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Significance of the Decision in Allcard v. Skinner, Ch.

D
145 (1887)

TABLE OF CONTENTS

TABLE OF CASES 1
CHAPTER 1: INTRODUCTION 3
1.1 Introduction to Indian Contracts Act,1872 3
 Preview of Contract Law 3
 Competing Definitions of Contract 3
 Indian Contract Act, 1872 4
1.2 Consensus Ad-Idem as an Essential to Contract 5

 Consent 5

 Free Consent 6

 Vitiating Factors 7

 Coercion 7

 Undue Influence 8

 Fraud 9

 Misrepresentation 9

1.3 Conclusion 10

CHAPTER 2: UNDUE INFLUENCE; A VITIATING FACTOR 10

2.1 Introduction 10

2.2 Position in Indian Law 11


11
 Section 16(1)-Essentials
11
 Relationship
12
 Dominating Position
12
 Use of Position
 Unfair Advantage 12
 Section 16(2)- Deeming Feature 12
 Real and Apparent Authority 13
 Fiduciary Relationship 13
 Section 16(3)- Unconscionable Bargain
 Onus of Proof 14
2.3 Position in English Law: Manifest Disadvantage 15
 Requirement 15

 Constituents 15

2.4 Conclusion 17
18

CHAPTER 3: ALLCARD V. SKINNER; CASE ANALYSIS


19
3.1 Facts of the Case 19
3.2 Issues Raised 20
3.3 Contentions Addressed 20
 The Gift 20
 Undue Influence 22
 Relationship 22
 Nature of Transaction 23
 Restitution 24
3.4 Court of Appeals 25

 Majority Opinion 25

 Judgement 25

 Lindley LJ 25

 Bowen LJ 26

 Dissenting Opinion (CottonLJ) 26

3.5 Precedent Cited: Huguenin v. Baseley, 14 Ves 273 27

 Facts 27
27
 Ratio
27
3.6 Conclusion
29
CHAPTER 4: APPLICATION OF ALLCARD V. SKINNER 29
4.1 Significance of the Decision 30
4.2 Cases that Followed
 Luffram v. Australian and New Zealand Banking Group Ltd 30
 Quek v. Beggs 30
4.3 Conclusion 31

CHAPTER 5: CONCLUSION 31
Allcard v.Skinner |1

TABLE OF CASES

Indian Cases

1. Afsar Shaikh v. Soleman Bibi, AIR 163 SC (1976)


2. Bal Gangadhar Tilak v. Shrinivas Pandit, AIR 7 PC (1915 )
3. Bhimbhat v. Yeshwantrao, 25 Bom 126 (1900)
4. Central National Bank v. United Industrial Bank, AIR 181 SC (1954)
5. Daulat v. Gulabrao, AIR 369 Nag (1925)
6. Deo Nandan v. Chhote, AIR 9 All (1983)
7. Ganesh Narayan Nagarkar v. Vishnu Ramchandra Saraf, 32 Bom 37 (1907)
8. India Meters Ltd. v. P.S.E.B. 1 SCC 231 (1993)
9. Ladli Prashad Jaiswal v.Kamal Distillery Co. Ltd., AIR 1279 SC (1963)
10. Lakshminarayana v. Singaravelu, 1963 AIR 24 Mad (1963)
11. Madras State v. G. Dunkerley & Co., AIR SC 560(1958)
12. Mahboob Khan v. Hakim Abdul Ragim, AIR 250 Raj (1964)
13. Mannu Singh v. Umadat Pande, 12 All 523 (1890)
14. Misrilal Jalamchand v. Sobhachand Jalamchand, AIR 569 Bom (1956)
15. P Saraswathi Ammal v. Lakshmi Ammal, AIR 361 Mad (1978)
16. Philip Lukka v. Franciscan Association Vashapally, AIR 204 Ker (1987)
17. Poosathurai v. Kannappa Chettiar, 47 IA 1 (1919)
18. Ram Kalap Pande v. Bansidhar, AIR 89 Oudh (1947)
19. Ranee Annapurni Nachiar v. Swaminatha Chettiar, 34 Mad 7 (1910)
20. Ranganayakamma v. Alwar Setti, ILR 13 Mad 214 (1889)
21. Sant Bux Singh v. Ali Raza Khan, 21 Luck 194 (1946)
22. Santhappa Rai v. Santhiraja, AIR 426 Mad (1938)
23. Singhasan v Jadu, 117 IC 315
24. Subhas Chandra Das Mushib v. Ganga Prasad Das Mushib, AIR 878 SC (1967)
25. Syed Noor v. Qutbuddin, AIR Hyd (1956) at 117
26. Vinayakappa Suryabhanappa Dahenkar v. Dulichand Hariram Murarka, AIR 566 Pat
(1919)

Foreign Cases

1. Alati v Kruger, 94 CLR 216 (1995)


2. Allcard v Skinner, 36 Ch D 145 (CA) (1887)
3. Aylesford v. Morris, L.R. 8 Ch.App. (1873)
4. Bank of Credit and Commerce International SA v Aboody, 1 QB 923 (CA) 965 (1989).
5. Barclays Bank Plc v O’Brien, 1 AC 180 (1994)
6. Cheese v Thomas, 1 WLR 129 (1994)
Allcard v.Skinner |2

7. Chenells v Bruce, 55 TLR 422 (1939)


8. CIBS Mortgages plc v Pitt, 4 All ER 433 HL (1994)
9. Clark v The Corporation of the Trustees of the Roman Catholic Archdiocese of Brisbane,
1 Qd R 26 (1998)
10. Dusik v Newton, 62 BCLR 1 (1985).
11. Earl of Aylesford v. Morris, 8 Ch. App. 484 (1873)
12. Erlanger v New Sombrero Phosphate Co, 3 App Cas 1218 (1878)
13. Flanigon v. Smith, 337 Ill. 572 (1929).
14. Franciscan Sisters Health Care Corp. v. Dean, 95 Ill.2d 452 (1983).
15. Fry v. Lane, 40 Ch.D. 312 (1888)
16. Goldsworthy v Brickell, Ch 378 CA (1987)
17. Huguenin v Baseley, (1807) 14 Ves Jr 273 (1807);
18. Johnson v Buttress, 56 CLR 113 (1936)
19. Langton v. Langton, F.L.R. 890 (1995)
20. Luffram v Australian and New Zealand Banking Group Ltd, ASC (1986)
21. Lyon v Home, LR 6 Eq 655 (1868)
22. Macedo v. Stroud, 2 A.C. 330 (1922).
23. McCulloch v Fern, NSWSC 406
24. Minsky's Follies of Florida v. Sennes, 206 F. 2d 1, 3 (5th Cir. 1953).
25. Morley v Loughnan , 1 Ch 763 (1893)
26. National Westminster Bank plc v. Morgan, AC 686 (1985).
27. Nel v Kean, EWHC 190 (2003)
28. Norton v Relly, 2 Eden 286 (1764)
29. Nottidge v Prince, 2 Giff 246 (1860)
30. O’Sullivan v Management Agency Ltd, 1 QB 428 (1987), 466–7.
31. Powell v. Bechtel, 340 Ill. 330 (1930).
32. Quek v. Beggs, 5 BPR (1990).
33. Royal Bank of Scotland v. Etridge, (No.2) UKHL 44 (2001).
34. Smith v Hughes, L.R. 6 Q.B. 597 (609).
35. Steinbruck v. Gazzara, 28 Misc. 2d 254 (1961).
36. Watkins v Combes , 30 CLR 180 (1922)
37. Xenos v. Wickham, L.R. 2 H.L. 296 (1866)
38. Yerkey v Jones, 63 CLR 649 (1939)
Allcard v.Skinner |3

CHAPTER 1: INTRODUCTION

1.1. INTRODUCTION TO INDIAN CONTRACT ACT, 1872

 Preview of Contract Law

As Sir Joseph Chitty observed, the law affecting commerce can be seen both in “the law of
nations [and] those municipal institutions of our own country, which are of a public and general
nature, and which form the basis of that commercial intercourse which takes place between
individuals” and is the law “which relates to commerce itself, strictly so called, as
contradistinguished from those measures of state policy by which it is secured and protected.”1In
the modern law, it remains useful to distinguish between laws which create the legal
environment within which parties conclude their contract (which may broadly be termed market
regulation) and laws which relate specifically to the conclusion of contracts, their terms, the
relative rights and obligations which they create and the remedies which arise on breach.2

