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- When and under what circumstance contract duly entered into...Undue influenceQ. What is undue influence what is its legal effect on a contract. (1999) (2000) (2001).
Undue influence is a mental or moral threat undue influence is exercised by or against the party to the agreement A contract which is the result of undue influences is void able.
2. Definition of undue influence:
According to contract act
Sec 16 (i)
“A contract is said to be induced by undue influence where the relations subsisting between the parties are such the one of the parties is in a position to dominate the will of other and uses that position an unfair advantage over the other.”
Sec 16 (ii)
A person is deemed to be in position to dominate the will of another,
(i) Where he holds a real or apparent authority over the other.
(ii) Where he stands in a fiduciary relation,
(iii) Where he makes contract with a person whose mental capacity is temporarily or permanent affected by reason of age, illness or mental bodily distress.
Suppose ‘B’ a guardian of ‘C advances Rs 5 lack to during his minority. ‘C’ attained the age of majority. ‘B’ use his influence of guardianship and gets a bound signed by ‘C’ for Rs. 10 Lac. ‘B’ has used undue influence.
4. Important points of undue influence:
Following are important points of undue influence.
(I) Dominating position:
Relation existing between the parties should be such that one of them must be in a position to dominate the will of other.
‘A’ a spiritual adviser induced his follower to ‘B’ to gift him all his property to gain the benefits to his soul in the next world. ‘B’ has used undue influence.
(II) Use of position:
A party is in a dominating position must have used his position to obtain an unfair, advantage from the other.
‘A having advanced money to his son B, obtains from him by misuse of parental influence, a bound for great amount than the sum advanced. A undue influence.
5. Person who can use undue influence:
Following persons can use undue influence:
(i) Parent and child,
(ii) Guardian and ward,
(iii) Doctor and patient,
(iv) Lawyer and client,
(v) Trustee and beneficiary.
(I) Burden of proof:
Burden of proof will be on the person who is in dominating position. He can rebut the presumption by arguing that:-
(i) Full disclosure of fact was made.
(ii) The price was adequate
(iii) The dominated party was in a position to receive independent advice.
(iv) The dominate party gave his free consent.
6. No presentation of undue influence:
Undue influence is not presumed in the following cases.
(i) Husband and wife
(ii) Landlord and tenant.
(iii) Creditor and debtor.
(iv) Principal and agent.
(v) Mother and daughter.
Burden of proof:
Burden of proof will be on the dominated person who will prove that undue influence has been exercised over him.
7. Legal effect of undue influence:
According to sec. 19-A
“Where consent is void able at the option of the party whose consent was so caused.”
P. L .D 1990 SC 48
It was held that a contract caused by undue influence is not free consent and the contract becomes voidable at the option of the party whose consent was so caused. Any such contract may be aside either absolutely or, if the party who was entitled to avoid it has received any benefit undue the contract, upon such terms and conditions as the court deems fit.
8. Refund of benefit:
Court has power to direct the aggrieved party to refund benefit received by him, if a contract is set aside by the court.
To conclusion it can be said that, a contract when caused by undue influence is not valid. It is void able at the option of the party whose consent is obtained by undue influence. The burdon of proof lies upon the person who is in the position to dominate the other.
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