Difference Between Coercion And Undue Influence

Introduction

Contracts form a part of our daily lives. In fact, we come across so many contracts without even realising that we are a party to one. Activities such as purchasing goods from a store, getting automobiles serviced, installing applications on our mobile phones, etc., all are different forms of contracts, whether oral or expressed. But for the sake of ease of living, we do not always record every contract or reduce it into writing. Daily activities cannot be recorded regularly, but where formal contracts such as business dealings, exchange of large amounts of money, or purchase of expensive goods come into question, it is important to have recorded evidence of such transactions so that one is always aware of the terms and conditions with which both the parties to a contract are bound.

Contracts of a more formal nature, such as those required to be recorded, need to be present with certain elements, that will render the contract valid in entirety. Contracts in India are governed by the Indian Contract Act of 1872, and the Act lays down certain elements which form the basics of a contract, and without which, a contract would be void.

Free Consent

Section 10 of the Indian Contract Act states that the following elements are the essentials of a contract:

1. An agreement between the two parties must exist, which will form the material of the contract, i.e. the basis on which the contract is to be entered into.
2. The parties so entering the contract must be competent to do so.
3. The agreement should be for a lawful object, and since a contract involves consideration of some kind, the agreement should have a lawful consideration.
4. The parties to the agreement must give their consent to the agreement, and such consent must be free.
5. The said agreement must not be expressly declared as void by the law.

One of the most important points here is that of free consent. Free consent does not mean that the parties merely agreed to enter into a contract without second thoughts. It represents the principle of consensus ad idem, which means that both the parties to the agreement must mean and agree to one and the same thing[1]. And as a matter of fact, consent of the parties is one such point where it becomes easy to affect the contract through altering the idea of free consent. If the consent to the contract is not free, the contract will be held voidable and will not be enforceable in a court of law.

For example, A offers to sell his goods of a particular quality to B. B, thinking that the goods belong to A, agrees to buy them, whereas in reality those goods are stolen by A from some place. Here, A and B are thinking of different goods and thus there is no consensus ad idem.

As per Section 14 of the Contract Act, free consent is defined as consent when it is free from the following factors:

1. Coercion
2. Undue Influence
3. Fraud
4. Misrepresentation
5. Mistake

If consent is given under the apprehension of any of the abovementioned factors, such consent cannot be termed as free. A consent given in furtherance of any of the abovementioned factors is not free consent.

For example, if A intentionally hides certain important terms of a contract from B while entering into a contract with him, such contract would be voidable at the option of B because the consent of B has been obtained through misrepresentation, i.e. after concealing certain elements of the contract.

Coercion and Undue Influence

While both, coercion and undue influence, may seem similar when taken a bird’s eye view, they are essentially very different, and as a result, have been accorded different meanings and positions under the Indian Contract Act, 1872.

Both combined, these are the factors vitiating consent. Since consent of the parties to a contract is one of the most important aspects of it, if consent is obtained through coercion or undue influence, such consent will not be held valid. Coercion and undue influence both contain the idea of having some kind of influence or impact over another person, and due to such influence or impact, the person subject to it performs the task which he/she would not have ordinarily done, had there been no coercion or undue influence.

In terms of contractual agreements, coercion and undue influence may be exercised by one party to the contract over another, when that party wants the other to unwillingly enter into a contract, or enter into a contract based on the terms of the party exercising such coercion or influence. In both cases, the consent obtained is not free and the contract will be voidable at the option of the party who is coerced/influenced.

For a clear difference between Coercion and Undue Influence, as well as to ascertain the similar idea present in both the factors, it is important to define coercion and undue influence separately.

Coercion

Section 15 of the Indian Contract Act defines coercion as the commission of, or the threat to commit, an act which is forbidden by the Indian Penal Code, 1860. It also includes acts which constitute unlawful detention, or the threat to detain, any property to the prejudice of a person, in order to induce that person to enter into an agreement.

Coercion implies forcing a person to enter into a contract through unlawful means. When intimidation tactics and threats are used to coerce a person to enter into an agreement, it will amount to coercion. The means may be actual physical harm, such as causing hurt, or may be psychological harm, such as wrongful confinement. Any such means that obtains the consent of a person which could not have been obtained under lawful circumstances fall under the category of coercion.

