influence where, (i) 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 (ii) he uses the position to obtain an unfair advantage over the other.”
A person is deemed to be in a position to dominate the will of another in cases where:
- One party holds real or apparent authority over the other.
- One party stands in a fiduciary relationship with the other.
- One party makes a contract with a person whose mental ability for decision-making is temporarily or permanently affected because of his age, illness, or mental or physical distress. For example, an old illiterate person.
Under undue influence, the dominant party must have the objective of taking advantage of the other party. If influence is wielded for the benefit of the other party, it will not be undue influence. But if the consent is not free due to undue influence, the contract will be voidable at the option of the aggrieved party. In such a case, the burden of proof will be on the dominant party to prove the absence of influence.
Section 19A of the Indian Contract Act, 1872 has established that an agreement induced by undue influence or where the aggrieved party has entered the contract by getting affected by undue influence is voidable at the option of that party whose consent was taken by influencing him. The act has also established that the performance of such agreements may be avoided either absolutely or by prescribing certain terms and conditions.
Difference between Coercion and Undue Influence
Coercion and Undue Influence are two different legal concepts under contract law that deal with situations where the consent of one party to agree may be compromised. Coercion and Undue Influence both are significant in protecting the integrity of contracts and ensuring that agreements are made voluntarily and in a fair manner. The following article discusses the difference between Coercion and Undue Influence.