THE ability to contract is the basis for the validity of any transfer or donation of assets, money or immovable property from one person to another. There are people who due to their age or health condition have reduced mental ability to manage their personal affairs. Under these circumstances,
any such person does not have the contractual ability to donate or transfer his property, unless an order is issued by the court appointing a suitable person to administer their estate.
Even when someone is appointed as an administrator, he acts gratuitously, for the benefit of the mentally weak or ill person and he may dispose
the property only after he obtains an order from the court. Elderly people, mainly those who have no close relatives are often victims of people who take advantage of the situation. They act illegally using various methods to acquire the property of the elderly. The most common method is to obtain a power of attorney through which they believe they are free to acquire the property.
Although this is not proper, they make use of the power of attorney and transfer the assets to their name. Even if the signature of the elderly was certified, any transfer of property made is illegal, since the elderly had no contractual ability and did not understand or comprehend the contents of the authorisation given. His consent is not considered to be free, but it is said to be caused by coercion, undue influence, fraud, misrepresentation or mistake.
Therefore, such transfer, if made, can be declared null and void. The relevant provisions of the law state that 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. In particular, 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.
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.
The Supreme Court had the opportunity to deal with the above issue emphasising that the application of the principle of undue influence aims at preventing someone from keeping the benefits of his fraudulent or unlawful act. When the court is satisfied that a transfer or a donation was the result of undue influence exercised by the recipient or where the relations between the donor and the doneé at the time of the donation or just before it, are such as to create the presumption that the donor was influenced by the doneé, the court declares the donation null and void.
For a transfer or a donation to be declared valid, it must be considered as a spontaneous act of the donor who acted with his free will and with full knowledge of his acts. The most common way for a transfer or a donation to be proven that it was not the result of undue influence, is to prove that it was made after a proper and independent legal advice was taken.