 Competing Definitions of Contract

“Contract is a promise or set of promises which the law will enforce”.3

“Contract is an agreement giving rise to obligations which are enforced or recognised by law.”4

Outside the context of consideration, in general neither courts nor parties to contract describe the
relationships which they create in terms of the promises, but rather in terms of agreements, and
for the courts this is clearest in the context of the rules as to offer and acceptance, which when
satisfied form that agreement.5Secondly, promises contained in deeds are enforceable by the
person in whose favour they are made, whether or not that person is aware of them6and so while

1
SIR J. CHITTY, A TREATIES ON THE LAWS OF COMMERCE AND MANUFACTURING AND THE
CONTRACTS RELATING THERETO STRAHAN, LONDON, 5 (1st ed, 1824) .
2
31 CHITTY ON CONTRACTS, Vol.1, 1-001, (31st ed,2012).
3
26 CHITTY ON CONTRACTS, Vol.1, 1-001, (26th ed,1989).
4
13 TREITEL, LAW OF CONTRACTS, EDITED BY E PEEL, 1-001, (13th ed, 2011).
5
The Law Commission, Privity of Contract: Contracts for the Benefit of Third Parties, Law Comm, No. 242 (1996),
Ch.2 .
6
Xenos v. Wickham, L.R. 2 H.L. 296 (1866); Macedo v. Stroud, 2 A.C. 330 (1922).
Allcard v.Skinner |4

a deed may give contractual force to an agreement, agreement is unnecessary for the
enforcement of the promises it contains.7

 Indian Contract Act, 1872

The first draft of the Indian Contract Act, 1872 made by the Third Indian Law Commission was
a simplified statement of the English Law with modifications suitable to India. There were
differences between the views of the Indian legislature and the Commission, and the
Commission resigned. The drafting the future statutes fell upon the Indian legislative department.
Some proposals of the Commissioners were rejected, whereas some provisions were borrowed
from the draft New York Code of 1862. The final draft was the work of Sir James Fitzjames
Stephen.8

There were 266 sections and a Schedule in the Indian Contract Act 1872 which can be broadly
classified into (1) law applicable generally to all types of contract, and (2) special types of
contract. 9Sections 1 to 75 of the Indian Contract Act contain provisions which can be applied to
all transactions relating to contracts.10 Section 76 to 266 of the Indian Contract Act deal with
specific types of contract, such as (a) sale of goods, (b) indemnity and guarantee, (c) bailment,
pledge or pawn, (d) agency, and (e) partnership.11

The Indian Contract Act occupies the most important place in the Commercial Law.12 Without
contract Act, it would have been difficult to carry on trade or any other business activity and in
employment law. It is not only the business community which is concerned with Contract Act,
but it affects everybody. The objective of the Contract Act is to ensure that the rights and
obligations arising out of a contract are honored and the legal remedies are made available to
those who are affected.13

7
Supra note 2, at 1-018.
8
14 NILIMA BHADBHADE, POLLOCK & MULLA, THE INDIAN CONTRACT AND SPECIFIC RELIEF
ACTS, Vol. 1, p. 9, (14th ed, 2013).
9
11 H.K. SAHARAY, DUTT ON CONTRACT, p.4 (11 th ed, 2013).
10
Madras State v. G. Dunkerley & Co., AIR SC 560(1958) (para 16).
11
Supra note 9.
12
Introduction, Indian Contract Act, Net Lawman In, available at- http://www.netlawman.co.in/ia/indian-contract-
act, last assessed 19th April 2017, 19:56 Hours.
13
PAACE, Introduction to Contract Act 1872, available at- http://www.paace.in/bcom-detail.php?xist=47, last
assessed 19th April 2017, 20:01 Hours.
Allcard v.Skinner |5

1.2. CONSENSUS AD-IDEM AS AN ESSENTIAL TO CONTRACT

 Consent ( Section 13)

‘Consent’ defined- “Two or more persons are said to consent when they agree upon the same
thing in the same sense.”14

Consent, in terms of voluntary choice, is – or, at least, appears to be or purports to be -- at the


essence of contract law.15 Contract law, both in principle and in practice, is about allowing
parties to enter into arrangements on terms they choose – each party imposing obligations on
itself in return for obligations another party has placed upon itself.16 This “freedom of contract”
– an ideal by which there are obligations to the extent, but only to the extent, freely chosen by
the parties – is contrasted with the duties of criminal law and tort law, which bind all parties
regardless of consent. We do not individually choose the legal obligations we have not to
murder and not to defraud, but we only have an obligation to pay Acme Painting four hundred
dollars to paint our fence if we choose to take on that duty.17

The deeming feature of the section is represented in the phrase “same sense” (ad –idem), the
doctrine of same sense was laid down in a leading case, where it was held that “It is essential to
the creation of a contract that both the parties should agree to the same thing in the same
sense.”18If the parties are not ad idem on the subject matter about which they are negotiating,
there is no real agreement between them.19

Whether there is consent or not has to be proved as a fact in accordance with the principles of
law of contract and when it is proved to exist, its existence cannot be nullified by application of

14
Section 13, Indian Contract Act, 1872.
15
Craig L. Carr ,The Political Writings of Samuel Pufendorf , (Oxford: Oxford University Press, 1994),166.
16
Brian H. Bix, Consent in Contract Law, Bix Workshop Paper, available at –
http://web.law.columbia.edu/sites/default/files/microsites/law-theory-
workshop/files/Bix%20Workshop%20Paper.pdf, last assessed 20 April 2017, 19:54 Hours.
17
See Joseph Raz, “On the Authority and Interpretation of Constitutions: Some Preliminaries,” in ed. Larry
Alexander, Constitutionalism (Cambridge University Press, 1998), 152-193, at 163.
18
Smith v Hughes, L.R. 6 Q.B. 597 (609).
19
Singhasan v Jadu, 117 IC 315; See India Meters Ltd. v. P.S.E.B. 1 SCC 231 (1993).
Allcard v.Skinner |6

any rule of criminal law.20The consent of a person who is acting as an agent of the owner of the
goods would be effective as the consent of the owner himself.21

 Free Consent (Section 14)

‘Free consent’22 defined.—“Consent is said to be free when it is not caused by— —Consent is
said to be free when it is not caused by—

(1) coercion, as defined in section 15, or

(2) undue influence, as defined in section 16, or

(3) fraud, as defined in section 17, or

(4) misrepresentation, as defined in section 18, or

(5) mistake, subject to the provisions of sections 20, 21 and 22. Consent is said to be so caused
when it would not have been given but for the existence of such coercion, undue influence, fraud,
misrepresentation or mistake.”
Not only consent, but free consent is declared by s. 1023 to be necessary to the complete validity
of a contract.24 This section defines when consent is free. This section declares in general the
causes which may exclude freedom of consent which are more fully explained by the later
sections.25

Consent is free when it works without obstacles to impede its exercise. Where there is no consent
or no real and certain object of consent,26 there can be no contract at all. Where there is consent,
but not free consent, there is generally a contract voidable at the option of the party whose

20
Supra note 9, at 203.
21
Central National Bank v. United Industrial Bank, AIR 181 SC (1954).
22
Section 14, Indian Contract Act, 1872.
23
Section 10 of Indian Contract Act, 1872 reads as “All agreements are contracts if they are made by the free
consent of parties competent to contract, for a lawful consideration and with a lawful object and are not hereby
expressly declared to be void…….”.
24
Supra note 8, at 321.
25
Ibid.
26
See also Section 29, Indian Contract Act, 1872.
Allcard v.Skinner |7

consent was not free.27 A general averment that consent was not freely obtained is not enough,
and it is necessary to set up one of the vitiating elements enumerated in the section.28

 Vitiating Factors (Section 15-18)

The law has evolved for the written document a limited set of traditional techniques of inquiring
into the reality of contractual assent; the categories into which they fall are Manifest Assent,
Fraud, Mistake, Capacity, and Undue Influence.29 The operation of each of these theoretically
serves to resolve for a given case the tension between the seemingly polar views that (a) a
consensus ad idem is a necessary element of contract formation,30yet (b) by the adoption of a
written form assent-infact becomes immaterial.31 The present task is therefore to assess each
category in turn, to determine towards which pole it gravitates, and whether its point of rest on
the continuum is a sound one.

