When a party enters in to a contract under any kind of influence, mental pressure or persuasion, which prevents him from exercising a free and independent judgment, is known as undue influence. It is an abuse of one's position and to achieve unfair benefit. Such contract is voidable at the option of the influenced party to make contract. Undue influence is an influence which compels another person to do some thing which he would not have done if he has been a free mind. Thus undue influence is the domination of a weak mind by a strong mind to the extent of exploitation in the context of an agreement.

• Definition of Undue Influence:

Section 16(1) of the Indian Contract Act, 1872 has defined undue influence as "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."

 Likewise Section 14.1(b) of Nepal Contract Act, 2056 states undue influence means "Influence exercised by a person upon another person who is under his influence for personal advantage or interest. Undue influence means relation abuse agreement.

From these definitions, it is clear that one of the party is in a position to dominate the will of the other and uses that position to obtain an unfair advantage over the other is an undue influence and a contract is formed in this way is called a contract by undue influence.

According to the section 14(2) of the Nepal Contract Act, 2056 the following person can dominate the will of another:

• Person under his detention, guardianship or protection.
• Person whose mental capacity is temporarily or permanently affected by reason of illness of bodily or mental distress.
• Person over whom there is possibility to exercise economic or social influence.

A contract formulate by undue influence is voidable at the option of aggrieved party whose consent is obtained by using undue influence. The aggrieved party is entitled to avoid the contract caused by undue influence. Such contract remains valid until it is declared void by the court or the aggrieved party remains silence or voluntarily accepts it

Presumption of Undue influence:

• Where a party holds a real or apparent authority over the other. (like- Master and Servant, Parent and Child)
• Where a party stands in a fiduciary relationship to the other. (like- Lawyer and Client, Trustee and beneficiary)
• Where a party playing a role of guardian or protector.
• When party makes a contract with a person whose mental capacity is temporarily or permanently affected by reason of old age, illness or mental or bodily distress it is often subject to influence of others and law provides protections to such a distressed person.

This is, however, no presumption of undue influence in the following cases:

• Husband and wife
• Mother and daughter
• Grandson and Grandfather
• Landlord and tenant
• Creditor and doctor.

In these cases, undue influence shall have to be proved by the party alleging that undue influence existed.

Burden of proof:

a.  The burden of proof lies on the party who is in a dominant position only When:

•  There is existed the power to dominate other's will.
• It appears that the transaction is not conscionable one.
• The circumstances are existed where undue influence is presumed.

b.  The burden of proof lies on the alleging party:

•  Undue influence cannot be presumed in the case of landlord and tenant or creditor and debtors.
• There is no presumption of undue influence where a lack of judgment, a lack of the knowledge of facts.

When suspected undue Influence:

 Undue influence is suspected in the following cases:

• Where consideration is inadequate.
• Where fiduciary relationship is between the parties.
• Where inequality is between the parties as regards to age, intelligence, social status etc.
• Where there is absence of independent advisors for the weaker/dominating party.
• Where there is unconscionable bargain or is against the conscience of reasonable person.

 Difference between coercion and undue influence:

Although in some respects both are similar but there are some major differences which are given below: