Residuary Powers (Art. 248)

Undue Influence
Section 16 defines Undue Influence as follows :
A contract is said to be induced by Undue Influence when the relationship between the parties is such that one party is able to dominate his will on the others and uses that position to gain an unfair advantage. A person is deemed to be in the position of dominating the will of the other if -

·                     If the person holds a real or apparent position of power

·                     If stands in a fiduciary relationship with the other.

·                     If the other person is mentally weak because of sickness, disease, or economic              distress

It further says that if a contract is unconscionable the burden of proof lies of the person in whose favor the contract is to prove that it was not induced by Undue Influence, other wise the burden of proof is on the one who alleges it.

Illustrations

1. A  advances some money to his minor son B. Upon majority, A makes B sign a contract to pay back more than the sum advanced.
2. A is sick and physically feeble and is attended by his nurse B. B influences A to enter a contract to pay him an unreasonable amount for his professional services.
3. A being in debt of B, the village money lender goes to B for getting a loan. B gives the loan on terms that are unconscionable. It lies on B to prove that undue influence was not used to create the contract.
4. A applies for loan to a banker B while there is a stringent crises in the money market. B declines to give the loan only at a very high rate. This is not coercion but simple business transaction.

• Ability to dominate the will

Mannu Singh vs Umadat Pandey 1890 - Spiritual guru induced the plaintiff, his devotee, to gift all his property to the guru.

• Relations of dominion over other - parties are not on equal footing.

Williams vs Baylex 1866 - father being afraid of bank manager, entered into a contract to mortgage his house. This was held voidable.

• Real of Aparant authority

Income tax office, magistrate, police officer etc.
It may not be real but if a person shows off as such then also it is applicable.

• Fiduciary Relation

Every relationship of trust and confidence is a fiduciary relationship.
Solicitor - client, doctor - patient, spiritual guru - devotee.

• Mental Distress

Ranee Annapurni vs Swaminatha 1910 - A poor widow who was in dire need to money to establish her right to maintenance, was persuaded by a money lender to take loan at the rate of 100%. It was held to be undue influence while a person was under mental distress and the court reduced the rate to 24%.

• Burden of Proof - The person must show that the other party was in position of dominating the will and that he used that position to gain advantage.

Presumption of undue influence

In certain cases, when it is established that the defendant was in a position to dominate the will of the plaintiff, it will be presumed that he must have used his position to obtain an unfair advantage. Thus, it will be up to the defendant to prove that the plaintiff freely consented.

Lancashire Loans Ltd. vs Black 1934 : It was held that a daughter may not necessarily be independent and may be under the influence of the mother.

Presumption is raised in the following cases -

1. Unconscionable bargains
Wajid Khan vs Raja Ewaz Ali Khan 1891 - An old illiterate woman conferred upon her managing agent a bug pecuniary benefit without any valuable consideration under the guise of a trust. This was held to be under undue influence.

2. Inequality in bargaining power
LLoyd's Bank vs Bundy -  Farmer pledged his farmhouse for securing a loan for his son. Later bank tried to take possession of the house. It was held that the contract might have been done under undue influence.

3. Contracts with Pardanashin women 
A contract with a pardanashin woman is presumed to have been induced by undue influence. However, such a woman must be totally secluded from ordinary society. In the case of Ismail vs Amir Bibi 1902, a lady stood as witness, put tenants, collected rents in respect of her house. She was held not a pardanashin woman.