1.3 Vitiating Factors (Duress and Undue Influence) Flashcards
How does duress and undue influence affect the court’s consideration of a contract?
Duress and undue influence both allow a contract to be set aside (rescission) if one party has been subjected to unfair and improper pressure by the other
What are the three types of duress?
- Duress to the person
- Duress to goods, and
- Economic duress
What is meant by ‘duress to the person’?
Duress to the person occurs when a contract is made because of either actual or threatened
violence to one of the parties or to that party’s family.
Once duress is established, the burden
of proof shifts to the guilty party to establish that the duress didn’t influence the innocent
party’s decision to make the contract
What is meant by ‘duress to goods’?
Duress to goods is a threat to damage a person’s property.
The view of the courts is that, even if there is no threat of physical violence to a person, if there is a threat to their property
which compels them to sign a contract, then that coercion would be sufficient to find duress.
What is meant by ‘economic duress’?
Economic duress occurs where one party takes advantage of the financial difficulties of the
other to either negotiate or re-negotiate terms. There may be a contractual relationship
already in existence, or the parties may be in negotiations.
Provide a definition of the term ‘duress’
Duress has been defined as pressure involving compulsion or a lack of practical choice for
the victim. This pressure must be illegitimate and must constitute a significant cause of the
claimant entering the contract.
As duress involves coercion, how does the court try to assess whether this is in place?
When the courts try to assess whether coercion has happened, the following will be
examined:
1. Did the party protest at the time?
2. Did they have an alternative option at the time?
3. Was the party independently advised?
4. After the contract was made, did the party take any steps to avoid it or not?
What is the difference between duress and undue influence?
Like duress, undue influence involves pressure being placed on a victim. However, with
undue influence, this pressure is more subtle and arises from the relationship between the
victim and the alleged perpetrator.
What are the three categories of undue influence?
- Actual undue influence
- Presumed undue influence, where there is a protected relationship, and
- Presumed undue influence, where there may be a presumption of influence, but the
existence of a relationship of trust and confidence must be established.
What is the definition of actual undue influence?
Actual undue influence is similar to duress and has been defined as overt acts of improper
pressure or coercion. It is no longer necessary to prove manifest disadvantage if you have
established actual undue influence.
What is meant by a protective relationship for presumed undue influence?
The type of relationships that fall into this category are those such as
solicitor and client, doctor and patient, religious adviser and disciple, and parent and child.
Spouses and civil partners do not automatically raise the presumption of undue influence. Elderly parents and grown-up children are also not classed as a protected relationship.
How do ‘other relationships’ give rise to the evidential presumption of influence?
Through proving a relationship of trust and confidence.
For “other relationships” which do not fall into the protected categories, a relationship of trust
and confidence must be proved to give rise to the evidential presumption of influence. It is
possible that this presumption may be rebutted.
Explain the relationship between undue influence and notice?
A creditor will be put on notice if a spouse
offers to stand surety for their spouse’s debt. If this happens, then the creditor - such as a bank - should make sure they have a separate, private meeting with the innocent party to
explain the liability and urge them to take independent advice.
In regard to the content of the legal advice, the innocent party must be advised whether they wish to proceed, what the
documents are, the consequences of signing those documents and the seriousness of the
risks. It is also important that they are told that they have a choice not to do so.
The partner should not be present at this meeting. Only once the lender has received confirmation that
the innocent party has been advised, are they are able to proceed with the transaction.
What is the remedy for undue influence?
The remedy for undue influence is rescission and the usual issues apply. This means the
right to rescind may be sufficient if the contract has been made after the influence, though a
lapse of time may complicate matters, as could the subsequent intervention of third-party
rights.
