project on position of domination in contract.docx

8/10/2019 PROJECT ON POSITION OF DOMINATION IN CONTRACT.docx

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POSITION OF DOMINATION IN CONTRACT

Contract

Shaik fazil

2013103

DAMODARAM SANJIVAYYA NATIONAL LAW

UNIVERSITY

VISAKHAPATNAM

MARCH 2014


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Acknowledgement

My project is position of domination in contract to complete this project Dr. Aparup

pakhira sir helped much and suggested me books

I want to say that he given me such a fantastic topic and he helped lot by giving idea how to

do the project.

At last I want to say I am so happy to do this project.


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S.no name of topics Page no.1. Introduction 5

2. Definition of contract and domination 5

3. Section 16 undue influence definition 6

4. Ability to will of domination 7

5. Consent under pressure 7

6. Subtle species of fraud 7

7. Relation which involve in domination 8

8. Presumption of undue influence 9

10. The rises of presumption

1. Unconscionable Bargains,

2. Inequality of bargaining power.

10

11. Unconscionableness

1. Unconscionable in money leading transaction

2. Position of domination necessary for presumption toarise.

10

11

11.

12. Inequality of bargaining power 18

13 Bibliography 20


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List of cases:

1.Williams Vs. Bayley.

2.

Lancashire loans VS Black

3.

Wajid Khan Vs Raja Ewaz Ali Khan

4.

Raghunath Prasad Sahu VS Saruj Prasad Sadu

5.

Lloyds Bank Vs Bundy


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Research methodology:

SOURCES:

1. Books

2.

Internet

RESEARCH TYPE: Doctrinal type of research has been followed in this project.


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Introduction:

Objectives:

The main object of this project to show how the person shows dominationtowards

others.

In what condition one person showsdominationon other.

In this project I am trying to say that a person try to dominate the will of other whena person is mentally challenged on or the person who is minor.

It can be said that one party is able to dominate the will of another? The answer is in

all cases where there is active trust and confidence between the parties or the parties

are not on equal footing.

In this project I try to say that in some cases presumption of undue influence is also

raised. The effect of presumption is that once it is shown that the defendant was in the

position to dominate the will of plaintiff it will be presumed that he must have used

his position to obtain an unfair advantage. It will be then open for the defendant to

show the plaintiff freely consented.

In what cases presumption is raised:

Unconscionable Bargains, Inequality of bargaining power.

Definition of domination:

(a)Control or power over another or other.

(b)The exercise of such control or power.


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Ability to dominate will of another

Sometimes the parties of the agreement are so related to each other that one of them is

able to dominate the will of another. The who occupies the superior position may prevail

upon the other to his consent to an agreement to which he, but for the influence exerted,

would not have consented. The relationship between the parties so as to enable one of

them to dominate the will of another is a sina qua non for undue influence to come into

play. A spiritual advisor, for example, in a case before the Allahabad High Court, induced the

plaintiff, his devotee to gift him the whole of his property to secure benefits of the soul to

the next world. Such a consent is said to be achieved by undue influence. Would any

reasonable man in full possession of his senses and not undue influence of some kind or theother do such a thing? the court asked.

Consent under pressure

In a mediclaim insurance policy, the insured was forced and pressurized to consent to

exclusion to cover for cardiac ailments. It was held that the consent being not lawful, it had

no binding effect.


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Subtle species of fraud

Undue influence1is said to be subtle species of fraud whereby mastery is

obtained over the mind of the victim by the insidious approaches seductive artifices.

Sometimes the result is brought by fear, coretion or other domination, calculated to

prevent expression of the victimstrue mind. It is constrait underming free agency,

overcoming the powers of resistance, bringing about the submission of other.

The following statement bears the difference between undue influence and coercion.

The law a distinction between duress and undue influence:

The laws a distinction between Duress (coercion) is the is the execution of a

contract or deed occurs when there is a physical compulsion of the person , which

must be very rare, or when there is a threat to the persons life or limb or threat of a

physical beating or imprisonment. It may also account threats of a wrongful

imprisonment or prosecution of a person and possibility of the persons near relative.

