Section 19A

” When consent to an agreement is caused by undue influence, the agreement is a contract voidable at the option of the party whose consent was so caused.

Any such contract may be set aside either absolutely or, if the party who was entitled to avoid it has received any benefit thereunder, upon such terms and conditions as to the Court may seem just.”

Illustrations

(a) As son has forged Bs name to a promissory note. B under threat of prosecuting As son, obtains a bond from A for the amount of the forged note. If B sues on this bond, the Court may set the bond aside.
(b) A, a money-lender, advances Rs. 100 to B, an agriculturist, and, by undue influence, induces B to execute a bond for Rs. 200 with interest at 6 per cent. per month. The Court may set the bond aside, ordering B to repay the Rs. 100 with such interest as may seem just.

Explained

Section 19A of the Indian Contract Act, 1872 provides a remedy where a contract has been obtained through undue influence. The provision states that when the consent of a party is caused by undue influence, the contract becomes voidable at the option of the party whose consent was improperly obtained. The provision also empowers the court to set aside the contract completely or impose appropriate conditions where the affected party has already received a benefit under the contract.

Section 19A operates together with Section 16, which defines undue influence. Generally, it involves a relationship in which one party is capable of dominating the will of another and uses that position to obtain an unfair advantage. Examples may include fiduciary relationships, relationships involving authority, or situations where a person’s capacity to make independent decisions is affected by age, illness, or distress.

The court does not automatically cancel every contract containing harsh or disadvantageous terms. The circumstances surrounding the parties and the manner in which consent was obtained are important.

Important Judgments

Raghunath Prasad v. Sarju Prasad (1923)
The Privy Council emphasized that the existence of an unconscionable bargain alone is not sufficient. The first question is whether one party was in a position to dominate the will of the other. Only after establishing this relationship does the question of undue influence and the burden of proof arise.

Dhanipal Das v. Raja Maneshar Bakhsh Singh (1906)
The decision is an important authority concerning a person’s special vulnerability and the circumstances in which a transaction may attract the principles of undue influence. It was subsequently considered in Raghunath Prasad v. Sarju Prasad.

Effect of Section 19A

The principal effect of Section 19A is to protect a party whose consent was obtained through undue influence. Depending upon the circumstances, the court may cancel the contract entirely or grant relief on equitable terms, including requiring restoration of benefits received.

Thus, Section 19A ensures that contractual consent is not merely formal but must be obtained freely and without improper domination or exploitation.