Section 16 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Section 16 defines "undue influence". A contract is induced by undue influence where the relations between the parties are such that one is in a position to dominate the will of the other and uses that position to obtain an unfair advantage. The section also lists who is deemed to be in such a position and shifts the burden of proof in certain cases.
A contract is induced by undue influence where one party is in a position to dominate the will of the other and uses that position to obtain an unfair advantage (16(1)). A person is deemed to be in that position where he holds real or apparent authority or stands in a fiduciary relation to the other, or contracts with a person whose mental capacity is affected by age, illness, or mental or bodily distress (16(2)). Where the deal looks unconscionable, the burden of proving there was no undue influence lies on the dominant party (16(3)).
A footnote on the text
The footnote in the source says that section 16 was substituted for the original section 16 by Act 6 of 1899, section 2. The text we discuss is the substituted section.
Section 16(1): the general principle
"A contract is said to be induced by 'undue influence' where the relations subsisting 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."
Two elements must be present:
- Position to dominate. The relations between the parties put one in a position to dominate the will of the other.
- Use for unfair advantage. He uses that position to obtain an unfair advantage over the other.
Being in a dominant position is not enough; using it to get an unfair advantage is also needed. If you are facing a claim of undue influence or want to challenge a one-sided deal, our legal dispute resolution service can help you assess it.
Section 16(2): who is deemed to be in a position to dominate
The sub-section says that "in particular and without prejudice to the generality of the foregoing principle", a person is deemed to be in a position to dominate the will of another in two cases.
| Clause | Text |
|---|---|
| 16(2)(a) | Where he holds a real or apparent authority over the other, or where he stands in a fiduciary relation to the other |
| 16(2)(b) | Where he makes a contract with a person whose mental capacity is temporarily or permanently affected by reason of age, illness, or mental or bodily distress |
The words "without prejudice to the generality of the foregoing principle" mean the list does not narrow sub-section (1). A dominant position can also exist in other relations, if the facts fit the general principle. The text does not list further examples, and we do not add any.
Section 16(3): the burden of proof
Sub-section (3) reads: "Where a person who is in a position to dominate the will of another, enters into a contract with him, and the transaction appears, on the face of it or on the evidence adduced, to be unconscionable, the burden of proving that such contract was not induced by undue influence shall lie upon the person in a position to dominate the will of the other."
Break it into steps:
- A person in a position to dominate the will of another enters into a contract with him.
- The transaction appears "on the face of it or on the evidence adduced" to be unconscionable.
- Then the burden of proof lies on the dominant person to show that the contract was not induced by undue influence.
The sub-section ends: "Nothing in this sub-section shall affect the provisions of section 111 of the Indian Evidence Act, 1872 (1 of 1872)." We quote the reference as the Act has it and do not discuss that section here.
The Act's own illustrations
The Act gives four illustrations, restated in plain words.
(a) A has advanced money to his son B during B's minority. When B comes of age, A obtains by misuse of parental influence a bond from B for a greater amount than the sum due for the advance. A employs undue influence.
(b) A, a man enfeebled by disease or age, is induced by B's influence over him as his medical attendant to agree to pay B an unreasonable sum for his professional services. B employs undue influence.
(c) A, being in debt to B, the money-lender of his village, contracts a fresh loan on terms which appear to be unconscionable. It lies on B to prove that the contract was not induced by undue influence.
(d) A applies to a banker for a loan at a time when there is stringency in the money market. The banker declines to make the loan except at an unusually high rate of interest. A accepts the loan on these terms. This is a transaction in the ordinary course of business, and the contract is not induced by undue influence.
Illustration (d) matters: a hard bargain in the ordinary course of business is not, by that alone, undue influence. Illustration (c) shows the burden shifting under 16(3).
What follows from undue influence
Section 16 is a definition. The consequence is in 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, and the Court may set it aside. See our article on section 19A. The "caused" test is in section 14.
A modern example (ours, not the Act's)
Savita, aged and recovering from a long illness, depends on her financial adviser, Gaurav, to manage her investments. Gaurav asks her to sign a document transferring a valuable flat to a company he controls, for a price far below its value. Gaurav stands in a fiduciary relation to Savita, so under 16(2)(a) he is deemed to be in a position to dominate her will; her illness points to 16(2)(b) as well. If the transaction appears unconscionable, the burden under 16(3) is on Gaurav to prove that the contract was not induced by undue influence. If, in contrast, Gaurav's firm had given Savita a published rate card and she accepted its ordinary terms, the facts would sit closer to illustration (d).
What can the parties change?
Section 16 does not give the parties power to contract out of undue influence. A clause stating that "no party had any influence over the other" does not change what the Act defines. What parties can do is deal on terms that are fair, give the weaker party time and the chance to take independent advice, and keep records. Whether independent advice affects the burden under 16(3) is not stated in the text, so we do not claim it does.
Practical points
- Know your position. If you act as adviser, guardian, employer, doctor or lender, take extra care when dealing with those who depend on you.
- Look at the terms. Unconscionable terms trigger the burden of proof under 16(3).
- Record advice and explanations. Written evidence of explanation and opportunity to consider helps you show the contract was not induced by undue influence.
- Time matters. If you believe you were unduly influenced, take advice early about the option under section 19A.
Need help with a one-sided agreement?
If you signed a deal with someone you depended on and the terms look unfair, or you are defending a contract against such a claim, our legal dispute resolution team can review the facts and explain where section 16 and section 19A may apply.
Key takeaways
- Undue influence is the use of a position to dominate another's will to obtain an unfair advantage (16(1)).
- Real or apparent authority, a fiduciary relation, or dealing with a person whose mental capacity is affected by age, illness or distress puts a person deemed in that position (16(2)).
- If the transaction looks unconscionable, the burden of proof is on the dominant party (16(3)).
- Section 16 was substituted by Act 6 of 1899; the effect is in section 19A.
Read next
- Section 15: coercion
- Section 17: fraud
- Section 19A: power to set aside a contract induced by undue influence
- Free consent: sections 13 to 22
Disclaimer: Based on the text of the Indian Contract Act, 1872 as consulted on 1 October 2026. Many questions under this Act turn on case law and on the wording of the particular contract, which this article does not cover. It is general information, not legal advice; check the official text and take advice before acting.