In the last part we discussed about the meaning of consent and coercion. Now in this part let’s continue our discussion.
Dictionary meaning of term undue influence is influence by which a person is induced to act otherwise than by their own free will or without adequate attention to the consequences. The Indian Contract Act 1872 while defining undue influence in section 16 says that “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.”
It is also observed in the same section that the burden of proving that consent was not given by undue influence shall lie upon the person who is in a position to dominate the will of the other. For instance X, being in debt to Y, the moneylender, contracts a fresh loan on terms which appear to be unconscionable. It lies on Y to prove that the contract was notinduced by undue influence. The law says that it is not only necessary that the defendant have a dominant position,but he must also use it. In Alec Lobb (Garages) Ltd v Total Oil Great Britain Ltd, (1983) 1 WLR 87 (Ch D) it was held that every person occupying a position of influence does not necessarily abuse it.
Thus where finance was provided twice over to a garage subject to certain protective clauses
but with a genuine concern to help its business, no undue influence was found though a part of
the agreement was struck down as unreasonable restraint of trade. It is also important to note that if the consent of any one of the parties is caused by undue influence then it is voidable at the option of the party whose consent was obtained due to undue influence.
Fiduciary relationship means a relationship of trust and confidence. When a person imposes faith and confidence on the other, he expects not to be betrayed. The principle of undue influence applies to all the cases where influence is acquired and abused, where confidence is betrayed.
The following categories of relations are included in fiduciary relation:
1. solicitor and client.
2. spiritual advisor and his devotee.
3. doctor and patient.
4. parent or guardian and child.
5. creditor and debtor.
Important case laws
•Mannu Singh v Umadat Pande ILR (1888-90) 12 ALL 523 In this case, a spiritual leader induced his devotee (plaintiff) to gift him the whole property to get benefits of the soul in the next world. It was held that the consent is obtained by undue influence and hence, it is voidable by the person whose consent was not free.
•Henry Williams and Others v James Bayley (1866) L.R. 1 H.L. 200
In this case an elderly farmer ,his son and a company owned by his son were customers of the same bank.The farmer was persuaded by his son and the bank manager to use his farm as security for a loan to the company of son .When the company defaulted on the loan and the bank sought possession of the farm,the farmer successfully pleaded undue influence.There was a clear conflict of interest because the bank represented all the parties.
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