For example, A causes B to enter into an agreement by keeping him in confinement in his basement. Here, A has committed coercion, and the consent obtained from B is not free consent.

It does not matter whether the Indian Penal Code was in force or not, where consent through coercion was obtained. For example, A and B are both aboard an English ship on the high seas, and A induces B to enter into a contract through keeping him in wrongful confinement. Here, even though the Indian Penal Code is not in force, the offence of coercion would be applicable on A.

In Chikkam Ammiraju v. Chikkam Seshamma[2], the accused induced his wife and son to execute a release of certain properties in favour of the brother of the accused, while threatening to commit suicide. The court held that the consent was not valid, and the contract too was invalid. The court also observed the difference between suicide and attempt to suicide, stating that while there is no punishment for the former, attempt to suicide is made punishable under the IPC. Attempt to suicide causes the parties induced severe mental pressure and can be used as a means of coercion.

Undue Influence

Undue influence has been defined under Section 16 of the Contract Act, and states that undue influence is exercised in such situations where the relationship between the parties is such that one party is inherently dominant over the other and possesses the capacity to influence the other party and thereby obtain an unfair advantage of some kind. The section mentions two instances where one party exercises dominance over the other:

• Where one party is an actual or apparent authority over the other, or is in a fiduciary relationship with the other
• Where the other party is deficit in mental capacity, or is defected, permanently or temporarily, by reason of age, illness, mental or bodily suffering

In both the cases, one party has certain amount of authority over the other, and if such authority is exercised in order to influence the other party to enter into a contract, such a contract will not be enforceable in a court of law because the consent obtained is through undue influence.

For example, A advanced some money to B during B’s minority, and after B’s coming of the age of majority, A, through undue influence of parental bond, obtained an amount greater than what A had advanced to B.

Relationship of both the parties is what matters most in terms of undue influence. The relationship of the parties will determine whether undue influence was exercised, and if so, then to what extent.

In Ganesh Narayan Nagarkar v. Vishnu Ramchandra Saraf[3], the court observed that unfair advantage is an advantage that is obtained through unfair means. It comes into existence when one party to the agreement bargains a favour from the other party owing to the relationship between the parties, and enjoys an unfair advantage whereas it proves unfair to the other.

Difference between Coercion And Undue Influence

Coercion and undue influence are two parts of a whole, but they stand for different meanings. In both cases, some sort of influence is exerted on the other party, with the intention to force the party to enter into an agreement, or to enter into an agreement based on the terms and conditions of the party exerting influence. But the form of pressure exerted, the relationship between the parties, and the punishment for both the acts are different.

Coercion may or may not involve physical harm, and sometimes even a threat is enough to show coercion. Acts such as pointing a gun towards a person, or locking him/her up in a place from where he/she cannot escape, in order to make him/her agree on something, would constitute coercion. It is not necessary that if a gun is pointed, it should necessarily be used to fire. Mere pointing of a gun in such a way that it becomes a threat is enough to prove coercion. Also, coercion involves causing harm, physical or mental, to another person in whom the party being influenced is interested, or any property that may be of interest to that party.

However, undue influence rests on the relationship between the parties, and no physical or mental harm is caused to the party being influenced; it is more like a black-mail. The other party does something because of the authority that the party exercising undue influence holds, and that authority is being misused to achieve an unlawful end. It signifies the placing of confidence in the party exercising influence, and that confidence is abused to obtain an unfair advantage.

Both acts, coercion and undue influence, warrant the taking of consent through unlawful means. But this does not imply that the means through which consent is obtained in coercion is the same as the one in undue influence. Further, coercion involves the provisions of the Indian Penal Code, which makes coercion a criminal act. The IPC does not come into play in undue influence, and thus, it renders it a civil wrong.

Coercion may be carried out by strangers, but undue influence is only carried out by someone holding an authority over another person, i.e. the person being influenced.

The essence of a contract lies, to a certain extent, in free consent. Whether a person is coerced into entering an agreement, or whether undue influence has been exercised on him/her, the contract becomes voidable at the option of the influenced party. Such a contract holds no place in law.

FAQs on Difference Between Coercion And Undue Influence

[1] The Indian Contract Act, 1872 (Act No. 09 of 1872), s. 13.

[2] (1917) 41 Mad. 33.

[3] (1907) 9 BOMLR 1164.