Duress, Undue influence, terms

Question 1

What are duress and undue influence?

Answer 1

Doctrines which deal with situations where free and independent consent to contract has not been given, and accordingly the contracts concerned are not allowed to stand

Question 2

Which courts developed the doctrines of duress and undue influence?

Answer 2

duress - common law courts

undue influence - the courts of equity

Question 3

What is the specific definition of duress?

Answer 3

Where consent to assumed obligations in a contract is not given freely; involves one party coercing another party

Question 4

What is the contractual consequence of duress?

Answer 4

The contract or variation of contract entered into under duress is voidable

Question 5

What does it mean for the contract to be ‘voidable’?

Answer 5

The wronged party MAY be able to take action to have the contract set aside, and to have the parties returned to the position they were in before the contract was entered into

Question 6

What are the 3 types of duress?

Answer 6

1. Duress to the person
2. Duress to property
3. Economic duress

Question 7

What was the 3 key ratios regarding duress to the person in the case of Barton v Armstrong?

Answer 7

1. Contract is voidable when threat of violence is involved
2. Burden of proof on the party who exerted the pressure to show the threats and unlawful pressure contributed nothing to the victim’s decision to contract
3. Test for causation: the duress need only be ONE FACTOR influencing the wronged party’s behaviour

Question 8

What are the key elements of duress to property?

Answer 8

Test for causation: the agreement would not have been entered into had it not been for the duress.

Unlike duress to person: NOT sufficient to show that duress was only one factor - but not the decisive factor - influencing the wronged party’s behaviour

Question 9

Define economic duress

Answer 9

Involves wrongful or unlawful conduct that creates fear of economic hardship which prevents free will in engaging in a business transaction

Question 10

What are the 3 necessary elements set out by Mr Justice Dyson to establish economic duress?

Answer 10

1. Lack of practical choice
2. Illegitimate pressure
3. A significant cause

Question 11

What are the subset of factors (4) to consider when assessing the legitimacy of the pressure?

Answer 11

1. Threatened breach of contract
2. Was the pressure applied in good or bad faith?
   Bad faith = an attempt to claim money you know you are not entitled to
   Good faith = a freely negotiated hard bargain
3. Did the victim protest at the time the threat was made?
   The Atlantic Baron case: court held that waiting 8 months before bringing legal action was too big a delay
4. Did the victim affirm?
   I.e. did the wronged party seek redress or affirm the contract e.g. through inaction

Question 12

Define undue influence

Answer 12

Occurs where there is a relationship of trust and confidence, and where one party abuses that relationship by taking advantage of the other party

Question 13

What remedy is available for undue influence?

Answer 13

Equitable remedy - at the discretion of the court

Question 14

What are the two types of undue influence set out by the court in RBS v Etridge?

Answer 14

1. Overt acts of improper pressure or coercion - rare
2. Relationship of influence/ascendency, of which unfair advantage is taken

Question 15

What is the effect of duress to the contract?

Answer 15

It is only voidable, and the contract remains valid until the victim takes the perpetrator to court to get the contract set aside

If only the variation of a contract is the result of duress, and the original contract was freely negotiated, it is the variation which is voidable - the underlying contract is unaffected

Question 16

What relationships do NOT give rise to an irrebuttable presumption that one party has influence over the other?

Answer 16

Parent and adult child

Husband and wife

The influence will need to be POSITIVELY SHOWN

Question 17

What is required as proof of taking advantage of influence or ascendency in a relationship?

Answer 17

Party alleging undue influence must show that there is a relationship of trust and confidence and also a ‘transaction which requires explanation’

Burden then shifts to defendant - can they produce evidence to show there was no undue influence?

Question 18

What is a transaction which requires explanation in the context of undue influence?

Answer 18

If it does not fit with what would usually be expected in the relationship, e.g. a suspicious type of transaction, or of suspiciously high value

Question 19

What is a caveat to the rule for transactions which require explanation?

Answer 19

Court has indicated that a husband/wife offering their interest in the matrimonial home as security for a loan to their spouse’s business is NOT a transaction which requires explanation, so the party alleging undue influence would need to prove UNFAIR ADVANTAGE had been taken of the relationship

Question 20

What are the limits on equitable relief?