 Coercion- “Coercion is the committing or threatening to commit, any act forbidden by


the Indian Penal Code (45 of 1860), or the unlawful detaining, or threatening to detain,
any property, to the prejudice of any person whatever, with the intention of causing any
person to enter into an agreement.”32

It is clear that coercion as thus defined implies to committing or threatening to commit or


threatening to commit some act which is contrary to law.33In Ranganayakamma v. Alwar
Setti34, the High Court of Madras held that an adoption by a Hindu Widow was not
binding upon her, when the relatives of the adopted boy obstructed the removal of the
corpse of her husband from her house until she consented to the adoption.

27
Deo Nandan v. Chhote, AIR 9 All (1983) at 11; Central National Bank Ltd v. United Industrial Bank Ltd., AIR
SC 181 (1954) at 184.
28
Bal Gangadhar Tilak v. Shrinivas Pandit, AIR 7 PC (1915 ) at 13-14.
29
Green, Fraud, Undue Influence and Mental Incompetency, 43 COLUM. L. Rev. 176, 177 (1943).
30
Minsky's Follies of Florida v. Sennes, 206 F. 2d 1, 3 (5th Cir. 1953).
31
Steinbruck v. Gazzara, 28 Misc. 2d 254 (1961).
32
Section 15, Indian Contract Act, 1872.
33
11 AVATAR SINGH, CONTRACT AND SPECIFIC RELIEF, p. 171, (11th ed., 2013).
34
Ranganayakamma v. Alwar Setti, ILR 13 Mad 214 (1889).
Allcard v.Skinner |8

 Undue Influence- “Undue influence’ defined.—

(1) 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."

(2) 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—

(a) where he holds a real or apparent authority over the other, or where he stands in a fiduciary
relation to the other; or

(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.

(3) 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 be upon the person in a position to dominate the will of the other. Nothing in the sub-
section shall affect the provisions of section 111 of the Indian Evidence Act, 1872 (1 of 1872).” 35

‘Influence’ has been defined as the ascendancy acquired by one person over another; it may be
used wisely, judiciously and helpfully.36 ‘Undue influence’ is improper use by the ascendant
person, of such ascendancy, for the benefit of himself or someone else so that the acts of the
person influenced are not, in the fullest sense of the word, his free, voluntary acts.37It is any
influence brought to bear upon a person entering into an agreement, which having regard to the
age and capacity of the party, the nature of the transaction, and all the circumstances of the case
appears to have been such as to preclude the exercise of free and deliberate judgement.38The
undertaken case study “Allcard v. Skinner” shall deal with undue influence in details in the
forthcoming chapters.

35
Section 16, Indian Contract Act, 1872.
36
Poosathurai v. Kannappa Chettiar, 47 IA 1 (1919).
37
Supra note 8, at 335.
38
Syed Noor v. Qutbuddin, AIR Hyd (1956) at 117.
Allcard v.Skinner |9

 Fraud- “Fraud means and includes any of the following acts committed by a party to a
contract, or with his connivance, or by his agent, with intent to deceive another party
thereto or his agent, or to induce him to enter into the contract:
(1) the suggestion, as a fact, of that which is not true, by one who does not believe it to be
true;
(2) the active concealment of a fact by one having knowledge or belief of the fact;
(3) a promise made without any intention of performing it;
(4) any other act fitted to deceive;
(5) any such act or omission as the law specially declares to be fraudulent.”39

Even if the fact is not material, the contract may be rescinded if the misrepresentation
was fraudulent. Fraud is the type of misrepresentation that is committed knowingly, with
the intent to deceive. The rationale for this rule is that a person who fraudulently
misrepresents a fact should not be able to profit from his intentionally deceptive
conduct.40

 Misrepresentation- “Misrepresentation means and includes-


(1) the positive assertion, in a manner not warranted by the information of the person
making it, of that which is not true, though he believes it to be true;
(2) any breach of duty which, without an intent to deceive, gains an advantage to the
person committing it, or any one claiming under him; by misleading another to his
prejudice or to the prejudice of any one claiming under him;
(3) causing, however innocently, a party to an agreement to make a mistake as to the
substance of the thing which is the subject of the agreement.”41

A misrepresentation is a positive statement of fact, which is made or adopted by a party


to a contract and is untrue. It may be fraudulently, carelessly or innocently. It is a false
representation. With regard to contracts, the general principle is that if one party has
induced the other to enter into a contract by misrepresenting, though innocently, any

39
Section 17, Indian Contract Act, 1872.
40
Key Concepts of Misrepresentation and Fraud, available at- http://www.csun.edu/~bz51361/gateway/fraud.pdf,
last assessed – April 21 2017, 00:17 Hours.
41
Section 18, Indian Contract Act, 1872.
A l l c a r d v . S k i n n e r | 10

material fact especially within his own knowledge, the party misled can avoid the
contract.42

1.3. CONCLUSION

The very purpose of this chapter was to provide a brief look into the backdrop of contract law
and its application in the scenario of the case study undertaken. The idea behind introducing the
concept of ‘consensus ad-idem’ was to establish it as an essential to contract in accordance to
both Indian and English law. The interplay of the vitiating factors, undue influence being the key
player here shall form the subject matter of the following chapter to inculcate the basic
perspectives and statutory knowledge before discussing the case in hand.

CHAPTER 2: UNDUE INFLUENCE; A VITIATING FACTOR

2.1 INTRODUCTION

Undue influence is a type of fraud perpetrated by someone who overpowers the will of, and
influences a testator.43 Undue influence is any act that causes the testator to act differently
regarding the will than he or she would have acted but for the influence.44 The testator’s free will
concerning the disposition of his or her estate is destroyed, the testator’s purpose is altered, and
the will is rendered more the will of the influencer than of the decedent. Undue influence must be
directly connected with the execution of will and operate at the time the will is made.45Acts of
undue influence can be outright threat, deprivation of daily necessities, excessive kindness or
attention, or isolated devotion.

The equitable doctrine of undue influence is a comprehensive phrase covering cases in which a
transaction between two parties who are in a relationship of trust and confidence may be set
aside if the transaction is the result of an abuse of the relationship.46The transaction may be set
aside if the claimant shows that the other party obtained it by abusing the relationship; this, is

42
Supra note 8, at 403.
43
Flanigon v. Smith, 337 Ill. 572 (1929).
44
Powell v. Bechtel, 340 Ill. 330 (1930).
45
Franciscan Sisters Health Care Corp. v. Dean, 95 Ill.2d 452 (1983).
46
Supra note 2, 7-057.
A l l c a r d v . S k i n n e r | 11

often termed as ‘actual undue influence’.47A transaction may also be set aside in the absence of
direct proof if claimant shows the existence of a relationship of trust and confidence with the
other party, and that the transaction is one that “calls for explanation”.48Then there will be an
evidential presumption49 that the transaction was a result of undue influence and unless the
presumption is rebutted, the transaction may be set aside.50

2.2 POSITION IN INDIAN LAW

 Section 16(1)- Essentials

The first paragraph gives the elements of undue influence a dominant position and the use of it to
obtain an unfair advantage. It requires the court trying a case to consider two things.51

(1) are the relations between the donor and the donee such that the donee is in a position to
dominate the will of the donor; and
(2) has the donee used that position to obtain an unfair advantage over the donor?52

Both the conditions have ordinarily to be established by the person seeking to avoid the
transaction.53

 Relationship- It is not necessary that the parties should be related by blood, marriage or
adoption, but that their relations towards each other are such that one is in a superior
position over the other.54Mere relationship is not sufficient for a Court to assume that one
relation was in a position to dominate the will of the other.55The section is not restricted
to cases where strictly or technically fiduciary relationship is established; and it applies to
all varieties of relations where the possibility of exercising undue influence exists from
coincidence created or established.56

47
Ibid.
48
Royal Bank of Scotland v. Etridge, (No.2) UKHL 44 (2001).
49
Supra note 2, at 7-061.
50
The right to rescind may be lost in various ways, supra note 2, at 7-101.
51
Subhas Chandra Das Mushib v. Ganga Prasad Das Mushib, AIR 878 SC (1967); Ladli Prashad Jaiswal v.Kamal
Distillery Co. Ltd., AIR 1279 SC (1963).
52
Afsar Shaikh v. Soleman Bibi, AIR 163 SC (1976).
53
Poosathurai v. Kannappa Chettiar, AIR 65 PC (1960).
54
Supra note 8, at 337.
55
P Saraswathi Ammal v. Lakshmi Ammal, AIR 361 Mad (1978).
56
Mahboob Khan v. Hakim Abdul Ragim, AIR 250 Raj (1964).
A l l c a r d v . S k i n n e r | 12