In contract to duress, undue influence may exist without violence or threats of

violence against the victim. It depends upon the existence of a relationship between

the two parties which causes one to place a confidence in the other which produces a

natural influence over the one which the other abuses to his own advantage2.

1. section 16 undue influence A contract is said to be induced by influence where the relation subsisting between the parties are such

that one of the parties is in the position of domination the will of others and uses that position to obtain an unfair advantage over the

other.In particular and without prejudice to the generality of the foregoing principle, a person is deemed to be in a position to

dominated the will of another---

Where he holds a real or apparent authority over the other or where he stands in a fiduciary relation to other or where he stands

in fiduciary relation to the other; or

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.

(2) Where a person who is in the position of dominate the will of the others, enter into contract with him and the transaction

appears, on the face of it on the evidence of adduced, to be unconscionable, the burden of proving that such contract was

not induced by undue influences shall lie up on the person in a position to dominate the will of the other.

(A) A having advanced money to his son, B, during his minority, upon B' s coming of age obtains, by misuse of parental influence, a

bond from B for a greater amount than the sum due in respect of the advance. An employs undue influence.

(B) A, a man enfeebled by disease or age, is induced, by Bs influence over him as his medical attendant, to agree to pay B an

unreasonable sum for his professional services. B employs undue influence.

(C) A, being in debt to B, the money- lender of his village, contracts a fresh loan on terms which appear to be unconscionable. It

lies on B to prove that the contract was not induced by undue influence.

(D) A applies to a banker for a loan at a time when there is stringency in the money market. The banker declines to make the loan

except at an unusually high rate of interest. A accepts the loan on these terms. This is a transaction in the ordinary course of

business, and the contract is not induced by undue influence.

2Saxon Vs saxon, (1976) 4 WWR 300, 305,306, (BC SC).


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Relations which involve domination

When can it be said that one party is able to dominate the will of another? The answer is in

all cases where there is active trust and confidence between the parties or the parties are

not on equal footing. The principle is applied in every case where influence is acquired and

abused, where confidence is reposed and betrayed. It applies to all variety of relation in

which domination may be exercised by one person or another. The relationships which may

develop a dominating influence of one over another are infinitely various. There is no

precisely defined law setting limits to the equitable jurisdiction of a court to relive against

undue influence. This is a world doctrine, not of neat and tidy rules. The courts of equity

have developed a body of learning enabling relief to be granted where the has to treat the

transaction as unreachable unless it can be held to have been procured by undue influence.

It is the unimpeachability at law of disadvantageous transactionwhich is the starting point

from which the court advances to consider whether the transanction is the product of

merely of ones own folly or the undue exercised by the other. Definition is a poor

instrument when used to determine whether a transaction is or is not unconscionable : this

is a question which depends on the facts of the case, for example,

Cases :

Williams

Vs.

Bayley.

A son forged his fathers signature on several promissory notes and paid them into hisbanking account. When the truth came into light, the manager of the bank threatened the

prosecution of the son and a transprortation if a satisfactory solution was not found. To

avert his threat the father agreed to mortgage on his property in return of the promissory

notes. Subsequently the father thought to get the agreement cancelled on the ground that

he was influence by the threat.

Presumption of Undue influence:

In certain cases presumption of undue influence is raised. The effect of presumption is that

once it is shown that the defendant was in the position to dominate the will of plaintiff it will

be presumed that he must have used his position to obtain an unfair advantage. It will be then

open for the defendant to show the plaintiff freely consented3. For example, in

3Krishna Mohan kul V pratima Maity, (2004) 9 SCC 468: AIR 2003 SC 4351, burden on the person standing in fiduciary relationship.


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Case:

Lancashire loans

VS

Black4

The defendant was married a girl of full age. She gave a security for the loan which her mother took

from a company. The only advise she has advise from the solicitor of the company.

