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Standard XII
Business Studies
Important Laws
When consent ...
Question

When consent to an agreement is caused by undue influence, the contract is _____________.

A
voidable at the option of any party
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B
voidable at the option of the promisee
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C
voidable at the option of the promisor
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D
voidable at the option of the party whose consent was so caused
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Solution

The correct option is D voidable at the option of the promisee
A contract is said to be induced by undue influence where the relations 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. Such a contract is voidable at the option of the promisee through whom such an consent was obtained.

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Q. Principle: Two or more persons are said to consent if they agree upon the same thing in the same sense. Consent is said to be free when it is not caused by coercion, on undue influence, or fraud, or misrepresentation, or mistake.
When consent to an agreement is caused by coercion, undue influence, fraud or misrepresentation, the agreement is a contract voidable (rescindable or terminable) at the option of the party whose consent was so caused. However, when consent to an agreement is caused by mistake as to a matter of fact essential to the agreement, the agreement is void.
Fact: 'X' threatens to gun down 'Y' if he ('Y') does not sell his property worth Rs.2000000 for Rs.100000 only. As a consequence, 'Y' agrees to sell it as demanded by 'X'.
Which of the following derivations is correct?
Q. Principle : An agreement without free consent can be enforced only at the option of the party whose consent was not free.
Facts : A obtains the consent of 'B' to enter into an agreement by putting a gun on the head of B's girl friend.
Q. Given below is a statement of legal principle followed by a factual situation. Apply the principle to the facts given below and select the most appropriate answer.
Legal Principle: Contract is an agreement freely entered into between the parties. But when consent to an agreement is obtained to undue influence, the contract is voidable at the option of the party whose consent was so obtained.
Factual Situation: The pragya had been worked for a business man Anurag since the age of 18, working for a range of Anurag's businesses. In 2000, (aged 21) Pragya purchased a flat. In 2005, Mr. Anurag's business was facing financial difficulties, and he asked Pragya to offe up her flat as financial security against an overdraft facility for the business. In July of that year, the banks solicitors wrote to Pragya, advising that she should take Independent legal advice before putting her property up as a security for the debt. The bank also notified Pragya that the guarantee was unlimited in both time and financial amount. Having discussed the arrangement with Anurag, Pragya was unaware of the extent of the borrowing, but was assured that her mortgage would not be called upon, and that his own properties which were also used as security would be looked at first. A charge was executed over the Pragya's property in August 2005. In 2009, Mr.s Anurag's business went into liquidation and the bank formally demanded Rs.60,24,912 from Pragya. Pragya raised the defence of undue influence - stating that Mr. Anurag had induced her to enter into the agreement, and the bank had full knowledge/ notice of this undue influence which should set aside the banks right to enforce the debt recovery against Pragya. Bank is contending that there is no undue influence.
Whether the consent to offer the flat as financial security obtained through undue influence?
Q. Given below is a statement of legal principle followed by a factual situation. Apply the principle to the facts given below and select the most appropriate answer.
Legal Principle: Contract is an agreement freely entered into between the parties. But when consent to an agreement is obtained to undue influence, the contract is voidable at the option of the party whose consent was so obtained.
Factual Situation: Pragya had been worked for a businessman Anurag since the age of 18, working for a range of Anurag's businesses. In 2000, (aged 21) Pragya purchased a flat. In 2005, Mr. Anurag's business was facing financial difficulties, and he asked Pragya to offer up her flat as a financial security against an overdraft facility for the business. In July of that year, the bank's solicitors wrote to Pragya, advising that she should take Independent legal advice before putting her property up as a security for the debt. The bank also notified Pragya that the guarantee was unlimited in both time and financial amount. Having discussed the arrangement with Anurag, Pragya was unaware of the extent of the borrowing, but was assured that her mortgage would not be called upon, and that his own properties which were also used as security would be looked at first. A charge was executed over the Pragya's property in August 2005. In 2009, Mr.s Anurag's business went into liquidation and the bank formally demanded Rs.60,24,912 from Pragya. Pragya raised the defence of undue influence - stating that Mr. Anurag had induced her to enter into the agreement, and the bank had full knowledge/ notice of this undue influence which should set aside the banks right to enforce the debt recovery against Pragya. Bank is contending that there is no undue influence.
Irrespective of your answer, assume it is a case of undue influence. Decide whether the bank has done enough to allay concerns of undue influence?
Q. Given below is a statement of legal principle followed by factual situation. Apply the principle to the facts and select the most appropriate answer.
Principle: An agreement becomes a contract when it is entered into between two or more people with each other's free consent. Two or more people are said to consent when they agree to the same thing in the same sence. Consent is said to be free when it is not caused by coercion, undue influence, fraud, misrepresentation or mistake.
A went to a doctor to get himself treated. The doctor asked him to sign a "consent form" and said that unless he signs it, he will not examine him. A signed the form waiving his right to sue the doctor.
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