For all valid contracts, free consent of the parties is necessary but consent is said to be free when it is not caused by coercion or undue influence or fraud or misrepresentation. Undue Influence is defined under Section 16 of the Indian Contract Act 1872  If a contract is entered into by obtaining consent through undue influence the contract is voidable.

1)  Meaning of Undue Influence:
                    Influence that prevents someone from exercising an independent judgement with respect to any transaction. In Simple words an improper use of any power over the other party to make him enter into an agreement.


 2) Definition of Undue Influence:
    Section 16 of the Indian Contract Act, 1872 defines ‘Undue influence' as -

           (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-

                 (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 be upon the person in a position to dominate the will of the other.

          (4) Nothing in this sub-section shall affect the provisions of section 111 of the Indian Evidence Act, 1872 (1 of 1872).


 Illustrations :

       (a) A having advanced money to his son, B, during his minority, upon B's coming of age obtains, by misuse of parental influence, a bond from B for a greater amount than the sum due in respect of the advance. A employs undue influence.

       (b) A, a man enfeebled by disease or age, is induced, by B's influence over him as his medical attendant, to agree to pay B an unreasonable sum for his professional services, B employs undue influence.

       (c) A, being in debt to B, the money-lender of his village, contracts a fresh loan on terms which appear to be unconscionable. It lies on B to prove that the contract was not induced by undue influence.

        (d) A applies to a banker for a loan at a time when there is stringency in the money market. The banker declines to make the loan except at an unusually high rate of interest. A accepts the loan on these terms. This is a transaction in the ordinary course of business, and the contract is not induced by undue influence.


3) Essential elements of Undue Influence:


  •      One of the Contracting Parties dominates the will and mind of another;
  •      The Dominating Party has taken an unfair advantage over the weaker party or the transaction is unconscionable.   

4) Relevant Cases:

Lakshmi Amma Vs. T. Narayana AIR 1967 SC 878


              In this case, a person was suffering from a number of ailments which confined him to a nursing home. There he made a deed gifting all his properties to one of his sons to the exclusion of others. Court Held that the gift was caused by undue influence voidable.



4) See also 

1) Difference between Coercion and Undue Influence

2) Difference between Offer and Invitation to Offer

3) Rights and Duties of Agent (Agency: Indian Contract Act,1872)

4) Difference between Void and Voidable Contracts

5) Distinction / Difference between Contract of Indemnity and Guarantee
 

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