Answer 20

Where undue influence is proven, a contract may be set aside BUT this is discretionary. The courts may not allow this relief where the innocent party has delayed making the claim (‘delay defeats equity’) OR where the claimant’s conduct has been underhand (‘he who comes to equity must come with clean hands’)

Question 21

What are two specific points to remember when considering whether a spouse has exercised undue influence over the other spouse in relation to third parties?

Answer 21

1. Spouse needs to prove a relationship of influence, likely by establishing they placed trust and confidence in their spouse
2. The party offering security needs to show more explicitly how their spouse’s influence has been used unduly

Question 22

Following the seminal case of Barclays Bank Plc v O’Brien, it was held that a creditor would be put on constructive notice of misrepresentation in which 2 instances?

Answer 22

When a wife offers to stand surety for her husband’s debts by the combination of two factors:

a) the transaction is on its face not to the financial advantage of the wife; and

b) there is a substantial risk in transactions of that kind that, in procuring the wife to act as surety, the husband has committed a legal or equitable wrong that entitles the wife to set aside the transaction

Question 23

What presumption follows the previous 2 instances?

Answer 23

It follows that unless the creditor who is put on inquiry takes reasonable steps to satisfy himself that the wife’s agreement to stand surety has been properly obtained, the creditor will have constructive notice of the wife’s rights

Question 24

What is the solicitor’s position when dealing with potential constructive notice of misrepresentations?

Answer 24

Lord Scott in Etridge: the solicitor should start by warning the wife that his involvement may be relied upon by the bank to counter allegations that she could not properly understand the transaction or had given her consent to it.

Question 25

If the wife then consents to advice being given, what should the core minimum advice contain from the solicitor?

Answer 25

1. An explanation of the documents and their practical consequences, including the risk that the wife may lose her home
2. The seriousness of the risk, including the duration and terms of the security and the wife’s assets and means
3. The fact that the wife has a choice

Question 26

What happens if the solicitor fails in his duty to properly inform the wife?

Answer 26

She will have an action in negligence against the solicitor, BUT she will have no recourse to the lender/creditor which is entitled to assume that the solicitor has properly advised the wife

Question 27

What is an express term in a contract?

Answer 27

Statements by parties, by which they intend to be bound - written or oral

Question 28

What are implied terms?

Answer 28

Terms which are not formed by statements made by parties - the law deems they exist

Question 29

What are mere puffs?

Answer 29

Statements of no legal significance

Question 30

What are representations?

Answer 30

Statements of fact/law which parties do not intend to be binding but which help induce the making of the contract

Question 31

How do you decide whether a statement in a contract is a representation or a term of contract i.e. legally binding?

Answer 31

Depends on intention of the parties - objectively tested as a reasonable man would see it

Question 32

In which case might a rebuttable presumption arise with regards to a statement being considered a term of the contract?

Answer 32

Where a statement is made during negotiations for the purpose of inducing the other party to enter into contract, there is prima facie grounds for inferring that statement was intended to be a binding term of the contract

Question 33

Why is it important to distinguish between representations and terms?

Answer 33

They have different legal consequences

Question 34

What are the different legal consequences of representations and terms of contract?

Answer 34

If a statement is a term of contract and this term is not fulfilled, this will amount to a breach of contract

If the untrue statement is only a representation, this may amount to a misrepresentation

Question 35

What factors will the courts consider when deciding whether a statement is a term or representation?

Answer 35

1. Importance - May be a term if it can be shown that the injured party considered it so important that it would not have entered into the contract but for that statement
2. Timing - If statement was made at the time of contracting, more likely to be a term of contract than if it was made at an early stage of negotiations
3. Reduction of contract to writing - but this is not decisive
4. Special knowledge or skill
5. Assumption of responsibility/further checks - statement becomes term where vendor expressly accepts responsibility for the soundness of the sale item in question

Question 36

How is an intention to be bound (which indicates an express term) demonstrated in different circumstances?

Answer 36

1. A signed written contract - shows parties intend to be bound by it
   EXCEPTIONS:
   - If the document signed was not one which was intended to have any contractual effect - Grogan v Robin Meredith Plant Hire
   - If the timing of the signing of the contract amounts to a post-contractual document
   - Oral misrepresentation: a party may be prevented from relying on incorporation of a clause through a signature of a document if it has orally misrepresented the written statement
2. Incorporation by notice including timing of notice - if an onerous clause is communicated after the contract is made, it will not amount to a binding term
3. Incorporation by a course of dealing - must be shown that the course of dealing has been consistent over a period of time and regular
4. Any way of agreeing express terms which indicate the parties’ intention to be bound by those terms e.g. verbal exchange, email

Question 37

What are incorporation and exclusion clauses, and what is required for them to be contractually binding?