Scrutton LJ held that in the case of contractual advantage obtain from a person coming with in

certain defined relations, such as the relation of parents and young child, solicitor and religious,

client, religious superior and inferior, by the related member of the that class, it is enough to prove

the existence of such a relation to through on the recipient of the advantage of the burden of

proving independence advise to the independent donor and in other respects justifying the

transaction. His lordship then pointed out that married women is not necessarily independence of

the influence of her mother, such cases should be delt with on there own facts, and not on any

presumption. On the fact of the case the court found that she was under the influence of her

mother5.

Similarly, where a parade lady of 70 years, having three daughters, was supposed to have gifted her

entire land to the defendant, who was the tenant of that land, it was that land, it was held from the

position of his position of the land he must have dominated the women and burden lay up him to

show the circumstances of the gift. He being not able to do so, the gift deed was set aside.

The presumption is raised in the following cases;

1. Unconscionable Bargains,

2. Inequality of bargaining power.

1) Unconscionableness

4(1934) 1 KB 380 CA.

5For a survey of a large number of such cases see Che Som Binte Yip V. Maha P Ltd, (1989) 2 CLJ 802, 906-911, High court, Singapore.


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Where one of the parties to contract is in the position of Domination the will of the other and

the contract is apparently unconsciobnable, that is, unfair, the law presumes that consent

must have been obtained by undue influence. The burden is shifted to the stronger party to

move that he did nothing to over bear the will of other. An instructive illustration is the

decision of thewill of other. An illustration is the decision of Privy Council in the Case:

Wajid Khan

Vs

Raja Ewaz Ali Khan6

An old and illiterate Woman, incapable of any business, conferred on her confidential

managing agent, without any valuable consideration, an important pecuniary benefit under

the guise of trust.

Their Lordship said that all the facts of the case go to show that there was active undue

influence. The onus is on the grantee to show conclusive that the transaction is honest, bona

fide, well understand, the subject of independent advise and free from undue influence.

Unconscionable in money leading transaction:

Unconscinable bargains have been witnessed mostly in money lending transaction and in

gifts. But the principle is not confined to such tractions only. In case before the Bombay high

court, a poor former, being unable to pay a loan, executed a sale deed in favour of the creditor

of his property three time the value of the sum due, the court granted relief by setting aside

the sale and allowing the former to pay back the lender within a fixed period.

6 (1890-91) 18 1 A 144


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Position of domination necessary for presumption to arise:

It should, however, be borne in mind that the presumption of undue influence on the ground

of unconscionableness of the bargain is raised only when one of the parties on equalfooting

the mere unconscionableness of the bargain does not create the presumption of undue influence.

The mere fact that the bargain is a hard one is no ground in itself for granting relief. The was pointed

out by the privacy council in the case

Raghunath Prasad Sahu

VS

Saruj Prasad Sadu7

Case

Contract - Applicability of Section 2 of Indian Contract (Amendment) Act, 1809 -

Moneylenders Act, 1900 - High Court allowed Suit filed by Plaintiff-Respondent for

recovery of amount of principal and compound interest due by Appellant-Defendant under

mortgage - Hence, this Appeal - Whether, Appellant fell within protective provisions of

Section 2 of 1809 Act - Held, Appellant-borrower was sui juries, had full power of

bargaining and of burdening his estate, that his estate was not under Court of Wards, and that

he lay under no disability - Further, only relation between parties that was proved was simply

that they were lender and borrower - Hence, it had not been proved that lender was in a

position to dominate the will of the borrower - Even, though bargain had been

unconscionable, remedy under 1809 Act did not came into view until initial fact of position to

7(1924) 19 LW 470: AIR 1924 PC 60.


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dominate would have been established - Once that fact was established, then unconscionable

nature of bargain and burden of proof on issue of undue influence came into operation -

Hence, this case did not form any authority in construction of 1809 Act - Therefore, decree of

High Court was varied by allowing compound interest on principal at rate of 2 per cent, per

mensem from date of execution of bond until 25th September 1917 and thereafter simple

interest at rate of 6 per cent, per annum up to date of realization - Appeal disposed of.

Ratio Decidendi

"Burden of proving that contract is not induced by undue influence shall lie upon person in

position to dominate will of other."

