FAIRNESS IN THE INDIAN CONTRACT ACT; PART-2

UNDUE INFLUENCE

  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-
    1. Where he holds a real or apparent authority over the other or where he stands in a fiduciary relation to the other; or
    1. 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 evidence adduced, to be unconscionable, the burden of proving that such contract was not induced by undue influence shall lie upon the person in position to dominate the will of the other.1

This sub-section provides for a fair chance to a person who, while signing a contract might be subdued by a higher authority, or may be in a weak mental capacity due to certain factors, which makes him/her to be a subject of undue influence. To understand this sub-section more precisely let’s take help of an illustration; A is an old man suffering with a lot of diseases, B

1. S. 16, The Indian Contract Act, 1872 (9 of 1872), Lexis Nexis.

his medical attendant and caretaker had an undue influence over him, which resulted in A paying B an unreasonable amount of money for his medical services. Afterwards A refused to pay him and subsequently B filed a suit against A for non-payment of dues. In this case the court held that the contract was voidable because; first, A’s mental capacity was severely affected by his old age and illness, and since B was his medical caretaker he had a dominating position over him to the extent of exerting his will upon A. It is pretty obvious in this case, as to how the court ensured fairness to A, who was in a position to be easily dominated by B.

The topic ‘Undue Influence’ is relatively a vast topic, and to understand it more precisely we need to understand a case law. ‘Shri Akshoy Kumar Paul and another vs. New India Assurance Co.2’, is one such interesting case, in which the plaintiffs one Akshoy Kumar Paul and his wife, who had first obtained a mediclaim policy from the respondent on 11/08/1999, and then subsequently in 2000, 2001, 2002. But, unfortunately in February 2003, plaintiff NO. 1 suffered a heart attack and he preferred mediclaim for the same. In august, 2003, when the petitioners sought renewal of the mediclaim policy, which was renewed only after excluding the cover for cardiac ailments for petitioner NO. 1, the same followed for the year 2004. In august, 2005, the petitioners sought renewal of the mediclaim but without excluding cover for cardiac ailments for petitioner N.O. 1, the company denied their request. The Delhi High Court ruled in favour of the petitioners and said that the insurance policy should include the cover for petitioner N.O. 1’s cardiac ailments as was in the original policy. Although, the noteworthy part of this judgement was; that the mediclaim signed by the plaintiff in 2003 and 2004 was because of the undue influence of the respondents. The court said that if the plaintiffs didn’t agree to the new condition added by the respondents they would lose not just the insurance for cardiac ailments for plaintiff N.O. 1 which they were losing anyways, but also insurance for any other medical ailments for the both of them. This implies that the plaintiffs consent was not of his free will but was actually a consent given under pressure.

This judgement by the Delhi High Court distinctly shows how section-16 of the Indian Contract Act, 1872 provides fairness to the contracting party, as it was very clear from the contract that the petitioners agreed of their own free will but the court rightly interpreted the contract as void on account of undue influence, because there was an invisible terror of not being entitled to any mediclaim policy at all.

2 Shri Akshoy Kumar Paul and anr. Vs. New India Assurance Co., A.I.R. 2007 Delhi 136, (Del. H.C. 2007).

Aishwarya Says:

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