Coercion vs. Undue Influence: Unraveling Key Differences Under Contract Law

An agreement or contract means the very base on which legal transactions is erected, and there has to be free consent among parties to a contract. However, in some cases, consent may not be voluntary, and it can be obtained by compulsion or undue influence. Though both deals with manipulation, they are fundamentally different concepts in nature, applicability, and also legally. Understanding their distinction has assumed greater significance under the new laws relating to contracts.

Coercion

According to Section 15 of the Indian Contract Act of 1872, coercion may be said to be committed where a person is forced to do an act forbidden by the Indian Penal Code, or where the consent of a person is obtained by unlawfully detaining or threatening to detain property belonging to such person with the intention of causing him to enter into a contract. Coercion implies direct threats or illegal acts to extort consent. For instance, it would be coercion if one is threatened with physical harm unless they sign a contract, or if property is detained unlawfully. The important factor is that a threat or an act must be illegal.

Contracts entered into under duress are voidable at the option of the coerced party. This means they may choose to either enforce or render null the contract. The rule of law here renders it impossible for any one person to forcibly, through illegal pressure, get another person to enter into an agreement against his free will.

Undue Influence

It  has been defined under Section 16 of the Indian Contract Act, 1872, as domination of will of one party by another through a position of power for the latter's benefit. Undue influence, therefore, comes into play in relationships where such influence may arise as a result of inherent powers-as between a guardian and ward, doctor and patient, and even employer and employee. A typical example would be when a doctor, through undue influence, manipulated a helpless patient into signing over property at an unfair price. The degree of subtlety in manipulation lies between coercion, where an individual actually threatens or uses physical force upon another, and undue influence.

As in the case of coercion, a contract induced by undue influence is voidable at the option of the victim. However, the pressure in undue influence operates by exploiting a position of trust or authority and not under illegal threat.

Key Differences

Both undue influence and coercion render a contract voidable at the option of the affected party. However, the primary difference lies in the nature of the manipulation: coercion involves direct threats or illegal acts, whereas undue influence involves exploiting a position of power or trust. Recognizing these differences is essential for understanding the protections available under the law, ensuring that all contractual agreements are entered into freely and fairly.