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CMA Intermediate · Business Laws and Ethics · Indian Contracts Act, 1872

Meera lends Rs 40,000 to Karan, who is her village neighbour and who has long depended on her for medical care during his illness. Karan, enfeebled by disease, agrees to repay Rs 90,000 for it. Meera is not a doctor but is his only caregiver and dominates his decisions. Which statement best applies under the Act?

The burden of proving that undue influence was not used lies on Meera. She is in a position to dominate Karan's will because his capacity is affected by illness, and the transaction appears unconscionable, so the Act places the onus on her.

  1. AThe contract is valid because Karan signed it freely
  2. BThe contract is void because there is no consideration
  3. CThe contract is valid because a bank also charges high interest
  4. DSince Meera is in a position to dominate Karan's will and the transaction appears unconscionable, the burden of proving no undue influence lies on MeeraCorrect

Explanation

A person is deemed to dominate another's will where the other's mental capacity is affected by illness or bodily distress. Where such a person contracts and the transaction appears unconscionable, the burden of proving absence of undue influence is on the dominating person. A bank's ordinary-course loan in a tight market is not undue influence, but this is not such a case.

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