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

Ramesh, a money-lender in a village, lends Suresh, who is already in debt to him, a fresh sum on terms that appear on their face to be unconscionable. Suresh later pleads undue influence. As per Section 16, on whom does the burden of proving that the contract was not induced by undue influence lie?

The burden lies on Ramesh, the money-lender. Under Section 16(3), when a person able to dominate another's will makes a contract that appears unconscionable, he must prove that it was not induced by undue influence. The weaker party need not prove it.

  1. AOn Suresh, because he is the one alleging undue influence
  2. BOn Ramesh, because he is in a position to dominate Suresh's will and the transaction appears unconscionableCorrect
  3. COn neither party, because the court presumes the contract is valid
  4. DOn both parties equally

Explanation

Section 16(3) provides that where a person in a position to dominate the will of another enters a contract and the transaction appears unconscionable, the burden of proving no undue influence lies on the dominating person. This mirrors the money-lender illustration. Placing the burden on Suresh reverses the rule.

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