NATIONAL UNIVERSITY OF STUDY AND RESEARCH IN LAW

________________________________________________________
RESEARCH TOPIC: Meaning of Undue Influence and its effect on Contract.

CONTRACT LAW

RESEARCH PAPER

SUBMITTED TO: SUBMITTED BY:

PRAGYA AISHWARYA AAYUSH KUMAR

ASST. PROFESSOR,LAW SEMESTER: I SEC:A

NUSRL,RANCHI ROLL:846

1
 INTRODUCTION
Section 16, The Indian Contract Act, 1872, deals with ‘Undue Influence’ and also tells as to
what constitutes Undue Influence.

Undue influence exists where a contract has been entered as a result of pressure which falls
short of amounting to duress. The contract is voidable at the consent of party subject to
pressure on the grounds of undue influence.

UNDUE INFLUENCE
According to Section 16,The Indian Contract Act, 1872,

(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) 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.

INSTANCES WHEN INFLUENCE IS UNDUE

Influence is said to be "undue" when a man, who is in the overwhelming position, utilizes
that situation to accomplish uncalled for advantage for himself at the expense of the
individual depending upon his power or help.

The expression "undue influence" can't be utilized legitimately except if a) certainty is

uncovered on the individual charged, as where the latter is a solicitor, trustee, guardian etc. or
on the other hand b) except if the influence of a man A is with the end goal that B remains in
some sort of respect, wonderment or fear of him, for example, a child towards his parents or a
student towards an otherworldly preceptor etc., so disappointing A by a refusal to submit to
his desires places B in a dread of imminent to his individual common or profound welfare
and satisfaction. Undue influence implies the control of a frail personality by a more stronger
personality to a degree which makes the conduct of the weaker individual accept an unnatural
character.

2
Undue Influence may be inferred when the benefit is such as the taker had no right to demand
and the granter had no rational motive to give. The fact that a person accepted the terms of a
compromise as he had no other option, cannot be the test to determine whether compromise is
liable to be attacked as vitiated by undue influence. The entirety of the transaction must be
taken into consideration and the necessity for the sale, are all factors which should
necessarily be borne in mind before a transaction could be set aside on the ground that the
price paid therefore is so low that it could be said to have been polluted by undue influence.

 Lord Nicholls, described the concept as:

"Undue influence is one of the grounds of relief developed by the courts of equity as a court
of conscience. The objective is to ensure that the influence of one person over another is not
abused. In everyday life people constantly seek to influence the decisions of others. They
seek to persuade those with whom they are dealing to enter into transactions, whether great or
small. The law has set limits to the means properly employable for this purpose. The law will
investigate the manner in which the intention to enter into the transaction was secured: If the
intention was produced by an unacceptable means, the law will not permit the transaction to
stand. The means used is regarded as an exercise of improper or 'undue' influence, and hence
unacceptable, whenever the consent thus procured ought not fairly to be treated as the
expression of a person's free will. It is impossible to be more precise or definitive. The
circumstances in which one person acquires influence over another, and the manner in which
influence may be exercised, vary too widely to permit of any more specific criterion." 1

ELEMENTS OF UNDUE INFLUENCE

Undue influence can take several forms such as:

 Importuning (insistently bothering someone to do something).

 Deception (misleading someone).

 Exhortation (strongly urging someone to do something).

 Insinuation (cunningly making indirect suggestions to gain advantage).

 Flattery (excessively and insincerely complimenting someone to gain advantage).

 Trickery.

RELATIONSHIPS PRONE TO UNDUE INFLUENCE

1
Royal Bank of Scotland v Etridge  [1998] 4 All ER 705

3
Undue influence typically occurs when parties relate in a certain way such as in the special
relationships between the following set of people:

 A parent and child.

 A lawyer and client. 

 A fiancé and fiancée.

 A doctor and patient. 

 A husband and wife.

 A pastor and parishioner. 

 A guardian and ward. 

PROVING ELEMENTS OF UNDUE INFLUENCE

Existence of the influence

In choosing whether the testator was influenced, the court thinks about numerous elements,
for example, how the deceased benefactor, the will challenger, and the supposed influencer
are connected; regardless of whether the supposed influencer had a chance to apply influence;
the conditions under which the will was arranged and executed; the supposed influencer's
rationale; and whether the testator was constantly exposed to control.

The supposed influencer's quality when the testator met with a lawyer to examine the terms
of the will or to execute the will can be a critical evidence of influence.

The influence was undue

An influence is undue just if "the free organization of the testator is devastated and a
confirmation is delivered that communicates the desire of the one applying the influence as
opposed to the desire of the testator."

Be that as it may, for the influence the testator would not have executed the will

The most essential factor in deciding whether the testator would not generally have executed
the will is whether it makes an unnatural attitude. An "unnatural air" is one that the testator
had no intelligent motivation to make, other than the undue influence.

