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

Under the Act, which of the following correctly describes a case where a person is deemed to be in a position to dominate the will of another?

A person is deemed to dominate another's will when he contracts with someone whose mental capacity is temporarily or permanently affected by age, illness, or mental or bodily distress. A banker charging high interest in a tight money market is ordinary business, not undue influence.

  1. AA banker refuses a loan except at a high interest rate during a stringency in the money market
  2. BA person contracts with someone whose mental capacity is affected by age, illness or mental or bodily distressCorrect
  3. CTwo businessmen negotiate a price at arm's length
  4. DA seller quotes a higher price than his competitor

Explanation

A person who contracts with someone whose mental capacity is temporarily or permanently affected by age, illness or distress is deemed to be in a dominating position. The banker's high-interest loan during a money stringency is an ordinary business transaction, not undue influence.

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