Month: Nov 2020

WHAT IS UNDUE INFLUENCE?

Literally, undue influence is the control of one person towards the mind of another person in relation to some transaction in such a way to deprive the latter of the will to make an unconventional decision. This is occurred when someone have an ability to persuade the decision of other due to the relationship between the two party. Undue influence is to prevent deception of a person over others and not because of one’s folly, imprudence or want of foresight. The definition of undue influence can be found in Contract Act 1950 under section 14(b) and section 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.

Section 6(1) of the Contract Act 1950

CLASSIFICATION of UNDUE INFLUENCE

1. ACTUAL UNDUE INFLUENCE

The offender clearly uses the influence over the accuser for obtaining the transaction for example gift or contract. The complainant must prove that in his relationship with the wrongdoer, the domination position was held by the wrongdoer and to enter into a particular impugned transaction he used or exerted undue influence on the complainant.

Once the complainant prove that the wrongdoer used that dominant position to obtain the transaction, he has the right to have the transaction set aside, regardless whether it was fair or unfair to the complainant

Visu Sinnaadurai J. in Polygram Records Sdn Bhd v The Search

Even though the complainant did not suffer any unfairness or disadvantage, the main important thing is to prove actual claim of undue influence. Thus, there is no need to show special relationship exist between the parties although there is a relationship.

2. PRESUMED UNDUE INFLUENCE

Different from actual undue influence, the presumed undue influence require the complainant to prove that the wrongdoer was in dominant position in his relationship of trust and confidence with the complainant and the transaction was unfair to the complainant.

In particular and without prejudice to the generality of the forgoing principles, 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 stand in a fiduciary relation to the other; or

(b) Where he makes a contact with a person whose mental capacity is temporarily or permanently affected by reason of age, illness, or mental or bodily distress

Section 16(2) of Contract Act 1950

DOMINANT POSITION – The wrongdoer was in position to dominate complainants will:

i. Real or apparent authority

ii. Fiduciary relationship

CLASS 2A & CLASS 2B

The practice to classify whether the relationship between two party falls under fiduciary relationship or trust and confidence under presume undue influence.

ClASS 2A

By the Law, it is a special relationship that give rise to one of the parties able to dominant the will of the other. For example, a Doctor is deemed to be in a dominant position over his patient.

CASES

ROSLI DARUS v MANSOR HJ SAAD

HELD: The defendant was in loco Parentis. The Plaintiff was unemployed andtotally dependent on the defendant for his daily maintenance. The DEFendant could be dominate the will of the plaintiff if he wanted to.

CLASS 2B

The complainant must prove there is existence of relationship of trust and confidence if the relationship falling within Class 2A. Example of relationship under Class 2B, a relationship between the Professor and his/her student.

CASES

TATE v WILLIAMSON

HELD: The sale of the property which was at undervalue from the nephew to uncle shall be set aside. The uncle stood in a cofidential relationship to his nephew and should not have purchased the property without the fullest communication to him of all material information that he had obtain as to its value. the fact that the nephew acted through independant solicitors was of no consequence which is surveyor’s report, which the defendant was bound to disclose.

MENTAL INCAPACITY

Have you ever heard about coercion before?

What is Coercion?

According to Cambridge Dictionary, coercion can be determined as the use of force to persuade someone to do something that they are unwilling to do. Literally, coercion can be understand as an action of convincing someone to do something using force or threat that subsequently puts someone to immediate fear of the effect in order to urge that person to do something against their will. For example, pointing a gun at someone’s head or put a knife to their throat is an actual physical threat.

Coercion in THE Contract ACT 1950

All the agreements are contract if they’re made with the free consent of the party

Section 10 of the Contract Act 1950

What is meant by ‘free consent’ in Section 10 of the Contract Act 1950?

Consent is said to be free when it is not caused – by coercion as defined by S.15 of the Act

Section 14 (a) of the Contract Act 1950

The definition of coercion in contract is provided in Section 15 in the Contract Act 1950.

Coercion is the committing, or threatening to commit, any act forbidden by the 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.

Section 15 of the Contract Act 1950

The section restrict the coercion to committing, or threatening to commit, any act forbidden by the Penal Code and unlawful detaining, or threatening to detain, any property, to prejudice of any person. Based on Section 15 of the Contract Act 1950, the act or threaten must be take with the intention of causing a person to entered into agreement.

The Element of Coercion in Contract

To determine if there is coercion in the contract, there are three elements need to be identify. The element was based on the Section 15 of the Contract Act 1950.

1. The coercion must be committing of an act forbidden by the Penal Code.
2. The coercion must be the unlawful detaining or threatening to detain any property.
3. The act of coercion must be carried out with the intention of causing any person to enter into an agreement.

CASE LAW

Kesarmal s/o Lecthman Das v Valliappa Chettiar [1954] MLJ 119

Fact: A transfer of property was made under ‘the orders of the Sultan, issued in the presence of 2 Japanese office during Japanese occupation of Malaysia.

The court held that the transfer of land contract was not valid as the consent given was under a threat and not free.

Per Ian Chin J

There are two ways of committing coercion as defined by s.15 of the Contract Act 1950, one of which is the threatening of an act forbidden by the Penal Code (FIRST LIMB), while the other is the unlawful detention or the threatening of such to the prejudice of any person (SECOND LIMB), with the intention of causing any person to enter into an agreement.

On the FIRST LIMB- it was held that defendants failed to show the court any of the act of the plaintiff is a threat to commit any act forbidden by the Penal Code. The reason given was commercial pressure/economic blackmail does not amount to coercion because the agreement to the price was an exercise of free will.

On the SECOND LIMB- the argument by the defendant that plaintiff’s refusal to supply the bars at the lower price amounted to an unlawful detention of property in order to get the defendant to agree to the higher price.

Held: Plaintiff’s refusal did not amount to unlawful detention of property because plaintiff was exercising his legal right of its own property.

Section 73 of the Contract Act 1950

A person to whom money has been paid, or anything delivered, by mistake or under coercion, must repay or return it

Eusoff Chin J:

“It would be difficult to give effect to s.73 illustration (b) if the word ‘coercion’ is to be given the meaning as defined in s.15 of the Act. They appear to be in conflict with each other. Therefore the word ‘coercion’ in the context of s.73 of the Act should be given its ordinary and general meaning since there is nothing under s.15 which says that the word ‘coercion’ should apply throughout the Act. The definition of ‘coercion’ in s.15 should only apply for the purpose contained in s.14, as s.14 of the Act specifically says so.”

EFFECT

When consent to an agreement is caused by coercion, fraud, or misrepresentation, the agreement is a contract voidable at the option of the party whose consent was so caused.

Section 16(1) of the Contract Act 1950

REMEDIES

When a person at whose option a contract is voidable rescind it, the other party thereto need not perform any promise therein contained in which he is promisor. The party rescinding a voidable contract shall, if he has received any benefit thereunder from another party such contract, restore the benefit, so far as may be, to the person from whom it was received.

Section 16(1) of the Contract Act 1950