 Dominating Position- Relationships which exist between a guardian and his ward, father
and son, patient and his medical adviser, solicitor and client, trustee and the cestui que
trust and other like persons , fall within the ambit of sub-s 1 of this section.57The position
of a person to dominate the will of another may arise not merely from the fact of parties
being relatives of each other;58 or from the fact that the relationship is such that one of
them relies upon the other for advice;59 it may also arise as a result of the circumstances
in which the contracts was entered into.60

 Use of Position- The law says that: (a) not only must the defendant have a dominant
position; but (b) he must use it.61

 Unfair Advantage- The words ‘unfair advantage’ must be taken with the context. They
do not limit the jurisdiction to cases where the transaction would be obviously unfair as
between persons dealing on an equal footing.62The expression ‘unfair advantage’ is used
as meaning an advantage obtained by unrighteous means. It would exist where the
bargain is in favour of the influencer and unfair to the other.63

 Section 16(2)- Deeming Feature

This sub-section lays down a special presumption that a person is deemed to be in a position to
dominate the will of another:

(1) where he holds a real or apparent authority over; or


(2) where he stands in a fiduciary relation to another; or
(3) where he enters into the transaction with a person whose mental capacity is tempoearily
or permanently affected by reasons of age, illness or mental or bodily distress.64

57
Ganesh Narayan Nagarkar v. Vishnu Ramchandra Saraf, 32 Bom 37 (1907).
58
Misrilal Jalamchand v. Sobhachand Jalamchand, AIR 569 Bom (1956).
59
Santhappa Rai v. Santhiraja, AIR 426 Mad (1938).
60
Ranee Annapurni Nachiar v. Swaminatha Chettiar, 34 Mad 7 (1910).
61
Supra note 53.
62
Supra note 8, at 339.
63
Daulat v. Gulabrao, AIR 369 Nag (1925).
64
Supra note 8, at 341.
A l l c a r d v . S k i n n e r | 13

The second paragraph of the present section makes a division of the subject matter on a different
principle, according to the origin of the relation of dependence, continuing or transitory, which
makes undue influence possible. Such a relation may arise:

(1) from a special authority or confidence committed to the donee; or


(2) from the feebleness in body or mind of the donor.65

 Real and Apparent Authority- A person in authority is in a position to dominate the


will of the person over whom his authority can be exercised. Such authority may be real,
as between employer and employee, an officer and his subordinate. The authority is
apparent where real authority does not exist, but the person is able to approach the other
with the show of authority.

 Fiduciary Relationship- A fiduciary relationship arises between parties when one of


them stands in a position of trust to the other,66 or in such a position that the latter
naturally reposes confidence in him, a confidence such that a influence grows out of that
confidence.67

Types of Fiduciary Relationships:-

o Parent and Child


o Expectant Heirs
o Husband and Wife
o Lawyer and Client
o Doctor and Patient
o Trustee and Beneficiary
o Creditor and Debtor
o Religious Influence- The case in hand in the brain child of this particular fiduciary
relationship. A devotional mind is the most vulnerable to religious influence. Where a

65
Ibid.
66
Sant Bux Singh v. Ali Raza Khan, 21 Luck 194 (1946).
67
Ram Kalap Pande v. Bansidhar, AIR 89 Oudh (1947).
A l l c a r d v . S k i n n e r | 14

gift is made to a spiritual organization, the courts expect a high degree of proof about the
voluntary and genuine character of the transaction.68

 Section 16(3)- Unconscionable Bargain

The third sub section of the present section does not lay down any rule of law, but throws the
burden of proving free consent on a party who, being in a dominant position makes a bargain so
much as to his own advantage that it ‘shocks the conscience’.69It has limited application. It lays
down conditions for raising a rebuttable presumption that a transaction is procured by the
exercise of undue influence.70

Unconscionability does not have a fixed meaning in law, but in contractual context it is generally
used to describe situations in which it is believed that, although no duress or fraud took place,
one contracting party took advantage of the other party’s weakness by extracting an unfair
bargain.71 Equitable relief against unconscionable bargains derives historically from the English
Court of Chancery’s power to set aside transactions in which expectant heirs had dealt with their
expectations without being adequately protected against the pressure placed upon them by their
poverty.72

There will always be some imbalance between contracting parties in terms of power, wealth,
understanding, experience, and information. If lawmakers and judges insisted on absolute
equality, we would have no more contracts.73 However, the law needs to adapt its philosophy of
contracts to the recent research suggesting contracting parties may not be fully rational or
informed. The antiquated assumptions of contract law prevent the courts from helping vulnerable

68
Philip Lukka v. Franciscan Association Vashapally, AIR 204 Ker (1987).
69
Supra note 8, at 356.
70
Ibid.
71
Siti Aliza Alias & Zuhairah Ariff Abdul Ghadas, Inequality of Bargaining Power and the Doctrine of
Unconscionability: Towards Substantive Fairness in Commercial Contracts, Australian Journal of Basic and
Applied Sciences, 6(11), p. 334, 2012.
72
See, e.g., Earl of Aylesford v. Morris, 8 Ch. App. 484 (1873), 484–88 (Eng.). The principle was subsequently
restated by Fry v. Lane, 40 Ch.D. 312 (1888), 321–22 (Eng.). For a doctrinal analysis of the English Law, see 1
CHITTY ON CONTRACTS paras. 7-126 to -139 (H. G. Beale ed., 30th ed. 2008); EDWIN PEEL, TREITEL: THE
LAW OF CONTRACT para. 10-040 (12th ed. 2007).
73
M Neil Browne & Lauren Biksacky, Unconscionability and the Contingent Assumptions of Contract Theory,
MICH. ST. L. REV. 211 (2013), p. 254.
A l l c a r d v . S k i n n e r | 15

parties prove unconscionability.74 Legislatures too have institutional advantages in promulgating


contract terms relative to courts.75 If the goal is to create fairer contracts for the greatest
percentage of parties possible, legislatures are likely to be more institutionally effective.
However, ultimately it is the job of the courts to police contracts for unconscionability. Until
they begin to employ the doctrine of unconscionability more frequently, the doctrine will remain
an underutilized tool in the court's arsenal.76

 Onus of Proof

Once a suit is filed seeking to avoid an unconscionable contract, and the plaintiff has discharged
his or her initial burden, the defendant must prove by cogent and convincing evidence that the
bargain was fair, just, and reasonable.77 If proved otherwise the contract is voidable under
Section 19A.78Mere inadequacy of consideration, without more, is insufficient to make the
bargain unconscionable,79 though the court may take it into account in determining whether the
consent was given freely. In this respect, the Bombay High Court has held that "inadequacy of
consideration in conjunction with the circumstances of indebtedness and ignorance were facts
from which it would have been... permissible... to infer use of undue influence.’80

2.3 POSITION IN ENGLISH LAW: MANIFEST DISADVANTAGE

 Requirement

Under the English law, the House of Lords, reversing the decision of the Court of Appeal
in National Westminster Bank plc v. Morgan,81had held that the presumption that undue
influence was used, arose only if the transaction was ‘manifestly disadvantageous’ to the

74
Frank P. Darr, Unconscionability and Price Fairness, 30 Hous. L. REv. 1819, 1820 (1994).
75
Russell Korobkin, Bounded Rationality, Standard Form Contracts, and Unconscionability, 70 U. CHI. L. REV.
1203, 1249 (2003).
76
Supra note 73, at 255.
77
Manmohan Lal Sarin, Contract Unconscionability in India, 14 Loy. L.A. Int'l & Comp. L. Rev. 569 (1992), p.
578.
78
Section 19A of Indian Contracts Act, 1872 reads as “Power to set aside contract induced by undue influence.—
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”.
79
Lakshminarayana v. Singaravelu, 1963 AIR 24 Mad (1963).
80
Bhimbhat v. Yeshwantrao, 25 Bom 126 (1900).
81
National Westminster Bank plc v. Morgan, AC 686 (1985).
A l l c a r d v . S k i n n e r | 16

person influenced.82 Lord Scarman, after consideration of the judgement by Lindley LJ in


Allcard v Skinner,83 stated that relief for undue influence rests “not on some vague public
policy but specifically on the victimisation of one party by the other.”