Answer 37

When a party wishes to limit or exclude liability for its own breach by terms incorporated by reference or by course of dealing - these are considered onerous clauses

Therefore, require REASONABLE NOTICE

Question 38

What is a boilerplate clause, and what is its contractual effect?

Answer 38

When parties agree that this agreement constitutes the entire agreement between them, superseding any previous agreements

Effective in avoiding confusion about which oral terms or preceding written statements form part of the contract

Boilerplate clauses are effective to exclude liability for misrepresentation

Question 39

What is an implied term?

Answer 39

Binding to the same extent as an express term

Question 40

A term may be implied in a contract on the basis of law or fact - what is the difference?

Answer 40

Fact: a term is implied in fact to give effect to parties’ presumed but unexpressed intentions

Law: a term is implied in law because the courts or statute require this

Question 41

In which 3 cases might a term be implied in fact?

Answer 41

1. Trade or professional customs - implication is based on the assumption that it was the party’s intention to be bound by well-known customs of a particular trade
2. A course of dealing between the parties - only implied where the dealings of the parties have followed a consistent and regular pattern
3. Business efficacy - to make the contract produce its intended objective. Only implied on this ground if, without the implied term, the arrangement would be so unworkable that sensible people could not be supposed to have entered into it

Question 42

In which 2 cases might a term be implied by law?

Answer 42

1. Terms implied at common law - give effect to legal duties which arise as a matter of policy
2. Terms implied by statute - certain statutes indicate that stipulated terms will be implied into contracts, and operate irrespective of the intention of the parties unless there is a valid exemption clause

Question 43

What are the implied terms in the Sales of Goods Act 1979?

Answer 43

1. Implied terms as to title - condition
2. Correspondence with description - condition
3. Satisfactory quality - condition
4. Fitness for a particular purpose
5. Sale by sample - sample must correspond with bulk

Question 44

What is the modification of remedies for a breach of any of the above conditions under SGA 1979?

Answer 44

section 15a: if the breach is so slight that it would be unreasonable for the buyer to reject the goods and repudiate the contract, the breach should be treated as a breach of warranty, which will only entitle the buyer to claim damages - burden of proof on seller

Question 45

What are the stipulations for contracting out of the implied terms under the SGA 1979?

Answer 45

Section 55: seller’s liability under the above schedules can be excluded/restricted subject to UCTA 1977

Question 46

What are the specific requirements for contracting out of implied terms according to UCTA?

Answer 46

section 6(1)(a) - implied undertaking as to title cannot be excluded/restricted

section 6(1A) - implied undertaking as to ss 13-15 can be excluded/restricted subject to the requirement of reasonableness

Question 47

The Supply of Goods and Services Act 1982 provides for the implication of terms in which 3 contracts?

Answer 47

1. Certain contracts for the transfer of property in goods
2. Contracts for the hire of goods; and
3. Contracts for the supply of services

Question 48

What are the 3 parts of the Consumer Rights Act 2015 comprised of?

Answer 48

part 1: deals with consumer contracts for goods, digital content, and services between a trader and consumer

part 2: regulates unfair terms in consumer contracts

part 3: is of a miscellaneous and general nature

Question 49

What are the remedies for contracts for goods under the Consumer Rights Act 2015?

Answer 49

1. Short term right to reject - 30 days from the time that ownership has passed
2. The right to repair or replacement - unless impossible or disproportionate
3. The right to a price reduction or the final right to reject - consumers not entitled to both, only one or the other.
   Where the final right to reject is exercised within 6 months, there should be a full refund with no deduction for use - does not apply to motor vehicles or any other goods that may be specified by statutory order

Question 50

What are the remedies for contracts for digital content under the Consumer Rights act 2015?

Answer 50

1. The right to repair or replacement
2. The right to price reduction
3. The right to a refund
4. Damage to device or other digital content

All the above, within a period of 6 months and a refund must be given within 14 days using the same method of payment, and without imposing any fee in respect of the refund