Q.
Explain "Undue Influence" as per Contract Act, 1950.
A.
“Undue influence”
A question on this subject came out in a narrative case in:
2013 Q3 here, inducement or undue influence.
MIA QE 2014/3 Q1 (c)(ii) undue influence
MIA QE 2012/3 Q1 (b)(ii) Undue influence
What constitute a voidable contract?
Explain "Undue Influence" as per Contract Act, 1950
Bad Contracts
Section 16
(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) (a) 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 the contract was not induced by undue influence shall lie upon the person in a position to dominate the will of the other.
(b) Nothing in this subsection shall affect section 111 of the Evidence Act 1950 [Act 56].
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 moneylender 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.
Ref:
Section 16 "Undue Influence", Contract Act, 1950. Available at,
http://www.agc.gov.my/Akta/Vol.%203/Act%20136.pdf