What Is Undue Influence And Coercion In Business Law?

The legal ecosystem of any country is known to be complex due to the presence of numerous terms and elements. And, in order to arrive at the right decision in any business setting, it is necessary to have a proper understanding of these things that tend to help a lot in various facets of both personal and professional life. In the field of business law, the two most commonly mentioned legal concepts are coercion and undue influence. Both elements play a role in scenarios where one party’s consent to agree gets compromised. 

These elements are meant to safeguard the integrity of contracts by ensuring that the agreements are initiated honestly and voluntarily. If you want to understand the difference between undue influence and coercion, continue reading below.

What is Undue Influence?

Undue influence mainly refers to a legal notion in regard to contract law. It becomes applicable when one party tries to take the benefit of a place of power or faith to affect the decision-making of another party, causing a one-sided or unacceptable agreement. Contrary to coercion, which is based upon the threats or pressure, undue influence is based on the inappropriate use of a leading position to affect the other party’s consent.

In the case of undue influence, the controlling party may not need to employ physical force or clear intimidation. Rather, it is suggested to leverage a special relationship, like a fiduciary connection or an association of trust and confidence, to apply psychological or emotional power to another party. This influence tends to majorly affect the inferior party’s power to make sovereign and sound decisions.

What is Coercion?

Coercion refers to a term that is employed in contract law. In other words, it creates a scenario where accord to get into an agreement is sought by the use of threats, pressure, or intimidation against the other party. In other words, coercion refers to pressurizing a person to agree to a contract under the influence of fear or duress.

In the case of coercion, one party pressurizes another party by threatening it to do something that is unlawful and can cause harm to another party or the associated property if the party doesn’t agree to the said agreement. The possible threats can be physical injury, unlawful custody, or any other act that is considered illegal under the eye of the law.

Consent is necessary for a binding contract and can be violated by coercion. Contracts procured by force are usually voidable, so the coerced party may either favor or disfavor its conditions. The conditioned party, therefore, owing to the illicitness and compulsoriness of his consent, might want to escape its duties in case it decides to cancel the agreement.

Difference Between Undue Influence and Coercion

Refer to the following part of this post to understand more about the difference between undue influence and coercion.

Definition

Force is using coercion or threats to convince somebody who does not want to sign a contract. Conversely, undue influence results when another person tries to convince another about something by use of psychological pressure or through the exploitation of existing relationships.

Nature of the Offense

Coercion is a criminal act because it involves using forceful acts or threatening others with violence to agree to contracts. In case it can be proved, undue influence is considered as a legal term that renders a contract voidable unlike being an offense in itself.

Legal Requirements

Section 15 of the Indian Contract Act 1872 deals with coercion while Section 16 talks about undue influence.

Connection between the Parties to the Contract

In circumstances of coercion, there is no established relationship between the contractual parties. The external source of coercion is usually someone who does not have any prior relationship with the person being coerced. On the other hand, undue influence necessitates that there exists an already existing connection of the parties to a contract such as a fiduciary relationship or relationships built on confidence and trust.

Activities

Coercion entails threats, bodily harm, or use of force to give consent. The concept of undue influence means applying psychological pressure or putting someone in social situations where one can prey upon their emotional gullibility or dependency on the influencer.

Goal

In practice, the aim of compulsion is to force someone into signing an agreement, usually for the advantage of the person coercing. In contrast, undue influence refers to a situation where one of the parties seeks to exploit the vulnerability or weakness of the other party.

The Burden of Proof

It falls on the complaining party to show that he agreed as a result of violence or duress in circumstances that amounted to coercion. Regarding undue influence, however, it is always for a dominant party in relation to another person who must justify that his conduct was right and reasonable.

The Conclusion

Undue influence simply refers to an inappropriate use of dominance or trust to pressure one party into signing an agreement, whereas coercion involves the use of force or threats to achieve a favorable outcome. Though undue influence is not illegal, coercion is considered unlawful. Both concepts are supposed to safeguard the integrity of contracts and guarantee that parties enter into agreements voluntarily and voluntarily. Understanding the distinctions between undue influence and coercion helps the decision-makers in defending the rights of parties to contracts and promotes transparency in business transactions.