Excluding a child isn't really evidence of an unnatural disposition if the testator and the child
were estranged, regardless of whether the other children attempted to talk the testator into it.
Also, leaving the greater part of one's bequest to one child isn't really an "unnatural manner"
if the testator and the kid were particularly close.

CLASSES OF UNDUE INFLUENCE

4
There are three classes of undue influence.2

Class 1 - Actual undue influence

Real undue influence, as the name recommends, requires evidence that the agreement was
gone into because of real influence applied. The claimant must plead and prove the act which
they declare added up to undue influence.

Class 2a - Presumed undue influence

Under class 2a there is no prerequisite to demonstrate that inappropriate influence was really
applied. Rather it must be built up:

1. There was a relationship which as an issue of law offers ascend to an assumption of undue
influence.

2. The exchange is one which can not promptly be clarified by the relationship of the parties.

Class 2b - Presumed undue influence

Under class 2b there is no programmed assumption emerging as an issue of law. Here it must
be built up that there is a relationship of such a kind, to the point that one party in reality put
their trust and trust in the other to defend their advantage. Any relationship is fit for adding
up to this models incorporate a couple, cohabitees, business and representative. The essential
distinction between class 2 an and 2b is the way that the trust and certainty relationship must
be demonstrated. In present day times it is not true anymore that spouses will for the most
part put all their trust in their husbands to manage the money related issues in spite of the fact
that in a few relational unions this might be the situation. On the off chance that the spouse
practices freedom of brain in budgetary issues then no assumption will be set up.3

Exceptionally, it has been held that a relationship of trust and certainty existed between a
bank manager and his customer.4

In any case, it has been held that the ordinary connection among banker and customer isn't
one of trust and certainty.5

 UNDUE INFLUENCE AND THIRD PARTY

Undue influence is currently frequently conjured by wife-sureties where their association

with the bank-creditor is controlled when the debtor-husband goes about as delegate.

REBUTTING THE PRESUMPTION

The impact of effectively setting up the presumption is that it moves the burden from the
complainant to the supposed transgressor to rebut the presumption. The supposed miscreant
2
Bank of Credit & Commerce  International v Aboody [1990] 1 QB 923 
3
Barclays Bank v O'Brian [1993] QB 109 
4
Lloyds Bank v Bundy  [1975] QB 326  
5
National Westminster Bank v Morgan [1985] 1 AC 686        

5
may rebut the presumption by demonstrating that the helpless party practiced through and
through freedom in entering the exchange. This is most regularly settled by demonstrating
that the complainant were completely aware of the dangers included and had gotten free
lawful exhortation before going into the exchange.

SEVERENCE
The court might be able to separate from an instrument influenced by undue influence the
frightful parts leaving the part uncontaminated by undue influence enforceable.6

DAMAGES
Damages are not available for undue influence, but rather if a bank has broken an obligation
of consideration to a wife-surety damages might be available in negligience.7

EFFECT OF UNDUE INFLUENCE ON A CONTRACT

An transaction which is appeared to have been entered into because of undue influence will
be voidable, and not void. The victim has the privilege to rescind the transaction, however on
the off chance that they have gotten any advantages under the transaction the privilege to
rescind is contingent after making restitution of those advantages8. Anyway the privilege to
rescind might be lost in four different ways:

 Affirmation. The right of a victim to rescind may be lost by either affirmation of the

transaction, acquiescence or estoppel.9

 Impossibility of restoring the parties. Normally a party will not be allowed to

rescind a contract unless the parties can all be restored to their prior positions.
However, in undue influence cases parties have been allowed to rescind contracts
where precise restitution is not possible, but the courts can obtain a result which is
"practically just",10usually by payment of a money equivalent.

 Delay. The victim of undue influence must "seek relief within a reasonable time after
the removal of the influence".[11]

 Third party rights. Although normally the right to rescind is lost when an innocent
third party acquires an interest in the subject matter, this general rule becomes more
complicated in relation to cases of undue influence.

6
Barclays Bank v Caplan and Another (1997) The Times, December 12.
7
Hedley Byrne & Co Ltd v Heller & Partners Ltd (1964) AC 465
8
Dunbar Bank plc v Nadeem [1998] 3 All ER 876
9
Goldsworthy v Brickell [1987] 378
10
O'Sullivan v Management Agency Ltd [1985] QB 428
11
Allcard v Skinner (1877) LR 36 Ch D 145

6
CONCLUSION
After doing the research it is found that Undue Influence can play a major role in deciding
whether a contract is voidable or not. Where it is built up that a plaintiff was prompted to
go into a contract or transaction by the undue influence of the respondent, the contract
might be rendered voidable. On the off chance that undue influence is demonstrated in a
contract, the innocent party is qualified for putting aside the contract against the
respondant, and the remedy is rescission.