SQE2 Contract Undue Influence and Duress

Question 1

What to consider for undue influence or duress?

Answer 1

1. Is there presumed undue influence
   - relationship of trust and confidence (established or must show)
   - transaction that requires explanation
2. Is there undue influence of 3rd party
   - must take reasonable steps to ensure no undue influence if you have actual/presumed notice of it.
3. Is there Duress
   - of the person (strong)
   - of goods (weak)
   - economic (consider factors)

Question 2

Process for presumed undue influcence

Answer 2

A rebuttable presumption will be presumed if C can show:

1. Relationship of trust and confidence
   - presumed in specified cases
   - otherwise have to show this relationship
2. Transaction that requires explanation
   - If it does not fit with what would usually be expected in the relationship concerned
   - Of suspicious types or suspiciously high value
3. Presumption can be rebutted
   - Must show that other party entered into contract of own free will and with informed consent
   - Eg. They obtained independent lega advice

Question 3

In what relationships can undue influence be presumed?

Answer 3

• fiduciary relationship
• parent /child
• doctor/patient
• guardian/ward
• solicitor/client

Question 4

When might actual undue influence claim succeed?

Answer 4

• requires the innocent party to prove that the other party overly influenced them into entering into a contract by improper pressure

Can be direct or indirect
- threats
- subjecting them to intolerable pressure
- misleading or tricking

Question 5

When might a transaction be set aside due to undue influence from 3rd party? How can this be avoided?

Answer 5

• If a party to the contract is aware there they may have been undue influence on other party but does not take reasonable steps to ensure that other party is entering contract of their own free will transaction may be voidable

Party can be put on notice by:
- actual notice of undue influence
- presumed notice of undue influence
- By relationship of third party and innocent party
- Nature of transaction (does innocent party get benefit, is it more commercia in nature)

Question 6

Types of duress?

Answer 6

Duress of the person
- physical duress
- must be one of the reasons to enter contract

Duress of goods (less successful)
- one party is unlawfully keeping goods belonging to another to exert some form of influence over them to enter into contract

Economic Duress
- where one party is in a stronger economic position and uses this in illegitimate manner to force other party into contract
- must be SIGNIFICANT reason for entering contract

Question 7

When might claim of economic duress succeed?

Answer 7

Must have been significant factor in decision to enter contract

Courts will consider:
- does threat deprive party of practical choice
- is threat unlawful (ie. threat of breach of contract)
- did innocent party seek to rely on contract
- did innocent party protest
- did innocent party affirm (ie not take immediate action when pressure was gone such as refuse to pay)