In particular this part of his judgement was seen as indicating that manifest disadvantage
of the transaction was required even in relation to actual undue influence, and
consequently that was the line taken by the Court of Appeal in Bank of Credit and
Commerce International SA v Aboody.84It was the House of Lords in CIBS Mortgages
plc v Pitt85 which made it clear that such an approach was wrong and that it is not
necessary in cases of actual undue influence to prove that the transaction was manifestly
disadvantageous in order to obtain relief, and that any requirement of manifest
disadvantage was confined to cases of presumed undue influence. Lord Browne-
Wilkinson went on to say that, if there is evidence that “the effect of… the conduct is to
prevent… (the other) party from bringing a free will… to bear on the proposed
transaction… (the contract) must be set aside… as a matter of justice”,86 without
consideration of the eventual disadvantageous character of the transaction in question.

It has been argued that the words of Lord Brown-Wilkinson are equally applicable to all
kinds of influence. His comment was, therefore, in effect an open invitation to debate the
correctness of the manifest disadvantage requirement with regards to presumed undue
influence.87 For this reason a number of legal writers88 have argued that, since such
procedural unfairness is generally, in itself, sufficient for the law to intervene, there
should be no additional requirement of substantive unfairness. Despite this criticism, the
courts still tend to require a manifestly disadvantageous transaction in relation to
presumed undue influence. Hence in Goldsworthy v Brickell89 Nourse L.J. stated that

82
Supra note 8, at 340.
83
Allcard v Skinner, 36 Ch D 145 (CA) (1887) 182-185.
84
Bank of Credit and Commerce International SA v Aboody, 1 QB 923 (CA) 965 (1989).
85
CIBS Mortgages plc v Pitt, 4 All ER 433 HL (1994), 439.
86
Ibid.
87
Armin Hadjiani, Duress and Undue Influence in English and German Contract Law: a comparative study on
vitiating factors in common and civil law, (2002) Oxford U Comparative L Forum 1, available at ouclf.iuscomp.org,
last assessed 24 April 2017, 19:26 Hours.
88
13 GC CHESHIRE & CHS FITFOOT, MP FUMSTON LAW OF CONTRACT, (13 th ed.,1996) p 330; J
Cartwright, Unequal Bargaining, Clarendon Oxford (1991) p 176; 3 H COLLINS, THE LAW OF CONTRACT (3rd
ed.,1997) p 140.
89
Goldsworthy v Brickell, Ch 378 CA (1987) at 401.
A l l c a r d v . S k i n n e r | 17

“the presumption is not perfected and remains inoperative until… the contract… is prima
facie explicable only on the basis that the influence was exerted.”

The reason to introduce this requirement in relation to presumed undue influence seems
to be based on the desire to find an equitable allocation of the parties’ interests, such that
it would be fairer to shift the burden of proof only in such cases where the party who
relies on undue influence is actually “victimized”.90

 Constituents

In Bank of Credit and Commerce International SA v Aboody91 it was held that “a


disadvantage would be manifest if it would be obvious as such to any independent and
reasonable persons who considered the transactions at the time with knowledge of all the
relevant facts.” In that case, the question was one of weighing the disadvantages, namely the
risk of the contract, against the benefit gained by the person giving the guarantee or
executing the charge. There were substantial potential liabilities. The fact however, that Mrs
Aboody’s actions gave some hope of survival to the family business was regarded as of
paramount importance and therefore resulted in a lack of a manifest disadvantage. It is
argued that, aside from material interests, even predominant immaterial interests such as
emotive family links could result in the manifestly disadvantageous character of a
transaction.92

The crucial question is, therefore, whether this particular transaction is “one that a party in a
similar situation would ordinarily be expected to have made…”.93 According to Royal Bank
of Scotland v Etridge, manifest disadvantage is found where the transaction is "explicable
only on the basis that undue influence had been exercised”.94 This terminology seems to me
to be circular: Proof that ‘undue influence had been exercised’ makes a presumption of
undue influence useless.

90
National Westminster Bank plc v. Morgan, AC 686 (1985); Royal Bank of Scotland v Etridge UKHL 44 number
24 (2001).
91
Bank of Credit and Commerce International SA v Aboody, 1 QB 923 (CA) 965 (1989).
92
28 CHITTY ON CONTRACTS, GENERAL PRINCIPLES, Vol I (28th ed Sweet & Maxwell London 1999) 7-
049.
93
Ibid.
94
Royal Bank of Scotland v Etridge UKHL 44 number 24 (2001).
A l l c a r d v . S k i n n e r | 18

2.4. CONCLUSION

The doctrine of consensus ad-idem is based on the very principle of a regime free of
vitiating factors, as the last chapter concluded. In light of the pre-requisites to be catered
before discussing the case in hand, the vitiating factor, ‘Undue Influence’ was explicitly
deliberated upon. The term ‘undue influence’ has sometimes been used by the courts to
describe the equitable doctrine of coercion, but it also includes, and it would be perhaps
more helpful to confine it to, forms of pressure much less direct or substantial.95

It was constituted that a relationship must exist between the parties and such a
relationship must pose a superior authority by virtue of which an entity shall influence
the free will of the other. Furthermore the types of authority were segregated to be real
and apparent on the basis of the face value of the authority conceived. The fiduciary
relationship of a devotee and a religious preacher was given due importance and the same
shall be sustained further in the case study. While statements of judicial caution towards
religion are explicable as a preliminary attempt to justify judicial intervention in the case
of transactions made under such influence, they also act as a prompt for examination of
the broader religious context within which the case was set.96

Equity can give relief against unconscionable bargains 97 in certain cases in which one
party is in a position to exploit a particular weakness of the other. 98The burden of
justifying such a transaction is on the former party.99

The requirement of manifest disadvantage, a former requisite in apparent undue influence


in English law, has now been discarded, since it leads to ambiguity.100The true position is
that in these cases if the gift is so large as not to be reasonably accounted for on the
ground of friendship, relationship, charity or other ordinary motives on which ordinary
persons act, the burden is on the donee to support the gift.101

95
29 J. BEATSON A. BURROWS & J. CARTWRIGHT, ANSON’S LAW OF CONTRACT, (29 th ed.,2010), p.
359.
96
PAUL MITCHELL & CHARLES MITCHELL, LANDMARK CASES IN THE LAW RESTITUTION, p. 189.
97
Langton v. Langton, F.L.R. 890 (1995).
98
13 EDWIN PEEL, TREITEL: THE LAW OF CONTRACTS, (13 th ed., 2010), p. 464.
99
Aylesford v. Morris, L.R. 8 Ch.App. (1873) at 484.
100
Supra note 48.
101
Supra note 8, at 340.
A l l c a r d v . S k i n n e r | 19

The above elaborated principles of law shall be applied in the next chapter to efficiently
analyse the given case.

CHAPTER 3: ALLCARD V. SKINNER, 1887, Ch.D. 145; CASE ANALYSIS

3.1 FACTS OF THE CASE

 In 1867, Ms. Allcard, the plaintiff, a lady of around 27 years of age, was
introduced by her spiritual advisor, Reverend Mr. Nihill (clergyman) to the
defendant, Ms. Skinner who was the Lady Superior of ‘The Sisters of the Poor’.

 Four years later in 1871, the plaintiff joined the sisterhood and was required to
surrender all her property as she took the vows of poverty, chastity and
obedience.

 She could have given her wealth away to anyone she choose.

 The rules to be observed by the members of the community forbade them from
seeking outside advice.

 She remained a sister for some eight years (subsequently left in 1879) during
which period she transferred property worth about £7000 to the defendant, who
had used most of the proceeds from the property for the purposes of the
sisterhood.

 Some five years after she left the sisterhood (1884), the plaintiff claimed the
return of the remaining money on the ground that the property had been procured
from her by undue influence.

 Court proceedings began in 1885.


