Coercion and undue influence are terms of contract law, legally recognized under the Indian Contract Act, 1872, which is the law governing contractual obligations between parties in the State of India.
Section 2(h) of the aforementioned Act, defines contract as “an agreement enforceable by law.” There is a saying that “all agreements are not contracts but all contracts are agreement.” Section 10 validates the statement. According to Section 10, “All agreements are contracts if they are made by free consent of parties competent to contract for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void.” Hence, we find 5 essential conditions that is required for an agreement to qualify as a contract. They are ;-
1. Free consent of the parties
2. Parties must be competent to contract
3. Lawful consideration
4. Lawful object
5. Not hereby expressly declared to be void.
Absence of conditions( b-e) renders the agreement void whereas, absence of condition (a) i.e. free consent makes the contract voidable i.e. one of the parties whose consent to the contract is not free can avoid the contract. A consent is said to be ‘free” when it is not caused by coercion, undue influence, fraud, misrepresentation and mistake. Only in the case of mistake the contract is void. [i]
According to Section 15 of the Indian Contract Act, “Coercion is the committing, or threatening to commit, any fact forbidden by the Indian Penal Code, or the unlawful detaining, or threatening to detain, any property, to the prejudice of any person whatever, with the intention of causing any person to enter into an agreement.”
Explanation – It is immaterial whether the Indian Penal Code (XLV of 1860), is or is not in force in the place where the coercion is employed.
The following illustration[ii] would elaborate further on this –
A, on board an English ship on the high seas, causes B to enter into an agreement by an act amounting to criminal intimidation under the Indian Penal Code.
A afterwards sues B for breach of contract at Calcutta.
A has employed coercion, although his act is not an offence by the law of England, and although section 506 of the Indian Penal Code was not in force at the time when or place where the act was done.
Techniques of causing coercion –
Coercion is said to be caused when consent is obtained by pressure exerted by either of the following ways :-
1. Committing or threatening to commit any act forbidden by the Indian Penal Code; or,
2. unlawful detaining or threatening to detain any property.
Act forbidden by the Indian Penal Code –
The definition makes it clear that the commission or threatening to commit any act must be forbidden/prohibited by the Indian Penal Code. IPC is the substantive law defining and prescribing punishments for criminal offences in territory of India.
In Chikkam Ammiraju v. Chikkam Seshama [iii] , the Madras High Court had to decide whether a threat to commit suicide was coercion. A, a Hindu, by a threat to commit suicide, induced his wife and son to execute a release in favour of his A’s brother in respect of certain properties which they claimed as their own. It was held by a majority “that a threat to commit suicide comes within the meaning of Section 15 of the Indian Contract Act, 1872 and the release deed was therefore voidable in nature. Threat to commit suicide was considered as an act forbidden by the Indian Penal Code, 1860. The majority bench further held, that when a person threatens to kill oneself, he is acting to his own prejudice and also for the prejudice of his spouse and son, and the basic requirements of Section 15, were thus fulfilled. However, Oldfield, J., dissented from the majority by saying that suicide is not an act forbidden by the Indian Penal Code but only an attempt to suicide is.
Pollock and Mulla too are of the same opinion as that of the minority view. They also recommend an amendment to Section 15 as to cover such instances also.[iv]
The Law Commission of India has also recommended the amendment of Section 15.[v] The recommendation is as under :-
“The proper function of the Indian Penal Code is to create offences and not merely to forbid. A penal code forbids only what it declared punishable. There are laws other than the Indian Penal Code performing the same function. We suggest that the words “any act forbidden by the Indian Penal Code” should be deleted and a wider expression be substituted thereof so that penal laws other than the Indian Penal Code may also be included. The explanation should also be amended to the same effect.”
Unlawful detaining of property –
Section 15 also states that coercion can also be caused be unlawful detaining, or threatening to detain, any property, to the prejudice of any person whatever, with the intention of causing any person to enter into an agreement. For example, it is coercion when an agent who is due to leave refuses to hand over the account books to the new entrant until the principal executes release in his favour. [vi] The detention of property must be unlawful in nature.
The section also states that the act causing coercion should not necessarily be against the a party to the contract. If the act is to the prejudice of any person whatever, and with the intention of causing any person to enter into an agreement, it is enough to cause coercion. For example, in Ranganayakamma v. Alwar Setti[vii] the widow was forced to adopt a child by the relatives of the adopted boy. If she didn’t do so the relatives did not allow the dead body of the widow’s husband to be taken out of home until the adoption was made. This amounted to coercion.
