Duress and Undue Influence Flashcards
What is Duress?
The Coercion of Consent to Contract.
What are the Three Types of Duress?
- Duress to Goods.
- Economic Duress.
- Duress to the Person.
What is Duress to Goods?
Definition:
- Coercion by threatening to seize or damage a Party’s Property (or actually doing so).
Legal Test:
- The Victim must prove they would not have Consented but for Duress.
What is Economic Duress?
Definition:
- Coercion by Illegitimate Pressuring a Party’s economic interests.
Legal Test:
- The Victim must prove the Pressure left them with no practical choice but Consent; and that
- They would not have Consented but for this.
What is Duress to the Person?
Definition:
- Coercion by threatening violence against the Party or a Third Party (or actually doing so).
Legal Test:
- The Victim must prove the Duress was one of the Drivers of its Consent.
What is the Legal Effect of Duress on a Contract?
- It renders any Contract Voidable.
- It entitles the Victim to Rescission.
When may the Right to Rescind be Lost?
The Victim:
- Affirms the Contract expressly or through conduct.
- Affirms the Contract implicity by failing to act within a reasonable time.
Regarding Economic Duress, when will the Victim have No Practical Choice?
When they have no reasonable alternative but Consent.
Regarding Economic Duress, what are Classic Examples of Illegitimate Pressure?
- Threats to Breach the Contract.
- Application of Pressure in Bad Faith.
- The use of unlawful or improper means.
Regarding Economic Duress, is the Victim’s Silence relevant?
Yes. The longer the Victim remains silent, especially at Duress, the likelier their Case will fail.
Regarding Economic Duress, is the Victim’s Conduct relevant?
Yes:
- Once Duress ends, it must not delay in its challenge, lest it be deemed to Affirm.
- The Victim should avoid extended compliance without objection, lest it be deemed to Affirm.
What is Undue Influence?
The use (or abuse) of Influence in such an unfair way that it vitiates a Party’s Consent.
What are the Two Types of Undue Influence?
- Overt Acts of Improper Pressure or Coercion.
- Taking Advantage of Influence or Ascendancy.
What is the Description and Legal Test for Overt Acts of Improper Pressure or Coercion?
Description:
- Any Act that explicitly Coerces or applies Illegitimate Pressure to the Victim.
Legal Test — Dishonest Acts:
- The Victim must prove the Influence was one of the Drivers of its Consent.
- The Counterparty must prove the Influence had no impact.
Legal Test — All Other Cases:
- The Victim must prove they would not have Consented but for the Influence.
Proving this only gives rise to a Presumption of Undue Influence.
What constitutes Taking Advantage of Influence or Ascendancy?
Description:
- A Counterparty exploiting its relationship with the Victim to gain an unfair advantage.
Legal Test:
- The Victim must prove the existence of a relationship of trust and confidence with the Counterparty; and that
- The given Transaction was unusual or requires explanation.
Proving this only gives rise to a Presumption of Undue Influence.
How may the Counterparty Rebut the Presumption of Undue Influence?
By proving:
- The Victim fully understood the Transaction.
- The Victim received independent legal advice.
- The Influence had no effect on the Victim’s decision-making.
However, even if properly advised or cautioned, the Court may still find the Victim was acting under the Counterparty’s Undue Influence.
Which Types of Relationships carry an Irrebuttable Presumption of Influence?
- Parent and Minor.
- Solicitor and Client.
- Doctor and Patient.
- Guardian and Ward.
- Trustee and Beneficiary.
What is the Legal Effect of Undue Influence on a Contract?
- It renders any Contract Voidable at the Court’s discretion;
- Which it will only exercise if Equity so demands.
When will Undue Influence exerted by a Third Party affect a Contract between the Victim and Counterparty?
- When the Counterparty has Constructive Notice of the Undue Influence.
- In other words, when it should have known despite its actual ignorance.
- This arises if:
- There is a non-commercial Surety;
- There is a substantial risk of Undue Influence at play; or
- The Transaction does not financially advantage the Victim.
What should a Counterparty do to Protect Itself from any Undue Influence exerted by Third Parties on the Victim?
It must take reasonable steps to ensure:
- The Transaction is legitimate; and
- The Victim is giving fully-informed Consent.
In practice, this means:
- Providing the Victim with sufficient Transaction information;
- Providing the Victim with an Independent Solicitor; and
- Warning the Solicitor of any suspicisons of Undue Influence.