JUDGMENT

Shaw, J.

1. This is an appeal from a decree, dated November 9, 1920, of the High Court of Judicature

at Patna, which varied a decree, dated September 25, 1917, of the Subordinate Judge of

Arrah.

2. The suit is for recovery of the amount of principal and interest due by the appellant to the

respondents (the plaintiffs) under a mortgage of date May 27, 1910 The Subordinate Judge

gave decree in the mortgage suit, but only allowed simple interest. The High Court allowed

compound interest.

3. The substantial question raised on the appeal is whether the appellant, in the circumstances

proved in the case, fell within the protective provisions of Section 2 of the Indian Contract

(Amendment) Act, 1809.

4. It may be convenient to set out that section in full: "2. Section 16 of the Indian Contract

Act, 1872, is hereby repealed, and the following is substituted therefor, namely:

16. - (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.


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(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.

5. It is in the view of the Board by that section that the question arising between these parties

falls to be settled, and not by reference to the legislation of other countries, e.g., the English

Moneylenders Act. The statute to be here construed is the Indian Contract Act as amended It

is accompanied with danger to invoke as authority in an Indian case expressions whichmerely connote the principles which underlie a particular English statute, and form a guide to

its interpretation. As will be seen, this general observation is required by reason of the

citation of certain authorities alluded to in the judgment of the Subordinate Judge and referred

to in the argument before their Lordships' Board.

6. The appellant is a member of a joint undivided family owning a property of considerable

value, including (inter alia) 186 villages, assessed to revenue for about Rs. 17,000 per annum.

7. The mortgage is dated May 27, 1910. It is for the sum of Rs. 9999 borrowed from the

plaintiffs. The rate of interest is covered by the following provision : "I, the declarant, do

promise that I shall pay interest on the said debt at the rate of 2 per cent, per mensem on the

30th Jeth of each year. In case of non-payment of the annual interest, the interest will be

taken as principal and interest will run thereon at the rate of 2 per cent, per mensem, that is,

interest will be calculated on the principle of compound interest."

8. There can be no question that these terms were high : if payment was not made the sumdue on the mortgage would speedily mount up. By the decree of the High Court which was


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pronounced on November 9, 1920, it is seen that the original debt of Rs. 10,000 had reached,

with interest and costs calculated up to May 8, 1921, more than a lac of rupees - namely, Rs.

112,885. In eleven years the stipulation for interest at 24 per cent, compound had magnified

the sum covered by the mortgage more than eleven-fold. It is upon these facts, coupled with

one other about to be mentioned, that the appellant takes his stand.

9. The statement in the defence admits that at the time of the execution of the mortgage the

defendant was owner of one half of a valuable joint family property. The owner of the other

half was his father. Father and son had quarrelled. Serious allegations are made by the son

against the father; whereas it appears that the father had instituted criminal proceedings

against the son. Shortly before the date of the mortgage the defendant had borrowed Rs. 1000

from the plaintiffs, so as to enable him to defend himself in these criminal proceedings. It is

alleged that they caused him great mental distress, and that he required more money to

conduct his litigations. That is the story.

10. Evidence was taken in the case. It is sufficient to say that the defendant gave no evidence

at all. It is quite plain that no Court can accept a story thus unproved by its author as

establishing a case either of mental distress or of undue influence under the Indian Contract

Act. The only case which the appellant has is the case derived from the contents of the

mortgage itself.

11. It is argued with force that these are unconscionable, and that it is the duty of the Court in

India to step in either to rescind the contract or to rectify the bargain. It was the latter course

which was argued for in the present case. In support of this argument much reliance was

placed upon the judgment delivered by Lord Davey in Dhanipal Das v. Maneshar Bakhsh

Singh (1906) L.R. 33 I.A. 118.

