Part C: Duress And Undue Influence Flashcards
What is duress and undue influence?
The law can protect a person if they have entered into a relationship by improper pressure being put on them.
The pressure must be improper not unequal bargaining power or unfairness of terms.
Doctrine of duress:
Common law.
If party entered into contract as a result of illegitimate pressure - rendering contract voidable.
Doctrine of undue influence:
Equitable.
If party enters into contract as excessive pressure or coercion.
What are the three categories of duress?
- Violence to a person
- Threats against property
- Economic duress
In relation to duress, what does violence to a person mean?
The party who has received the actual violence or threats, to enter into a contract, can avoid contracts.
Duress doesn’t need to be the sole reason - but must be one of the reasons.
CASE: Claimant threatened with death if didn’t purchase shares. Purchased shares but later tried to avoid contract.
Threats were only part of the reason - but contract still declared voidable.
In relation to duress, what does threats against property mean?
Traditionally, precedents suggested that a threat against property could not amount to duress.
But, the real issue is now consider as to whether the contract was entered into and agreed ‘voluntarily’
What is economic duress?
An example, is when one party demands that there is a variation in their favour using a threat to break original contract unless the other party agrees to their demand.
CASE: Made false threats that they would be bankrupt if contracts not renogiation of contracts.
Judge held that commercial pressure was inadequate to prove economic duress.
Two questions:
1. Did the victim protest at the time of the demand?
2. Did the victim regard the transaction as closed or did they not en d to repudiate the new agreement?
CASE: Defendant threatened to act in breach of contract if didn’t pay extra funds. Increase was paid as they had no option.
Held to be an incident of economic duress which would result in contract being voidable.
However, there was a delay in the claim for return of 10% and therefore claim for rescission of contract failed.
Recent cases show that there is a more relaxed approach to proving economic duress.
Now must show:
1. Illegitimate suppression of the victim’s will
2. Illegitimate suppression of the victim’s voluntary consent
However, unclear of line between legit and illegit pressure.
How is economic duress distinguished from commercial pressure?
CASE: Held that mere commercial pressure was not sufficient to amount to economic duress and there must be coercion of will (not after voluntary)
Factors distinguishing:
1. Did the victim protest?
2. Was there an alternative course open to victim?
3. Was the victim independently advised?
4. After having entered into the agreement - did the victim take steps to avoid?
What is the effect of duress?
If the claim is successful - the contract will be voidable.
Not void.
The right to rescind will be lost if affirmation of contract after duress been lifted, undue delay bringing claim or if rights to a third party would be effected.
What is the equitable notion of undue influence?
Undue influence provides relief if contract entered due to improper pressure.
Doctrine of undue influence is wider than doctrine of duress.
Undue influence often occurs where there is a relationship between parties which has been exploited to gain an unfair advantage (e. trust and confidence)
Most common undue influence is abuse of trust and confidence.
CASE: Barclays v O’Brian
Refined two categories:
1. Actual undue influence - necessary for claimant to prove affirmative that the wrongdoer exerted undue influence to enter into transaction
2. Presumed undue influence - claimant to show that there was a relationship of trust and confidence and the wrongdoer abused that.
For presumed undue influence, no need to produce evidence.
Once relationship has been shown - the burden shifts to wrongdoer to prove claimant entered transaction freely.
Relationships can be established into two sub-categories:
A: Certain relationships as a matter of law (lawyer and client)
B: If claimant can prove that relationship exists under which claimant reposed trust and confidence.
Sub-categories critiqued.
Now, court must be satisfied that undue influence is proven.
What is actual undue influence?
It is necessary for claimant to prove affirmative that the wrongdoer exerted undue influence to enter into transaction.
CASE: Father pressured into giving security for son’s debts after threats they would deport him.
Agreement held invalid on grounds that undue pressure had been put on father.
The requirements of actual undue influence set out in CASE: Bank of Credit v Anbody
1. The other party to the transaction (or someone who had induced transaction for their benefit) had capacity to influence the claimant
2. The influence was exercised
3. It’s exercise was undue
4. It’s exercise brought about transaction.
What is presumed undue influence?
There must be a recognised relationship - relationship of trust and confidence.
The court will then consider whether presumption has been rebutted (e.g if weaker party received independent legal advise)
For recognised relationships (e.g lawyer / client) the presumption of influence is irrebuttable. Courts automatically presume lawyer has influence.
For non-recognised relationships - the presumption of influence will arise if there is evidence that the relationship is one where one party places trust and confidence in the other.
One party will need to provide evidence of nature of relationship - the other will need to bring evidence that no trust and confidence had developed.
Commonly between spouses.
What are the effects of undue influence and bars of relief?
One remedy is courts refusing to enforce the agreement against person influenced.
Some cases - appropriate remedy for undue influence is rescission.
Rescission may be lost - in the same way as misrepresentation.
