Duress and undue influence Flashcards
What is duress in a contract?
Violence, illegitimate threats, pressure that coerce a party to enter into or vary a contract.
Who bears the burden of proof with duress?
The party alleging it.
What is the effect of the contract if duress is proven?
The original or renegotiated contract is voidable and can be rescinded by the innocent party.
How can the innocent party rescind the contract?
They must notify the other party of their intention to rescind
OR
Apply to the court for an order of rescission where the other party refuses to pay/return property.
What are the bars to rescission? (4)
Where contract has been affirmed
Where there has been undue delay
Where someone has acquired the property without being aware the seller was coerced
Where it is impossible to restore the goods or property
What is undue influence?
Where a person in a position of trust abuses that position and takes unfair advantage of the other party.
What is the consequence of a contract with undue influence proven?
The contract can be rescinded provided the bars to rescission do not apply.
What are the two types of undue influence?
Actual undue influence
Presumed undue influence
What is actual undue influence?
Where a person is subject to direct pressure or coercion by another.
This is difficult to prove in practice.
What are the requirements for presumed undue influence?
There must be a relationship of trust and confidence
There must be a transaction that calls for an explanation.
What is the position where a husband’s business requires extra capital and a commercial lender requires security over the matrimonial home?
The wife would be a surety.
The creditor should have been put on inquiry and take reasonable steps to ensure the surety is aware of the implications.
What does it mean to be put on inquiry for undue influence?
Where the relationship between the debtor and the surety is non-commercial and the loan is not for their joint benefit.
What reasonable steps should a creditor take once they are put on inquiry?
Have a private meeting with the surety
Insist they take independent advice from a solicitor
What happens if a creditor does not follow the required steps?
They are stopped from enforcing its security, but it will still have an action against the debtor for the money it is owed.
