.

Name. Zafarullah
Semester.
Section. A
Submitted to. Anila Fasial
Date. 6/6/2022
Subject. Contract Act 1872
Assignment
Create a situation in which a
consent of a party has been
obtained by committing of Undue
Influence and also state the effect
of it on a contract and how a
Contract becomes Voidable.
 Undue influence
DEFINITION
1. A contract is said to be induced by undue influence where the relation subsisting
between the parties are such that one of the party is in a position to dominate the
will of the other. And uses that position to obtain an unfair advantage over the
other.

Explanation
 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
 Very holds a real or apparent authority over the other or where he stands in a
fiduciary relation to the other Or
 where he makes a contract with a person whose mental capacity is temporarily or
permanently affected because of age, illness, or mental or bodily distress
 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 the evidence
adduced to be the unconscionable burden of proving that such contract was not
induced by undue influence shall Iie upon the person in a position to dominate the
will of the other.
 As noted above, a victim party may seek to have a contract voidable due to
undue influence. The reason that undue influence makes a contract voidable
rather than void, is because there are often cases in which the contract is
beneficial to the patry that is accusing the other party of taking advantage of
them.

 When a victim party, or those close to them, realize that the contract may
have been entered into through the use of undue influence, that party may
then choose to file a legal claim against the dominant party in court to return
them to the state they were in before the undue influence was exerted over
them.

Types of undue influence

 judgement in Qahir khan Khalpan ullah and [1] classified the cases on undue
influence in two parts- those in which there is a charge against donee or where
there is an abuse of opportunities which a person got through his duty. The court in
the above case further elaborated on the ratio of the judgement and stated that “in
the former case the remedy is given on the principle that no one should be allowed
to retain any benefit that he gets through his fraudulent or illegal activities and in
later cases it is based on the grounds of public policy so that it can prevent the
abuse of influence between the parties by preventing relation between them”.
 There are two conditions which are needed to be proved by the person seeking
damages

1. That the relation between parties is such that one can influence the
decision and will of the other, and secondly

2. That the donee or the defendant has abused his position to enrich
himself.
But here, a joint discussion of all the cases would be feasible and will prevent
confusion in understanding them. Mainly, all the cases of undue influence fall under
the following categories.
 Relationship-   For a case to fall in this category, the parties don’t need to be
related to each other by blood relation, marriage or through adoption but what is
necessarily required is that one party must be in a superior position and be able to
dominate the will of the other. It does not restrict itself to strict fiduciary
relationships but applies to all varieties of relationships. However, only the existence
of such relationships is not able to prove undue influence but there must be an
exercise of the dominance.
 Dominating Position- In this category of undue influence, the circumstance
under which the contract was made is taken in the account along with their
relationships. The existence of dominating position along with its use is mandatory
to invoke an action. If once dominance is established, unless any contrary object
appears, it is presumed that there was a use in the particular instance.   

 Unfair Advantage- In Atal khan vs Habib khan, it was stated by the court that,
“unfair advantage is the advantage or enrichment which is obtained through
unrighteous or unjust means”. It comes into existence when the bargain favours the
person who enjoys influence and which proves unfair to others.

 Real and Apparent Authority- In this type of influence, there is a real authority
like a police officer or an employer who uses his dominance for his enrichment.
Apparent authority is pretending real authority without its existence.

 Fiduciary Relationship- This type of relationship is solely based on the existence

of trust between the parties for each other. It is such that one of the parties
naturally reposes its confidence in the other one and with an increase in that
confidence gradually, one party starts influencing the other. This type of relationship
usually exists between doctor and patient, lawyer and client, parent and child,
teacher and student and beneficiary of a trust (cestui que trust) etc. An example of
such type of case was in 
  In Hamdan vs Irfan, where a guru influenced his disciple to take his property in
gift by promising to secure benefits to him in the next world. The court set the gift
aside as it was not formed with free consent.

 Parent and Child- As parent fulfil every need of their children and want them to
act on their supervision, there is an inherent influence on children from their
childhood and that follows throughout their life. Thus, when any benefit is
transferred to the parent or any third-party on the expense of the child, it is
considered as jealousy on the part of a parent by the courts of equity. Thus in every
case, children’s age is always taken into account to determine the extent of parental
influence.

 In insureance company vs Munir Ahmed, when a girl just before her marriage
entered in a money lending transaction as surety for her mother, it was held to be
entered under undue influence.

 Affecting Mental Capacity- It is an established law from the case of chakra vs

Salar that, “undue influence arises when one party taking the advantage of the
temporary or permanent advantage of another’s mental condition executes a
contract. But, a mere distressed state of mind cannot amount to undue influence
until the defendant has used this opportunity to his advantage. Similarly, instigating
a person to enter into a contract who has just attained his majority amounts to
undue influence under this category due to a lack of plate plaintiff’s experience.
 In case e of Yousaf khan v. Safi afghan, who by their physical or mental
capacity are prone to easy influence and after inducement tends to enter into
contract or transactions relating to purchasing and sale of the property. The principle
on which the protection by law is accorded to a pardanashin women is based on
equity and good conscience.

Who can plea against undue influence?

