Discuss undue influence or fraud.

Question: Discuss undue influence or fraud. [MPJS 2021]

Find the answer to the mains question of the Law of Contract only on Legal Bites. [Discuss undue influence or fraud.]

Answer

According to Section 16, a contract is said to be induced by undue influence when one party, who is in a position to dominate the will of the other, uses that position to obtain an unfair advantage. It focuses on the imbalance of power between the parties and ensures protection against exploitation. A dominant position may arise from a fiduciary relationship (e.g., doctor-patient, lawyer-client) or due to dependence (e.g., illness, mental weakness). To prove undue influence, it must be shown that:

• One party had a dominating position.
• The influence was used to gain an unfair advantage. If undue influence is established, the burden shifts to the dominant party to prove the fairness of the contract. Courts presume undue influence in cases involving fiduciary relationships. 

Fraud (Section 17):

Fraud involves intentional deception to induce another party into a contract. It includes false representation, concealment of facts, and any act done with the intent to deceive. Key elements include:

• False representation made knowingly.
• Intent to deceive the other party.
• Inducement to enter into the contract. Fraud renders a contract voidable at the aggrieved party’s discretion. 

In the case of Akhtar Jahan Begam v. Hazarilal, (AIR 1927 ALL 693), A sold some property to B and included a clause in the sale deed stating that he would not be liable for any loss B might suffer due to a defective title. However, A had previously sold the same property to another person but failed to disclose this fact to B. The court held that A committed fraud under the Indian Contract Act, 1872.

Both undue influence and fraud compromise free consent, making contracts voidable under the Act. These provisions ensure fairness, protecting parties from exploitation or deceit, which is essential for judicial interpretation and enforcement.