A l l c a r d v . S k i n n e r | 20

3.2 ISSUES RASIED

1. Whether the transaction can be construed as a ‘gift’?

2. Whether the plaintiff acted under ‘undue influence’ while carrying out the transaction?

3. Whether the plaintiff is entitled to restitution of the donated property?

3.3 CONTENTIONS ADDRESSED

 The Gift

A gift is the voluntary and gratuitous transfer of property.102 The equitable doctrine of
undue influence allows for the rescission of a gift or contract arising out of a relationship
of influence between the transacting parties.103 Only those relationships in which it is not
normal to expect contracts or sizeable gifts are affected by the automatic presumption of
undue influence.104The words ‘voluntary’ and ‘gratuitous’ represent the bulk of the
definition. Voluntary in its literal sense shall constitute an act done without prejudice or
any by standing obligation. The very nature of the transaction that currently is being dealt
with does indicate mala-fide intention, though not express but implied. A gift is generally
a mirror of an individual’s personal capacity and one’s life’s worth is never his gifting
capability.

For the transaction to stand, the presumption that undue influence was exercised must be
rebutted by the stronger party.105 This can be achieved by demonstrating that the stronger
party ‘took no advantage of the donor, but that the gift was the independent and well-
understood act of a man in a position to exercise a free judgment based on information as

102
BLACK’S LAW DICTIONARY, (7th ed., 1999); DUKELOW, D.A. & NUSE B., THE DICTIONARY OF
CANADIAN LAW (2nd ed.); BURKE J., JOWITT’S DICTIONARY OF ENGLISH (2nt ed.) (London, Sweet &
Maxwell, 1977).
103
Matthew Tyson, An Analysis of the Differences between the Doctrine of Undue Influence with Respect to
Testamentary and Inter Vivos Dispositions, 5 Australian Property Law Journal 38 (1997).
104
Yerkey v Jones, 63 CLR 649 (1939), 675.
105
Pauline Ridge, The Equitable Doctrine of Undue Influence Considered in the Context of Spiritual Influence and
Religious Faith: Allcard v. Skinner Revisited in Australia, UNSW Law Journal, Volume 26(1), p. 67.
A l l c a r d v . S k i n n e r | 21

full as that of the donee’.106 Producing evidence that the person subject to the influence
received independent advice before entering into the transaction is the most common way
to rebut the presumption, although not essential in all cases.

The facts of the case indicate that the plaintiff has not allowed to seek external advice
and the only way of joining the sisterhood was by giving up all she possessed. Lindley LJ
rights elaborates

“But the influence of one mind over another is very subtle, and of all influences religious
influence is the most dangerous and the most powerful, and to counteract it Courts of
Equity have gone very far. They have not shrunk from setting aside gifts made to persons
in a position to exercise undue influence over the donors, although there has been no
proof of the actual exercise of such influence; and the Courts have done this on the
avowed ground of the necessity of going this length in order to protect persons from the
exercise of such influence under circumstances which render proof of it impossible”107
In McCulloch v Fern108 there was also deliberate manipulation of a relationship of
spiritual influence in order to secure a personal benefit in the form of a reduction of a
mortgage held by the leader of the sect to which both parties belonged. It was linked that
the parties’ shared religious practices in that the mortgaged property was to be used for
the purposes of the sect. The donor believed that the donee represented God. Through
physical and psychological pressure, the donor was convinced by the donee that it was
God’s will that she make the gift.109 Justice Palmer relied upon the presumption but
found in the alternative that there was actual undue influence.

The thesis derived from the above explanation does suggest give clear indication that the
transaction was nothing near a gift.

106
Johnson v Buttress, 56 CLR 113 (1936) at 135; Union Fidelity Trustee Co of Aust Ltd v Gibson, VR 573 (1971)
575.
107
Allcard v Skinner, 36 Ch D 145 (CA) (1887) at 183.
108
McCulloch v Fern, NSWSC 406 (Unreported, Palmer J, 28 May 2001).
109
See also Norton v Relly, 2 Eden 286 (1764); 28 ER 908; Huguenin v Baseley, (1807) 14 Ves Jr 273 (1807);
Nottidge v Prince, 2 Giff 246 (1860); Lyon v Home, LR 6 Eq 655 (1868); Morley v Loughnan , 1 Ch 763 (1893);
Chennells v Bruce, 55 TLR 422 (1939).
A l l c a r d v . S k i n n e r | 22

 Undue Influence

The alternative application of the doctrine of undue influence is through ‘presumed


undue influence’.110 Here, the court presumes that the transaction resulted from the
unconscionable exertion of influence if two factors are satisfied. The first is whether
there is a sufficiently strong relationship of influence between the transacting parties on
the facts or, alternatively, whether the parties’ relationship belongs to a class to which the
presumption applies automatically for reasons of public policy. The second is that, given
the relationship i+n question, the transaction would not normally be expected because of
its value or other factors. The relationship coupled with the transaction activates the
presumption of undue influence.111

 Relationship- The presumption of undue influence has applied automatically to


relationships of spiritual influence, for example, ‘confessor/penitent’ and spiritual
adviser/follower, although the automatic presumption is not usually relied upon in
the modern cases.112 Instead, the court examines the nature of the particular
relationship in question.113 In addition to relationships whose primary
characteristic is shared religious beliefs, a relationship with a religious or spiritual
aspect may be characterised as a relationship of trust and confidence to which the
presumption of undue influence should apply.114

Historically, spiritual influence was seen as one of the most powerful influences
upon a person’s conduct:

“What is the authority of a guardian, or even parental authority, what are the
means of influence by severity or indulgence in such a relation, compared with
the power of religious impressions under the ascendancy of a spiritual adviser;
with such an engine to work upon the passions; to excite superstitious fears or
pious hopes; to inspire, as the object may be best promoted, despair or

110
Supra note 48.
111
See Watkins v Combes , 30 CLR 180 (1922), 193–4; Yerkey v Jones, 63 CLR 649 (1939), 675; See also
Meagher, Heydon and Leeming, above n 3, [15-030]; Rick Bigwood, Undue Influence in the House of Lords:
Principles and Proof, 65(3) Modern Law Review 435 (2002), 445; Paul Desmond Finn, Fiduciary Obligations
(1977) , p.179; Barclays Bank Plc v O’Brien, 1 AC 180 (1994), 189–90.
112
Contra Royal Bank of Scotland Plc v Etridge, (No 2) 2 AC 773 (2002).
113
See also Clark v The Corporation of the Trustees of the Roman Catholic Archdiocese of Brisbane, 1 Qd R 26
(1998).
114
See Nel v Kean, EWHC 190 (2003).
A l l c a r d v . S k i n n e r | 23

confidence; to alarm the conscience by the horrors of eternal misery, or support


the drooping spirits by unfolding the prospect of eternal happiness: that good or
evil, which is never to end? What are all other means to these? Are inferior
considerations to have so much effect; and is no regard to be given to the most
powerful motive, that can actuate the human mind?”115

 Nature of Transaction- It has been well established in this context that a mind
under religious influence is gullible in nature and can be mould as the preacher’s
yardstick. A gift of the whole of his property by a Hindu, well advanced in years,
to his guru, or spiritual advisor, was set aside where the only reason for the gift,
as disclosed by the deed being the donor’s desire to secure benefits to his soul in
the next world.116

Given the facts of the present case117 Ms. Allcard was conceal ably forced to part
with all her belongings much like the above cited case to be a part of the
sisterhood.

