Indian Contract Act Section 16 — “Undue influence” defined
CHAPTER II OF CONTRACTS, VOIDABLE CONTRACTS AND VOID AGREEMENTS
Commercial / Corporate
Summary
Sub-section (1) defines undue influence. A contract is said to be induced by undue influence when the relationship between the parties is such that one party is in a position to dominate the will of the other, and that party uses this position to gain an unfair advantage over the other.
Sub-section (2) gives specific examples of when a person is considered to be in a position to dominate the will of another, without limiting the general principle in sub-section (1). Under clause (a), a person is deemed to be in such a position if they hold real or apparent authority over the other person, or if they stand in a fiduciary relationship with the other person. Under clause (b), a person is deemed to be in such a position if they make a contract with someone whose mental capacity is temporarily or permanently affected by age, illness, or mental or bodily distress.
Sub-section (3) deals with the burden of proof. Where a person who is in a position to dominate the will of another enters into a contract with that person, and the transaction appears to be unconscionable—either on its face or based on the evidence presented—the burden of proving that the contract was not induced by undue influence lies on the person who is in the position to dominate the will of the other. This sub-section does not affect the provisions of section 111 of the Indian Evidence Act, 1872.
Official Text
(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 lie upon the person in a position to dominate the will of the other. Nothing in this sub-section shall affect the provisions of section 111 of the Indian Evidence Act, 1872 (1 of 1872).