Free Consent and Undue Influence | Law of Contracts - CLAT PG PDF Download

Consent in a Contract

•  Definition:  Free consent is a crucial element of a valid contract as per Section 10 of the Indian Contract Act. It implies that all parties involved have a mutual understanding of the contract's subject matter. 
•  Explanation of Consent:  According to Section 13 of the Indian Contract Act, consent means that two or more parties agree on the same thing in the same sense. This concept, known as 'consensus-ad-idem' in English Law, emphasizes the importance of a shared understanding among the parties. 
•  Example:  Consider a scenario where A owns two horses, one black and one red. If B agrees to buy a horse from A, but B believes he is getting the black horse while A thinks he is selling the red horse, there is no true consent. This lack of mutual understanding about the subject matter of the contract invalidates the agreement. 

 Concept of Free Consent 

• For a contract to be valid, it is not sufficient for the parties to merely give their consent; that consent must also be free, meaning it is given voluntarily without any pressure or coercion.
• According to  Section 10 of the Contract Act  ,  agreements are considered contracts when they are made with the free consent of the parties involved.
• 1.  Consent is considered free when it is not influenced by: 
  • (i) Coercion
  • (ii) Undue influence
  • (iii) Fraud
  • (iv) Misrepresentation
  • (v) Mistake
• 2.  If the consent of any party is not free, the contract is considered voidable at the option of the party whose consent was not free. However, if both parties are mistaken, the contract is deemed void. 

 Undue Influence 

• Undue influence occurs when one party exerts dominance over another's will and misuses that power, rendering the contract voidable.
• For a situation to be considered undue influence, three conditions must be met:
•  One person is in a position to dominate the will of others. 
•  He misuses his position. 
•  He obtains an unfair advantage. 

Understanding Undue Influence 

•  Undue  influence involves the exertion of pressure or influence in a manner that is considered excessive or unwarranted.
•  Influence  refers to the act of persuading or convincing someone to change their mind or will. However, this influence must be undue, meaning it is not necessary or appropriate.
• Undue influence can occur in various types of relationships, including those based on trust, fiduciary relationships, or even familial ties. It arises when one party is in a position of confidence or dependence over the other, allowing them to exert influence that, while potentially natural, can be abused.

Ability to Dominate the Will of Others 

 Definition of Dominant Position:  The dominant position is not explicitly defined in the Indian Contract Act. However, Section 16(2) outlines certain conditions under which a person can dominate the will of another.

 Conditions for Dominating Will  The following conditions indicate when a person is in a position to dominate the will of others:

 1. Relationship Between Parties 

In order for one party to dominate the will of another, there must be a relationship between the parties involved.

 a) Real or Apparent Authority/Relation: 

This refers to situations where one party has the authority or relationship that allows them to exert influence over the other party.

• Example 1: A father exerts undue influence on his son to do something according to the father's will, threatening to sever their relationship if the son does not comply.
• Example 2: A factory owner exerts undue influence on an employee to enter into a specific agreement, threatening to terminate the employee's job if he does not agree.

 b) Fiduciary Relation: 

A fiduciary relationship is based on trust and confidence between the parties involved.

• Example: An advocate asks his client for extra money to represent him in a case, exploiting the trust between them.
• Another example is the relationship between a doctor and a patient where the doctor may exert undue influence for personal gain.

 2. Mental or Bodily Distress 

Mental or bodily distress refers to the impairment of a person's mental capacity, either temporarily or permanently. This impairment can be caused by factors such as age, illness, or mental or physical distress.

 3. Consent Under Pressure 

Consent obtained under pressure is considered unlawful and lacks binding effect. When consent is forcefully obtained, it is not considered valid.

Relations Involving Domination 

• Undue influence applies in situations where one party has a dominating position over another and abuses that influence to gain an unfair advantage.
• This principle is relevant in relationships characterized by trust and confidence, where the parties are not on equal footing.
• The mere existence of a dominant position is not enough to establish undue influence; it must be accompanied by the use of that position to gain an undue advantage.
• An undue advantage refers to benefits that are not justified by the circumstances surrounding the contract.
• Undue influence can be invoked when there is a combination of a dominating position and its exploitation to secure an unfair benefit.

Real or Apparent Authority 

•  Section 16(2) of the Indian Contract Act  discusses  Undue Influence  , which can occur when the  donee  is in a  fiduciary relationship  with the  donor  or holds a position of real or apparent authority.
•  Real Authority  involves individuals like  police officers  or  employers  who misuse their power for personal gain.
•  Apparent Authority  refers to the act of  pretending  to have real authority when it does not actually exist.

 Mental Distress 

• Mental distress alone does not constitute undue influence unless the defendant has exploited this situation to gain an unfair advantage over another party.
• Undue influence can also occur when a person is encouraged to enter into a contract just after reaching legal adulthood, as this situation reflects a lack of experience on the part of the plaintiff.
• Establishing a case of undue influence becomes easier when there is evidence indicating that the influenced person was of weak mental capacity or in poor health.

 Burden of Proof 

• The burden of proof generally lies with the party making a claim to prove the facts they rely on.
• In cases of undue influence, the claimant must demonstrate that a stronger party exerted influence over a weaker party, preventing the latter from exercising free choice in the agreement.
• However, the burden can shift to the defendant if the plaintiff establishes the existence of a confidential relationship between them and the defendant, along with suspicious circumstances surrounding the will's preparation and execution.
• In such scenarios, the defendant must prove that undue influence did not occur.
• If a person is in a position to dominate another's will, or if a transaction appears influenced by such dominance, the burden of proof rests on the dominant party to show that no undue influence was exercised.

 Presumption of Undue Influence 

 When do Indian Courts presume undue influence? 

•  Dominating Party:  If one party in a contract can dominate the will of the other and the contract seems unfair (unconscionable), the court assumes undue influence is present.
•  Pardanashin Woman:  When one party is a Pardanashin Woman, the contract is presumed to be influenced by undue pressure. The Bombay High Court explains that a Pardanashin Woman is someone who is completely removed from ordinary social interactions, not merely secluded to some extent.