Section 16 of the Indian Contract defines Undue Influence. The Section reads as:
(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)
From the aforementioned definition, the following are the necessary ingredients of undue influence –
- The relations subsisting between the parties are such that one of the parties is in a position to dominate the will of the other;
- Such a person uses his dominant position to obtain an unfair advantage over the other
In the following cases a person is deemed to be in a position to dominate will of the other party –
1.Where he holds a real or apparent authority over the other –
If a person holds a real or apparent authority over the other party it is expected that he won’t abuse that authority to obtain an undue advantage from the other party.
2. Where he is in a fiduciary relation to the other party-
Fiduciary relationship means a relationship of trust and confidence. When a person imposes faith and confidence on the other, he expects not to be betrayed. If the other party betrays the confidence and truth reposed in him and gains an undue advantage then the suffering party has an option to avoid the contract. Examples of fiduciary relationship include –
- Solicitor and client[viii]
- Trustee and trust[ix]
- Spiritual adviser and devotee[x]
- Medical attendant and patient[xi]
- Parent and child[xii]
- Husband and wife[xiii]
- Master and servant[xiv]
- Creditor and debtor[xv]
- Guardian and ward[xvi]
3. Where he enters into a contract with a person whose mental capacity is temporarily or permanently affected by reason of age, illness or bodily distress – The law tries to protect people whose mental capacity might be temporarily or permanently be affected on account of his old age, illness or bodily distress and therefore, doesn’t let anyone take undue advantage of such a person.
In Merci Celine D’Souza v. Renie Fernandez,[xvii] an infirm person, totally dependent on the defendants for his existence, gifted his property to them. It was discovered by the court that the defendants tried to obtain an undue advantage and the gift deed was not attested by the two witnesses as the law requires it to be.
Further, sub-section (3) of Section 16 states that in case of a fiduciary relationship, if a person in a dominant position gains an undue advantage in a transaction, in that case the burden of proof will lie on him and not on the aggrieved. He has to prove that the transaction was carried out without undue influence. The rule regarding burden of proof is mentioned under Section 111 of the Indian Evidence Act, which reads as under:
“Where there is a question as to the good faith of a transaction between parties, one of whom stands to the other in a position of active confidence, the burden of proving the good faith of the transaction is on the party who is in a position of active confidence.”
The Difference between Coercion and Undue Influence
From the detailed explanation of coercion and undue influence, we can find that there are certain points in common. In both the cases the consent is not “free,”[xviii] and the contract is voidable in nature.[xix] However, there are many differences as well –
1. Coercion is defined under Section 15 of the Act whereas, Undue Influence is defined under Section 16 of the Act.
2. In Coercion the parties may or may not be related to each other. It is not mandatory for any kind relationship to exist between the parties. However, in the case of undue influence the parties are in relation to each other.
3. Coercion is committed when a party obtains the consent of the other party by committing or threatening to commit any act which is punishable under the Indian Penal Code, 1860 to make him enter into an agreement. Undue Influence refers to an improper use of authority or power by one party over the other to make him enter into an agreement.
4. In coercion use of physical force exists. In undue influence there exists use of mental or moral pressure.
5. In coercion. when the contract is avoided, the benefit received has to be restored or refunded to the injured part. Thus, the injured party has to be put in his original place. When the contract is avoided in the case of undue influence, it is the discretion of the court whether to direct the aggrieved party to restore or refund the benefit received.
[ii]Illustration to Section 15.
[iii]I.L.R (1918) 41 Mad. 33.
[iv]Indian Contract and Specific Relief Acts, 9th ed., 150.
[v]13th Report (1958), p.21.
[vi]Muthiah Chettiar v. Karupan Chetti, I.L.R (1927) Mad. 786: A.I.R. 1927 Mad. 852:105 I.C.5.
[vii] I.L.R (1889) 13 Mad. 214.
[viii]Davies v. Provincial Marine Insurance Co., 8 Ch. D. 469; Amrit Lal v. Ram Kumar, A.I.R 1962 Punj. 325.
[ix]Raghunath v. Vajivandas, I.L.R (1906) 30 Bom. 578.
[x]Philip v. Franciscan Association, A.I.R 1987 Ker. 204.
[xi]Daya Shankar v. Bachi, A.I.R. 1982 All. 376.
[xii]Subhash Chandra v. Ganga Prasad, A.I.R. 1967 S.C. 878.
[xiii]Bank of Montreal v. Stuart, (1911) A.C. 120; Tauga Bai v. Yeshvant, A.I.R. 1945 P.C. 8.
[xiv]U.P. Government v. J.R. Bhatta, A.I.R. 1956 All. 439.
[xv]Dhanipal Das v. Maneshar Baksh Singh, 33 I.A. 118.
[xvi]Daya Shankar v. Bachi, A.I.R. 1982 All. 376.
[xvii]A.I.R. 1998 Kerala 280.
[xix]Section 19 and 19A.