When can it be said that in a contract one party is able to dominate the will of another party? Discuss with suitable examples.

Question: When can it be said that in a contract one party is able to dominate the will of another party? Discuss with suitable examples. [Punjab JS 2019]

Find the answer to the mains question of the Law of Contract only on Legal Bites. [When can it be said that in a contract one party is able to dominate the will of another party? Discuss with suitable examples.]

Answer

According to Section 16 of the Indian Contract Act, a contract is said to be influenced by undue influence when one party is in a position to dominate the will of the other party. This dominance can arise from various relationships or circumstances where there is an imbalance of power, trust, or vulnerability. Undue influence can render a contract voidable at the option of the party who was under its influence.

Ability to dominate the will of other:

The dominant position is not defined in the Indian Contract Act but Section 16(2) provides certain conditions when a person is in a position to dominate the will of another. Cases, where a person is in a position to dominate the will of others, are as follows:

There must be a relation between the parties:

a) Real or apparent authority/relation in which one party can be dominated by the other party. For example, father and son, mother and daughter.

b) Fiduciary relation is the relation which is made upon the belief and trust between the parties. One party must believe the other. For example, Advocate and client, teacher and student, Doctor and patient.

Here's a discussion with suitable examples:

Parent and Child Relationship:

Example: A elderly parent asks their financially dependent adult child to transfer a valuable property to them, promising to take care of the child's needs in return. The parent's position of authority and dependency on the child create an imbalance, leading to undue influence.

Doctor and Patient Relationship:

Example: A patient, relying on the medical expertise and advice of their trusted doctor, agrees to pay an exorbitant fee for a medical procedure that is not necessary. The patient's vulnerability and dependence on the doctor's knowledge give rise to undue influence.

Guardian and Ward Relationship:

Example: A legal guardian misuses their authority over a minor ward's financial affairs, pressuring the ward to sign a contract that is highly unfavourable to the ward's interests. The guardian's control over the ward's financial matters constitutes undue influence.

Spiritual or Religious Advisor and Follower Relationship:

Example: A spiritual guru, with a strong influence over their followers, persuades a devotee to transfer all their assets to the guru as a sign of devotion and spiritual progress. The devotee's trust and reliance on the guru's spiritual guidance can result in undue influence.

Bank and Illiterate Customer Relationship:

Example: A bank, aware of a customer's illiteracy and lack of understanding of financial matters, convinces the customer to sign a loan agreement with significantly unfavourable terms. The bank's knowledge of the customer's vulnerability and lack of understanding constitutes undue influence.

In all these examples, the dominant party takes advantage of the weaker party's vulnerability, trust, or dependency to influence their decision-making process. Undue influence can involve various forms of coercion, manipulation, or misuse of authority.

If undue influence is proven, the affected party may have the right to rescind or set aside the contract. In the case of Diala Ram v. Sarga, AIR 1927 Lahore 536, the defendant was already indebted to the plaintiff, who was a village moneylender. He again took a fresh loan from a plaintiff and then executed a bond, wherein he agreed to pay some interest. The court held that the contract was unconscionable and therefore, the burden of proof was on the plaintiff to show that there was no undue influence in this case. The burden of proving that the contract was not induced by undue influence is to lie upon the person who was in the position to dominate the will of others if the transaction appears to be unconscionable.