There was no finding of actual undue influence in Allcard v Skinner. All members of the
Court were adamant that Miss Skinner and Mr Nihill had behaved with complete
propriety:

“The result of the evidence convinces me that no pressure, except the inevitable pressure
of the vows and rules, was brought to bear on the Plaintiff; that no deception was
practised upon her; that no unfair advantage was taken of her; that none of her money
was obtained or applied for any purpose other than the legitimate objects of the
sisterhood. Not a farthing of it was either obtained or applied for the private advantage
of the lady superior or Mr Nihill …”118
Despite this, a presumption of undue influence arose because the relationship between
Miss Allcard and Miss Skinner was one of complete spiritual submission and obedience
in which Miss Allcard could not ‘freely exercise her own will’.119 The presumption could
not be rebutted because when joining the Sisterhood Miss Allcard had promised not to
seek the advice of outsiders without Miss Skinner’s consent. The lack of independent

115
Huguenin v Baseley, 14 Ves Jr 273 (1807), 288.
116
Mannu Singh v. Umadat Pande, 12 All 523 (1890).
117
See above p.17.
118
Allcard v Skinner, 36 ChD 145 (1887), 179.
119
Ibid 172.
A l l c a r d v . S k i n n e r | 24

advice was fatal even though it was highly unlikely that Miss Allcard would have
followed any advice that counselled her against the gift. At first instance, Kekewich J
acknowledged that ‘she would have put from her the advice received as a temptation of
the evil one’.120

 Restitution

In Allcard v Skinner, Miss Skinner received no personal gain from the gifts. It was
intended that the proceeds would be used for the charitable purposes of the Sisterhood.
This was the case, and Miss Allcard enthusiastically participated in the expenditure. Only
Cotton LJ considered the question of Miss Allcard’s remedy.121 After noting the absence
of personal gain and that there was no deliberate deception by Miss Skinner, he stated:

“But if the Plaintiff has an equity to set aside gifts made to the Defendant, in my opinion
the Defendant would have a stronger equity against the Plaintiff to prevent her from
making the Defendant personally liable for money spent for the charitable purposes to
promote which the Plaintiff and Defendant were at the time of the expenditure
associated, and which the Plaintiff was at the time willing and anxious to promote.”122
In his dissenting judgment, Cotton LJ held that Miss Allcard was only entitled to any part
of the gift still held by Miss Skinner and to income derived from it since commencing her
action. It is not clear how Cotton LJ reached this conclusion, however, it seems to be the
most appropriate one. Similarly, in obiter, Lindley LJ said that Miss Allcard would have
been entitled ‘to obtain restitution from the Defendant of so much of the Plaintiff’s
property as had not been spent in accordance with the wishes of the Plaintiff, but
remained in the hands of the Defendant’.123 Are these conclusions possible if the
traditional remedy of equitable rescission124 is applied? The aim of equitable rescission is
to restore the parties, as far as possible, to their original positions before the gift was
made. However, unlike common law rescission, ‘[t]he question is not whether the parties
can be restored to their original position; it is what does the justice of the case
require?’125 Equitable rescission is a flexible remedy that can accommodate changes in

120
Ibid 159.
121
Lindley and Bowen LJJ held that the claim was barred due to Miss Allcard’s delay in commencing the action.
122
Supra note 83, at 170-1.
123
Ibid 186.
124
Dusik v Newton, 62 BCLR 1 (1985).
125
O’Sullivan v Management Agency Ltd, 1 QB 428 (1987), 466–7.
A l l c a r d v . S k i n n e r | 25

the value of the property received, or performance of the transaction entered into.126
Thus, equitable rescission can be granted upon terms.

In Allcard v Skinner there are four factors relevant to a grant of rescission that explain
the limited remedy that Cotton LJ was prepared to grant. These are: (a) the delay on the
part of Miss Allcard, (b) the moral character of Miss Skinner, (c) the lack of personal
benefit, (d) and the fact that most of the gift had been dissipated. A plaintiff’s delay in
taking action, even if it does not preclude recovery outright, will be taken into account in
awarding a just remedy.127 Secondly, the fact that a defendant’s ‘personal conduct is not
open to criticism’ will be taken into account in formulating a remedy that does not
operate harshly.128 Because Miss Skinner received no personal benefit and most of the
money had been spent she would not have been restored to her original position if
ordered to repay the gift.

3.4. COURT OF APPEALS

 Majority Opinion (Lindley and Bowen LJJ)

 Judgement

A majority of the Court of Appeal (Lindley and Bowen LJJ) held that she would have
been allowed to recover at least some of her property, had it not been for her delay in
instituting proceedings.129

 Lindley LJ

On the transaction as a gift,

“But if the gift is so large as not to be reasonably accounted for on the ground of
friendship, relationship, charity, or other ordinary motives on which ordinary men act,
the burden is upon the donee to support the gift”

“What then is the principle? Is it that it is right and expedient to save persons from the
consequences of their own folly? or is it that it is right and expedient to save them from
126
Alati v Kruger, 94 CLR 216 (1995), 223–4.
127
Erlanger v New Sombrero Phosphate Co, 3 App Cas 1218 (1878), 1278–9.
128
Cheese v Thomas, 1 WLR 129 (1994), 138.
129
Supra note 105, at 69.
A l l c a r d v . S k i n n e r | 26

being victimised by other people? In my opinion the doctrine of undue influence is


founded upon the second of these two principles. Courts of Equity have never set aside
gifts on the ground of the folly, imprudence, or want of foresight on the part of donors.
The Courts have always repudiated any such jurisdiction. Huguenin v Baseley 14 Ves
273 is itself a clear authority to this effect. It would obviously be to encourage folly,
recklessness, extravagance and vice if persons could get back property which they
foolishly made away with, whether by giving it to charitable institutions or by bestowing
it on less worthy objects. On the other hand, to protect people from being forced, tricked
or misled in any way by others into parting with their property is one of the most
legitimate objects of all laws; and the equitable doctrine of undue influence has grown
out of and been developed by the necessity of grappling with insidious forms of spiritual
tyranny and with the infinite varieties of fraud.”

 Bowen LJ

“The gifts should be set aside ‘unless it is shewn that the donor, at the time of making the
gift, was allowed full and free opportunity for counsel and advice outside – the means of
considering his or her worldly position and exercising an independent will about it.’ and
‘This is not a limitation placed on the action of the donor; it is a fetter placed upon the
conscience of the recipient of the gift, and one which arises out of public policy and fair
play.’”

 Dissenting Opinion (Cotton LJ)

Diverting from the majority opinion Cotton LJ said that the plaintiff had the right to
recover irrespective of the time lag.

“First where the court has been satisfied that the gift was the result of influence expressly
used by the donee for the purpose; second, where the relations between the donor and
donee have at or shortly before the execution of the gift been such as to raise a
presumption that the donee had influence over the donor.”
A l l c a r d v . S k i n n e r | 27

3.5 PRECEDENT CITED: HUGUENIN V. BASELEY, 14 Ves 273

 Facts

The plaintiff, Mrs. Huguenin, whilst a widow, constituted the defendant her agent, and he
undertook the management of her property and affairs; and she afterwards executed a voluntary
settlement in favour of him and his family. Mrs. Huguenin having remarried, this suit was
brought by her and her husband for the purpose of setting aside the settlement.130

 Ratio

Held, that the settlement should be set aside as obtained by undue influence and abused
confidence in the defendant, as an agent undertaking the management of her affairs ; upon the
principles of public policy and utility, applicable to the relation of guardian and ward.

When undue influence is alleged, the law will investigate the way the intention to enter into the
transaction was secured. Lord Eldon LC said: ‘Take it that she (the plaintiff) intended to give it
to him (the defendant): it is by no means out of the reach of the principle. The question is, not,
whether she knew, what she was doing, had done, or proposed to do, but how the intention was
produced.’131

3.6 CONCLUSION

Given the era in which the case is based, Allcard v. Skinner, can be enlisted as a landmark case
with respect to the fine sense of judgement catered by the learned bench.

The first question went to the conceptual basis of undue influence. It was argued that the
religious faith cases have a prophylactic rationale based upon the defendant’s unconscionable
behaviour. Equitable intervention is warranted to ensure that unconscionable advantage is not
taken of those who have let down their guard due to trust and confidence in another person. In

130
Legal Definition and Related Resources of Huguenin v. Basely, Legal Dictionary, available at-
http://legaldictionary.lawin.org/huguenin-v-basely/, last assessed 25 April 2017, 01:38 Hours.

131
Huguenin v. Baseley 1807, Swarb.Co.Uk, available at- http://swarb.co.uk/huguenin-v-baseley-1807/, last
assessed- 25 April 2017, 01:43 Hours.
A l l c a r d v . S k i n n e r | 28

addition, high standards are set for religious institutions or individuals who wish to benefit from
someone over whom they exert influence. Any doubt as to whether an unfair advantage was
taken must be resolved in favour of the donor. This explains why Miss Skinner was presumed to
have exercised undue influence, even though the Courts emphasised that there was no evidence
of deliberate wrongdoing. Consistently with the prophylactic rationale, the enquiry can focus
upon the defendant’s conduct or the plaintiff’s lack of independence in decision-making; they are
two sides of the same coin. However, this conclusion does not resolve the other, more specific,
doctrinal questions concerning the role of independent advice: the fashioning of the remedy and
the significance of improvidence of a transaction. The independent advice requirement (although
not mandatory) shows that no advantage has been taken of the donor and also that a free, fully-
informed decision was made. I argued that the role of independent advice varied in significance
depending upon the particular facts. In cases about the presumption of undue influence, such as
Allcard v Skinner where there was no personal benefit received from the gift and no suggestion
of actual wrongdoing, the mere presence of adequate independent advice would probably rebut
the presumption, regardless of whether Miss Allcard followed it. It was suggested that there are
scenarios where independent advice that is ignored demonstrates that the donor is completely
under the influence of the donee; that is, there are some gifts that can never be accepted due to
the complete reliance of the donor on the donee.