12. Before, however, addressing themselves to the authorities cited their Lordships think it

desirable to make clear their views upon, in particular, Section 16, Sub-section 3, of the

Contract Act as amended. By that section three matters are dealt with. In the first place the

relations between the parties to each other must be such that one is in a position to dominate

the will of the other. Once that position is substantiated the second stage has been reached -

namely, the issue whether the contract has been induced by undue influence. Upon the

determination of this issue a third point emerges, which is that of the onus probandi. If the

transaction appears to be unconscionable; then the burden of proving that the contract was not


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induced by undue influence is to lie upon the person who was in a position to dominate the

will of the other.

13. Error is almost sure to arise if the order of, these propositions be changed. The

unconscionableness of the bargain is not the first thing to be considered. The first thing to be

considered is the relations of these parties. Were they such as to put one in a position to

dominate the will of the other? Having this distinction and order in view the authorities

appear to their Lordships to be easily properly interpreted.

14. In the judgment of this Board in Dhanipal Das v. Maneshar Bakhsh Singh (1906) L.R. 33

I.A. 118 the outstanding effect was that the borrower who mortgaged the estate was actually,

at the date of the transaction, under the control of the Court of Wards. He was treated, to use

the language of Lord Davey, as "under a peculiar disability" and placed in a position of

helplessness, and the lender was proved to have been aware of that and, therefore, in a

position to dominate the borrower's will. Lord Davey thus expressed the Board's view Ibid.

126 : "Their Lordships are of opinion that although the respondent was left free to contract

debt, yet he was under a peculiar disability and placed in a position of helplessness by the fact

of his estate being under the control of the Court of Wards, and they must assume that Auseri

Lal, who had known the respondent for some fifty years, was aware of it. They are therefore

of opinion that the position of the parties was such that Auseri Lal was ' in a position to

dominate the will' of the respondent within the meaning of the amended Section 16 of the

Indian Contract Act. It remains to be seen whether Auseri Lal used that position to obtain an

unfair advantage over the respondent."

15. This case was followed in terms in Maneshar Bakhsh Singh v. Shadi Lal (1909) L.R. 36

I.A. 96, in which the bond in suit was given by a talukdar in Oudh without the knowledge and

consent of the Court of Wards after his estate had been placed under it. In these

circumstances the former case was followed, and Lord Collins expressed the opinion of the

Board to be that they "are satisfied that in this case also the borrower was placed in such a

condition of helplessness that the lender was in a position to dominate his will and that he

used that position to obtain an unfair advantage over the appellant."

16. It is sufficient to say that the borrower in the present case was sui juris; had the full power

of bargaining and of burdening his estate, that his estate was not under the Court of Wards,

and that he lay under no disability. With regard : to his helplessness nothing whatsoever isproved in the case except the bare fact that he, being a man of wealth as owner of one-half of


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certain joint family property, wished to obtain and did obtain certain moneys on loan. The

only relation between the parties that was proved was simply that they were lender and

borrower.

17. It is an entire mistake to represent the decisions of this Board as being wanting in light

upon the case last but one mentioned. For in Sundar Koer v. Sham Krishen L.R. 34 I.A. 9, 16

the exact point was referred to by Lord Davey in the course of the judgment read by him :

"There is no evidence of any actual exercise of undue influence by the mortgagees or of any

special circumstances from which an inference of undue influence could be legitimately

drawn, except that the mortgagor was in urgent need of money. The learned Counsel for the

appellant argued that the mortgagees were thereby placed in a position 'to dominate the will'

of the mortgagor, and cited a recent decision of this Board: Dhanipul Das v. Maneslmr

Bakhsh Singh L.R. 33 I.A. 118. In that case, however, the borrower was ' a disqualified

proprietor 'under the Oudh Land Revenue Act, 1876, and his estate was under the

management of the Court of Wards, and it was on that ground that their Lordships held that

the borrower was under a peculiar disability and the position of the parties was such that the

lender was' in a position to dominate his will.' There is nothing of that kind in the present

case, and their Lordships are not prepared to hold that urgent need of money on the part of

the borrower will of itself place the parties in that position."

18. This precisely fits the situation of these parties. It has not been proved - it might be said

that it has not even been attempted to be proved - that the lender was in a position to

dominate the will of the borrower.

