ASSIGNMENT NAME

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
SUBJECT
________________ Contract Act _ ________________
Submitted by: Aziz Ullah ________________
Submitted to: Miss Anila Faisal___________
Roll No: ______574________________

UNIVERSITY LAW C OLLEGE

QUETTA
 "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 dominate the will of the other and uses
that 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 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.

Nothing in this sub-section shall affect the provisions of section 111

of the Evidence Act, 1872.
 Illustrations:

(a) 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.

(b) 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.

(c) 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
to prove that the contract was not induced by undue influence.

(d) 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.

Types of Undue influence

The judgement in Allcard v. Skinner[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 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[2]:

1. That the relation between parties is such that one is able to

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 the 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, it is not

mandatory that the parties are 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.
[3]

 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 Ganesh Narayan Nagarkar v. Vishnu
Ramchandra Saraf[4], 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 Mannu Singh v.
Umadat Pande[5] 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 Lancashire Loans Ltd v. Black[6], 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 Inder Singh v. Dayal Singh[7] 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 lack of plaintiff’s experience.
Illustration- A entered a contract with B, who is a minor and is
unable to understand the complex terms of the contract. Unless A
proves that the contract was entered in good faith and with
adequate consideration, it will amount to undue influence

The threat to prosecute:

This is a different case for undue influence wherein one party, to get
some enrichment in its favour, threats to prosecute the other party.
Even when there was no instigation to cause a direct threat, taking
an undertaking of something from the party who wants to avoid
prosecution suffices the elements of the case if the desire to avoid
prosecution is known to whom the undertaking is given. This
doctrine applies to every case where a person gives the undertaking
in order to avoid prosecution was in substance influenced to act in
such a manner. However, where there is further consideration,
undue influence may not be applicable. As in Flower v.
Saddler[8], when a debtor secured his debt, as the other party
indebted wanted to avoid prosecution. In addition, a threat to
prosecute is considered contrary to public policy in some cases.

The doctrine of inequality in bargaining power

This doctrine deals with those cases in which one party took
advantage of others bargaining power and necessity and pressurizes
it to enter into the contract. This doctrine is applied in the cases of
contracts as an independent principle. In Lloyds Bank Ltd v.
Bundy[9], the bank was held liable as there was the existence of a
special relationship of confidence which was vested in them by the
father of the person in regard to his debt.

The doctrine was further discussed in the case of Central Inland

Water Transport Corporation Limited v. Brojo Nath
Ganguly[10] when petitioner’s services were terminated by giving a
three-month notice under the terms of the contract through which
he was employed which as alleged, was arbitrary under Article 14
and was bad in law. The court held that “a contract which was
entered between the parties who are not at the same footing in
their bargaining power will be not enforced by the court”.

Contract with a pardanashin women

‘Pardanashin’ means hidden behind the veil or a screen. It refers to a

woman who practices seclusion. The ground on which this doctrine
is established is that “such women are less conscious and can be
easily influenced with very little external manifestation. This rule is
not limited to an only veiled woman but is also extended to those
women who are not technically pardanashin but are illiterate, old or
sick. But, this principle also applies to men as in Daya Shanker v.
Bachi[11], 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.[12]

Who can plea against undue influence?

As held in M Venkatasubbaiah v. M Subbamma[13], the plea of
undue influence has to be from the party or from its legal
representatives[14] who have executed the document or formed the
contract under such influence from the other party. Any third party
is not allowed to claim adversity or lack of consensus in any manner
even if he feels so. But, a 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.

Conclusion:

While concluding, it may be said that undue influence is one of the

ways under which there is inadequate consent as defined under
Section 13 of the Act. In addition, the formation of a contract by
misusing one’s influence violates the principle of equity. Thus, in
fiduciary and other relationships where one party enjoys real of
apparent authority or influence, one must ascertain that the
contract he/she has made is free from any external manifestation.
However, such contracts are voidable at the option of the party
whose consent was so taken under Section 19A and cannot be
enforced in Court of law.