The remedy of rescission was found to contain sufficient flexibility to avoid unjust outcomes.
Otherwise, there was a danger that a prophylactic doctrine with high standards might operate too
harshly on donees who receive no personal gain and who dissipate the proceeds of the gift. This
cannot be said of more novel remedies for undue influence, such as equitable compensation and
constructive trust. Another doctrinal issue is whether undue influence is always the appropriate
doctrine when a gift in the context of religious faith is disputed. I argued that scenarios such as in
Hartigan are better pleaded as an unconscionable dealing pursuant to Amadio.

The degree of improvidence of a disputed gift is relevant both doctrinally and with respect to
religious donees. It was found that suspicion of the presence of undue influence increased as the
improvidence of a gift increased. Although it is often said that gifts will not be rescinded on the
ground of improvidence alone, this was not convincing.
A l l c a r d v . S k i n n e r | 29

There are two questions of specific relevance to the context of religious faith. First, there is the
‘ordinary motives’ threshold test for presumed undue influence, which discriminates against gifts
by ‘obdurate believers’ and against religions that are not accepted within mainstream society.
This is not necessarily a reason for rejecting the test because there is a public policy in ensuring
that even obdurate believers are not taken advantage of. Miss Allcard, for example, was
undoubtedly an obdurate believer. However, sensitivity is required in applying the ‘ordinary
motives’ test, and Justice Bryson’s approach in Hartigan of testing also against the motives of
ordinary Hare Krishna adherents seems appropriate. It is also important that judges be informed
in detail of the beliefs and practices of minority religious groups.

Other policies that underpin undue influence decisions in the context of religious faith were
discussed. Of interest is the idea that one must provide for one’s dependants before giving a gift
according to one’s religious beliefs. Although not clearly articulated, it was suggested that this
policy was present in Hartigan and Quek v Beggs and may be an unintended reflection of the
policy of testators’ family maintenance legislation. Whether or not this is an appropriate policy
and whether a distinction can be drawn between inter vivos and testamentary gifts deserves
further study.

CHAPTER 4: THE APPLICATION OF ALLCARD V. SKINNER

4.1 SIGNIFICANCE OF THE RATIO

There are a number of policies or themes underlying the decisions on undue influence in
the context of religious faith. Some have been mentioned previously, for example, the
statement that equity will not undo unwise bargains. Whilst such policies clearly
influence the outcomes of cases, they are neither conclusive, nor sufficient in themselves
to determine outcomes.132 Two other policies are worthy of mention. A clear policy,
apparent in the undue influence cases concerning religious faith, is that of protecting
persons from exploitation in the practice of their religious and spiritual beliefs.133 In early
cases, this was expressed in terms of protection against fraudsters, that is, people

132
Supra note 105, at 86.
133
Allcard v Skinner, 36 ChD 145 (1887), 183.
A l l c a r d v . S k i n n e r | 30

masquerading as spiritual leaders who extorted material benefits from their followers.
For example, in Norton v Relly134 in 1764, the defendant was described as a person who
‘preys upon his deluded hearers, and robs them under the mask of religion’.135

Lindley LJ, rightly pointed out that at the time of the hearing of Allcard v Skinner there
was no set precedent for concepts like fraud, undue influence related to religious
influence. The case set the tone for generations of cases as the rising levels of fraud in the
name of religion is a common scenario in the 21st century. The concept of restitution
based on the time aspect is again an unique feature of the judgement and reaffirms the
statement ‘time is the sense of contract.’

4.2 CASES THAT FOLLOWED

 Luffram v. Australian and New Zealand Banking Group Ltd136

In Luffram, a religious leader, described as ‘a person who in the name of religion preys on the
sensibilities of those who are gullible and uses the beliefs of those weaker than himself for his
own self advancement’, persuaded one of his followers to provide security for his debts to a
bank.137 It appears that the basis of the decision was actual undue influence with notice by the
defendant bank.

 Quek v. Beggs138

The remaining two cases do not involve deliberate (or conscious) exploitation. In Quek v Beggs
substantial gifts of property comprising most of the donor’s assets were set aside due to an
unrebutted presumption of undue influence arising from the relationship between the donor, Mrs
Quek, and the primary donee, her Baptist pastor, Mr Beggs. The parties enjoyed a close
friendship in which the donor received substantial emotional, practical and spiritual support

134
Norton v Relly, 28 ER 908 (1764), 909.
135
See also, Nottidge v Prince, 2 Giff 246(1860); 66 ER 103; Lyon v Home , LR 6 Eq 653(1868); Morley v
Loughnan, 1 Ch 763 (1893); Chenells v Bruce, 55 TLR 422 (1939).
136
Luffram v Australian and New Zealand Banking Group Ltd, ASC (1986) , ¶55-483.
137
Ibid 602.
138
Quek v. Beggs, 5 BPR (1990).
A l l c a r d v . S k i n n e r | 31

during her terminal illness.139 She had estranged herself from her children and relied almost
exclusively on the pastor and his wife for support.

A generous reading of the facts would suggest that the pastor behaved naively in accepting her
gifts, that he genuinely shared the donor’s belief that God had asked her to make the gifts, and
that he was to use them to build a house for his retirement. Her children brought the action after
she died.

4.3 CONCLUSION

Even after 100 years of the decision, the significance of Allcard v. Skinner stands true and valid
and has found implications in a varied number of cases in both English and Indian Law. The
specialty about the judgement is in the dissenting opinion. Even the minority opinion has been
taken up in a number of leading cases.

The parameter of fiduciary relationship in terms of religious influence finds its first recognised
effect in the said case. The precedent shall serve to be valid until the tides turn and the clocks
rewind and an overruling provision of law emerges.

CHAPTER 5: CONCLUSION

The prime motive of the project was to prima facie substantiate the case of Allcard v. Skinner,
with special reference to the associated aspect of undue influence. For the said purpose, initiation
of this project was marked by introduction to contract law and the interplay between general and
public law and the associated factors as elaborated by various luminaries.140 The subsequent part
dealt with Indian Contract Act, 1872 and efforts were made to draw an analogy between the
position of English and Indian law with regard to generic contracts. The concept of ‘freedom of
contract’ or more technically termed consensus ad-idem was outlined with the various vitiating
factors including coercion, misrepresentation, fraud and undue influence.

The vitiating factor of undue influence, being the major stakeholder in the discussion of Allcard
v. Skinner, formed the subject matter of the second chapter. A bifurcation was made in terms of
position in Indian law and English Law. The former catering to the essentials as the

139
Supra note 71.
140
Supra note 1.
A l l c a r d v . S k i n n e r | 32

establishment of a set relationship, the existence of a dominating position and the further
misappropriation of that dominating position to subdue the free will of another. The deeming
feature was enshrined in the hoard of authority; real and apparent and the concept of fiduciary
relationship. The relationship between religious preacher and a subject has been enlisted to be
the most important in this case and finds direct reference in the same. An unconscionable bargain
is such an agreement as no sane man, not under a delusion, would make and no honest man
would take advantage of.141The presence of the following features shall hold a transaction
voidable.

The third chapter enshrines the case. Ms. Allcard was unduely influenced by her religious
advisor to transfer all her property to the sisterhood in order to be a member of the same without
seeking any external say on the same. The 2:1 judgement given by the Court of Appeals held that
though she was influenced unlawfully, the delay in initiation of proceedings waived her right to
restitution. The minority opinion by Cotton LJ however deemed the right of restitution to be
valid irrespective of the time lag.

The precedent of Allcard v. Skinner has served as the uncontested law for generations of cases
dealing with undue influence and shall serve to be so in the years to come.

141
Vinayakappa Suryabhanappa Dahenkar v. Dulichand Hariram Murarka, AIR 566 Pat (1919).