Duress and Undue Influence Flashcards
What are the three types of duress?
Duress to the person
Duress to property
Economic duress
When will duress to the person be found?
When actual or threatened violence contribute to the decisions to enter the contract - need be only one factor.
BOP on the person accused of duress
When will duress to goods be found?
If, but for the duress, the contract would not have been entered into [higher threshold]
What are the components of economic duress?
DSND Subsea:
1) Pressure, which creates
2) A lack of practical choice
3) Illegitimate
4) Significant cause in inducing contract to be signed (but for test)
What is the effect on a contract entered into under duress?
Voidable - remains in force unless action is taken.
Remedy is recsission unless the contract is affirmed.
How can a contract be affirmed?
If after the duress has ceased, the innocent party fails to challenge the contract in a timely way or acts in compliance with the contract.
What does ‘lack of practical choice’ mean?
Example: Carillion v Felix
Work dependant on completion of building and subcontractor demanded significantly more money. Carillion wrote a letter protesting - duress found.
When a party has no alternative but to accept revised terms that are detrimental to its interest - this amounts to economic duress.
“Take it or leave it” offer in knowledge of significant fees if not completed - amounts to economic duress.
How is illegitimate pressure understood?
DSND:
- Actual / threatened breach of contract
- Good or bad faith?
- Did the victim protest at the time?
- Did the victim affirm / rely on the contract?
What is the difference between good and bad faith?
Can be very small - in DSND it was good faith to make sure insurance for deep sea divers was in order.
In Carillion and Atlas - the difference was that it was essentially extortion.
CTN Cash v Gallaher - you can use coercion to achieve money you are genuinely owed (good faith) but not for money you know is not (bad faith)
Example - removing credit facilities.
It is possible for a lawful act to amount to illegitimate pressure - but this will be rare in a commercial negotiation.
What happens if a victim protests at the time?
Claim more likely to succeed.
What does a victim affirming look like and what is likely to happen?
Delay to action - victim must take immediate action once pressure has ceased to operate.
What is the causation test for economic duress?
But for
What is ‘undue influence’
When a person’s consent to a transaction has been produced in a way meaning that the consent ought not fairly to be treated as the expression of their free will
What are the two types of undue influence?
Overt acts of pressure / coercion
Relationship of influence / ascendancy, of which advantage is taken.
What is causation test for overt acts of coercion?
Is it deceitful / fradulent - Need only be one factor in deciding
If not - ‘but for’
In which relationships is there an irrebutable presumption that one party has influence over the other?
Parent and child
Guardian and ward
Trustee and beneficiary
Solicitor and client
Doctor and patient
In which relationships is there NOT an irrebutable presumption that one party has influence over the other?
Parent and adult child
Spouses
How can undue influence be proven by the alleged victim?
- Relationship of trust and confidence
- Transaction which requires explanation
Burden shifts to the defendant - must prove that there was NO undue influence
What is a ‘transaction requiring explanation’?
If it does not fit with what is usually expected in the relationship concerned.
Offering interest in matrimonial home as security for a spouses business venture is not automatically a transaction requiring explanation.
What is remedy for undue influence?
Equitable - transaction can be set aside - can’t delay / need clean hands.
When do we need to consider the notice of the bank?
Once undue influence has been established
When is a creditor put on notice for a transaction?
When a wife offers to stand surety for her husband’s debts with two factors:
- Transaction is not to advantage of wife
- Substantial risk that in procuring the wife to act as surety, husband has committed a legal / equitable wrong
What is the current law regarding when banks are put on inquiry?
In every case where the relationship between surety and debtor is non-commercial a bank is on inquiry whenever one party in a commercial setting is standing as surety for the other party.
What are reasonable steps for a bank to take to avoid undue influence?
No obligation for creditor to see wife but they need a confirmation from a solicitor that this has happened.
Creditor must give solicitor enough information about the transaction for solicitor to be able to explain it fully to the wife
If creditor is aware / thinks wife has been misled - must tell solicitor.
What must the solicitor do?
Before giving advice: warn wife that solicitor’s involvement may be relied upon by bank to show she understands transaction
Explaining documents / consequences / risk of losing home
Seriousness of risk / duration + terms of the security
Fact that wife has a choice
Solicitor needs any necessary information from lender / creditor
If a solicitor is negligent, what recourse does a wife accusing undue influence have?
Negligence against solicitor - but bank entitled to assume solicitor acts properly