12. In these circumstances, even though the bargain had been unconscionable (and it has the

appearance of being so), a remedy under the Indian Contract Act does not come into : view

until the initial fact of a position to dominate the will has been established. Once that fact is

established, then the unconscionable nature of the bargain and the burden of proof on the

issue of undue influence come into operation. In the present case, for the reasons stated, these

stages are not reached.

13. Their Lordships think it right to observe that the judgment now pronounced is not in

accord with the principles laid down by the Appellate Civil Court of Calcutta in Abdul

Majeed v. Khirode Chandra Pal I.L.R. 42 C. 690, that "where there is ample security, the

exaction of excessive and usurious interest in itself raises a presumption of undue influencewhich it requires very little evidence to substantiate." Their Lordships think that decision to


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be wrong. There is no such presumption until the question has first been settled as to the

lender being in a position to dominate the borrower's will. Their Lordships are further of

opinion with reference to the citation of Samuel v. Newbold [1906] A.C. 461 that that case

does not form any authority in the construction of the Indian Contract Act. The case was

determined under the Moneylenders Act, 1900, as it expressly bears. The issue was thus

stated by Lord Macnaghten : "It seems to me that the construction of the Moneylenders Act,

1900, is plain enough, and that the evidence before their Lordships is more than sufficient to

show that this case is within the mischief which the Act was designed to remedy."

14. In the view of the Board cases of that character form no precedent for a decision of the

present appeal, which is rested on another and very differently worded statute.

15. Their Lordships are of opinion that the decree of the High Court should be varied by

allowing compound interest on the principal at the rate of 2 per cent, per mensem from the

date of the execution of the bond until September 25, 1917, and thereafter simple interest at

the rate of 6 per cent, per annum up to the date of realization, and that in other respects the

decree of the High Court should be affirmed, and they will humbly advise His Majesty

accordingly. The appellants will pay the costs of the appeal.

Inequality of bargaining power:

The presumption of undue influence may also rise from the fact that there is such an

inequalities of bargaining power between the parties that one can cause economic durness to

the other. The decisions of court of Appeal in the case:


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Lloyds Bank

Vs

Bundy8

A contractor barrow a sum of money from bank. He could not pay back in time the bankerpressed for payment or for security. He suggested that his father might mortgage the familys

only residential house. The bank offer visited the father and obtained his signature upon

readymade papers. The contractor still could not pay and the banker sought to enforce the

mortgage which might have meant throwing out the family from its only residence.

Accordingly Mr Bundy relied upon the unfair character of the motgage.

He allowed to set aside the mortgage. Lord Denning MR tried to locate the principles which

run through all the varied situation situations which relief is allowed on account of unequal

bargaining power. He said: English law gives relief to one who, without independent advice,

enters into a contract upon terms which are very unfair, or transfers property for a

consideration which is grossly in adequate, when his bargaining power is grievously impaired

by reason of his own needs or by his own ignorance or infirmity, coupled with undue

influence or presser brought to bear on him by or for the benefit of other.

The bank exploited the vulnerability of father, cause by his desire to help his son to such an

extent that he charged his house to his ruin for avery short moratorium, which was a hibhly in

adequate consideration for the motgage.

8(1975) 1 QB 326.


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Biblography:

Contract and specific relief (Avatar sing)

Contracts 1 Cases and Materials (V Kesava Rao)

Web site:www.IndianContract Act.

Web site: Manupatra.com
http://www.indian/http://www.indian/http://www.indian/http://www.indian/


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Conclusion:

The persons those who are entering in to the contract they have to confirm that they are fit for

the contract or not otherwise the opponent will try to dominate him. If he or she mentally

challenged then one must take care of them, because others should be misuse the contract.

In the case of minor, the domination is mostly we can see in the case of minor, if any person

enter in to contract with minor to show domination on the minor, but minor can drop out the

contract nobody has rights to stop him (the minor)

If we a person is not a mentally challenged those person some time unconsiable positions at

the time of contract then has to stop and have to think that the agreement which he is doing is

acceptable or not.

project on position of domination in contract.docx

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