 As held in in Ali Muhammad v Muhammad ismail , the plea of undue

influence has to be from the party or from its legal representatives who have
executed the document or formed the contract under such influence from the other
party. Any third party woman is not allowed to claim adversity or lack of consensus
in any manner even if he feels so. But, the contract is fit to be set aside if there was
undue influence by any other (third party) party[15] other than that in the contract.
Similarly, a party to the contract can lose its rights under the contract if it was in
conspiracy with a third party[16], was an agent or principle of the third party by the
aid of which it was able to exercise his influence over the contract.

Effects of undue influence:

 Under Section 19A of the Contract Act, an agreement induced by undue influence is
voidable at the option of that party whose consent was taken by influencing
 him/her. Performance of such agreements may be avoided absolutely or on
prescribing certain terms and conditions.

Example
 Ali Mohammed met with an accident and got injured when he had shifted to
the hospital, the doctor said that he had get a serious injury for which we want
to do his operation and for the operation they want money because it was
Private hospital. Dr said that for the operation we want 25lakh money and at
that time Ali Mohammed have only 5 lakh in his bank account but Ali
Mohammed have a flat in a Kasi road which price is almost 15 to 18 lakh
rupee. when the his friend knew that Ali Muhammad have a flat . Friend give a
proposal to Ali Muhammad that he sign a contract with him to give his flat to
him, then he will pay his operation fee. because of his serious injury and have
no other option, so he accept proposal of friend and do a contract because of
his injury and he give his flat to his friend and friend pay the operation fee.
here the friend dominating the will of Ali Muhammad because of compulsion
and necessity of Ali Muhammad.

In This case friend dominating Ali Muhammad will and he have authority to go
to the court and file case against friend that contact was made by the method
of Undue influence so I want to revoke this contract. And Ali Mohammad
have full authority to revoke the contract or continue the contract

Fraud
DEFINITION
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 induce him to enter into a contract

EXPLIANTION
 Suggestion as to fact of which is not true by one who does not believe it to be
true

 the active consignment of affect by one having knowledge or belief of the fact

 I promise which is form but and not intention to perform it

 Any other act fitted to deceive

 Simply put, contract fraud occurs when a person knowingly makes a false
statement in order to have someone else agree to a contract. This act is
intended to deceive or trick the other person into signing a contract that they
may not otherwise agree to

 Contract fraud may also occur when a person uses misrepresentation to trick
another person into signing a contract when that other person does not
believe that they are entering into a contract.

 A contract fraud lawsuit is a lawsuit in which the injured party sues the party
who is responsible for the misrepresentation. Any sort of contract fraud or
misrepresentation would render the contract void; a lawsuit would attempt to
compensate the deceived party for their losses resulting from the defendant’s
actions.

 PPC Pakistan penal code the fraud is defined as an offence

Types of Fraud
 Contract fraud usually falls into one of two different categories Fraud in the
inducement , or fraud in the factum.

 Fraud in the inducement, or fraudulent inducement, refers to contract fraud

wherein one party who is involved in the contract bases their decision on
misleading information. To put it more specifically, an example of this would
be if an employer convinces a potential job candidate to sign an employment
contract by using falsified terms. The employee later discovers that the
employment contract’s terms are not as initially promised, and they relied on
the fraudulent term when making their decision to sign the contract. Using
fake contracts would be another example of fraud in the inducement.

In order to have a successful fraud in the inducement claim, the following

elements must be proven:

 The defendant made a misrepresentation, or omitted an important fact;

 The defendant knew, at the time that they made the statement, that the statement was
false;

 The defendant made their statement in order to cause the plaintiff to rely on the
statement when making their decision;

 The plaintiff reasonably relied on the misrepresentation, reasonably meaning what a

prudent person would believe; and

 This reasonable reliance is the direct cause of valid legal injury to the plaintiff, such as
losing money or a valuable possession that they would not have given up otherwise.
Fraud in the factum, or fraud in the fact, also occurs when the injured party
enters into the agreement based on a fraudulent misrepresentation. This false
claim causes the plaintiff to misunderstand the nature, substance, or
consequences of what they are agreeing to. A common example of fraud in
the factum would be when the plaintiff believes that what they are agreeing to
is not legally binding, when it actually is. Another way of saying it would be
that they were tricked into signing a document.

To clarify the differences between the two, fraudulent inducement involves

circumstances that caused the injured party to act, while fraud in the factum
involves deceitful subject matter contained within the contract. Fraud in the
inducement utilizes deceit to get the other party to sign the contract, while
fraud in the factum involves the deceitful party actually acting out the fraud
themselves.

EXAMPLE
Ayaz Khan make a proposal to sell his is car Sohail Ahmed and he told to
Sohail Ahmed that his car have comfortable seats TV and having and there is
no mechanical problem in a car and also told that the car has 2018 model
car and car has not punched having its original documents with my phone
name and a single handed car when shall do contract with Ayaz and give
price of the car after 2 days he knew that the car has punched and not
original car it's Kabali car so he go together court and file a case against that
he do fraud with me by selling paunched car to me, due to committed fraud
with him Sohail Ahmed have authority to revoke or continue the contract in
case of revoking the contract Sohail Ahmed also claim damages from Ayaz
Khan this case first look at the at text is it voidable