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Section 16 - Undue influence defined : Indian Contract Act 1872

What is Undue influence? Section 16 of Indian Contract Act 1872

Section 16 of Indian Contract Act 1872 : "Undue influence defined"

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) 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).

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.

 

INDIAN CONTRACT ACT 1872

Section 2 - Interpretation clause

CHAPTER I THE COMMUNICATION, ACCEPTANCE AND REVOCATION OF PROPOSALS

Section 3 - Communication, acceptance and revocation of proposals

Section 4 - Communication when complete

Section 5 - Revocation of proposals and acceptances

 

 

Section 6 - Revocation how made

Section 7 - Acceptance must be absolute

Section 8 - Acceptance by performing conditions, or receiving consideration

Section 9 - Promises, express and implied

CHAPTER II CONTRACTS, VOIDABLE CONTRACTS AND VOID AGREEMENTS

Section 10 - What agreements are contracts

 

 

Section 11 - Who are competent to contract

Section 12 - What is a sound mind for the purposes of contracting

Section 13 - Consent defined

Section 14 - Free consent defined

Section 15 - Coercion defined

 

 

Section 16 - Undue influence defined

Section 17 - Fraud defined

Section 18 - Misrepresentation defined

Section 19 - Voidability of agreements without free consent

Section 19A - Power to set aside contract induced by undue influence

Section 20 - Agreement void where both parties are under mistake as to matter of fact

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