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Presumption of undue influence Sec. 16(2)

In certain cases, the existence of undue influence shall be presumed by law. These are the cases where in there is all possibility that one party has used its superior position in order to gain an unfair advantage over the other by gaining such weaker party’s consent to the contract. The ground for presuming such domination of will is due to the relation subsisting between the parties which provide an indication that the party enjoying superior position used its position to gain an unfair advantage over the other and moreover the dominant party can further influence the weaker party and hinder his pursuit of justice. Thus in such cases when the weaker party raises the question of undue influence, the dominant party has to justify the transaction and prove that there was no use of undue influence. The following are the circumstances when undue influence shall be presumed in favor of the weaker person and the burden of proof shall shift to the stronger person.
 
Following are the circumstances which indicate the presumption of undue influence:
  • One party is presumed to be in a position to dominate the will of the other
     
    In the following circumstances, a person is deemed to be in a position to dominate the will of the other.
    • Where one holds real or apparent authority (direct or indirect control) over the other, such a relation exists. For example, relationship between a parent and a child, a master and a servant, income tax officer and an assesse.
       

      Example: A sold his cycle to his servant, B, for ₹ 1,600. Subsequently, B refused to take the cycle on the ground that the cycle was overvalued. Here, A being the master, holds a real authority over B and is in a position to dominate his (B’s) will. In such cases, there is presumption to domination of will. This contract of sale is, therefore, voidable at the option of B.

    • Where one party stands in fiduciary relation: (relation of trust and confidence).
       

      Example: Between a guardian and a child, a guru and a disciple, a trustee and a beneficiary, a doctor and a patient.

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  • Where a person’s mental capacity is temporarily or permanently affected by reason of old age, illness, or mental distress.
     

    Example: Between a medical attendant and his patient.

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Some relationships where there is presumption to domination of will

  • Father and son
  • Guardian and ward
  • Doctor and patient
  • Trustee and beneficiary
  • Income tax officer and assessee
  • Pardanashin women and other contracting party

Some relationships where there is no presumption to domination of will-

  • Husband and wife
  • Creditor and debtor
  • Landlord and tenant

Rebutting (disproving) the presumption

Such presumption is established by law as a party who is in position to dominate the will of the other party would also be in a position to curb or adversely affect the plea raised by the weaker party. It also provides an opportunity to the dominant party to rebut the presumption, but if the presumption is not rebutted then such a presumption would prevail. The above presumptions can be rebutted by a party (dominating party) seeking to set the contract aside then such a party must prove that
  • The dominating party has made full disclosure of all the facts to the weaker party
  • The weaker party has understood the terms of the contract and its effect
  • The weaker party was in receipt of competent independent advice before entering into the contract
  • The transaction was not unconscionable (unreasonable)

Other cases of undue influence

  • Pardanashin woman A woman who observes complete seclusion (i.e. who does not come in contact with people other than her family members) is called a pardanashin woman. If a pardanashin women raises the plea of domination of will then a contract with a pardanashin woman is presumed to have been induced by undue influence. The contract is voidable at the option of such a woman. This special protection is provided by law only to protect them from being cheated by dishonest people. The other party has to prove that undue influence was not exercised by proving that-
    • The terms of the contract were explained to her fully and clearly
    • She was in receipt of independent competent advice
    • She understood the terms of the contract completely and its effect on her interests
    • The terms of the contract were equitable
  • Unconscionable transactions: Unfair or unreasonable bargains belong to the category of ‘unconscionable transactions’. These are such transactions where between two contracting parties; one is in a dominant position and makes an exorbitant profit of the other’s distress. Unconscionable bargains mostly take place in money lending transactions where moneylenders charge high rates of interest from needy borrowers. The presumption of undue influence on the ground of high rate of interest is raised only when the following two things are proved:
    • That the money lender was in a position to dominate the will of the borrower and
    • That the bargain is unreasonable i.e., rate of interest is excessive without any valid reason
       

      Example: 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. In case if undue influence is proved then the court would set aside the original bond and issue a new bond with terms and conditions which are reasonable and binding upon both the parties

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Burden of proof in case of undue influence

The burden of proof in case of undue influence can be studied under the following two heads
  • In case of presumption of domination of will- There are certain cases were the law presumes domination of will by one party over the other, in such cases the dominant party can rebut such presumption.
     
    The burden of proof lies on the dominating party and the dominating party has to prove
    • That there is no strong relationship between the parties
    • That he had disclosed all material facts
    • That he had given enough time and opportunity to the other party to receive competent and independent advice
    • The transaction was not unconscionable
  • In all other cases- The law however does not presume undue influence in all transactions and hence in transactions were there is no presumption of domination of will then the other party (aggrieved party) has to prove the application of undue influence.
     
    The burden of proof lies on the aggrieved party and the aggrieved party has to prove that
    • The relationship between the parties was such that the other party was in a position to dominate the will
    • The other party actually used his influence to obtain an unfair advantage
    • The transaction was unconscionable. i.e. the transaction helped the dominant party to secure an unfair advantage at the detriment of the other




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