According to section 16 of The Contract Act, A contract 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.


From the above definition, it is clear that undue influence is said to have existed when these two conditions are fulfilled
(a)     Dominating Position: The relations between the parties are such that one of them is in a position to dominate the will of the
(b)      Unfair Advantage: The party having such position, has used that position to obtain an unfair advantage over the other
Illustration: X having advanced money to his son Y during his minority, obtains by misuse of parental influence, a bond from Y for a greater amount than the sum due in respect of the advance. In this Illustration, It will be assumed the X has employed undue Influence


According to section 16(2) of the Contract Act, A person is presumed to have dominating position under the following circumstances
1.       Real or Apparent Authority: Where one of the contracting party holds real or apparent authority over the other contracting party, it is said that he or she is in dominating position and can apply undue influence. For example, the relationship between master and servant manager of a company and an employee, police officer and an accused person.
2.       Fiduciary Relation: A person can dominate the Will of another in a contract, where he stands in a fiduciary relation to the other. Fiduciary relation means a relation of mutual trust and confidence, and mutual love and affection. Their relations may be in the following shapes:
(a) Father and son
(b) Guardian and ward
(c) Grandfather and grandson
(d) Landlord and tenant

(e) Doctor and patient
(f) Husband and Wife etc.

3. Mental Distress: A person may have dominating position over the Will of a person who mentally distressed A person is said to be mentally distressed, whose mental capacity is temporarily or permanently affected by reason of age, illness or mental or bodily distress.

                 BURDEN OF PROOF: Whether the undue influence have been employed or not, depends upon the relation between the contracting parties and it is the responsibility of the party to prove who claim that the other contracting party has received an unfair advantage from the contract. But in case of a contract With pardanashin lady, the burden of proof lies upon the person who contracts with a pardanashin lady that he has not applied undue influence. A pardanashin lady refers to a woman who observes complete seclusion (parda) from a contract with people outside her own family.


When the consent of any of the contracting party is caused by Undue influence, the contract is voidable at the option of a party whose consent is so caused.
Illustration: A teacher purchases a motorcycle from his student B for Rs. 20000 whereas the market price is Rs. 40000 It means that undue influence has been applied and a contract will be voidable at the option of B.