Under Duress

Question 1

Wiliam v Bayley

Answer 1

Fact:
 Def’s bank manager said that his son obtained money from the bank by forging the def’s
signature and the bank intend to prosecute the son unless the father repaid the funds.
 During the meeting, the Def signed a contract agreeing to pay back the money to the bank in
instalments. He later changed his mind and refused to do so. Bank claimed for breach of
contract.
Held:
 Def was able to prove that the Bank had used its influence to pressure him into signing the
agreement.
 He signed the contract during the meeting without having the opportunity to really think
through the consequences because the bank was threatening immediate prosecution of his
son.
 The court held that the contract was voidable at the option of the father because he had not
entered into it freely and he could cancel the contract.

Question 2

Barclays Bank v O’Brian

Answer 2

Fact:
 Husband persuaded wife to sign a guarantee for an overdraft for his company using their
jointly-owned matrimonial home as security.
 He told that the OD was for 3 weeks only and only £60,000 but in actuality it is of unlimited
amount and period of time.
 When the husband’s business liquidated, the bank wanted to repossess the house, but wife
asked the court to set aside the guarantee on the grounds that it was entered under undue
influence.
Held:
 The bank was aware that the home was jointly owned by the husband and wife.
 So they had the DUTY to ensure that the wife was fully informed of the transaction entered
into between the bank and her husband because of the possibility of undue influence taking
place.
 The bank did not discharge this duty and hence the guarantee can be set aside.
*Lenders/banks need to be aware that if a husband and wife sign over the matrimonial home as a
security for business debts, then the bank must be satisfied that both parties are aware of the full
nature of the transaction and must ensure that, that duty is carried out

Question 3

Royal Bank of Scotland v Etridge 2001

Answer 3

House of Lords Held:
 A bank is ‘put on enquiry’ whenever a wife/partner offers to stand as a guarantor for a
husband/partner’s debts.
 Once a bank has been put on enquiry, it must take reasonable steps to satisfy that the wife/
partner understands the transaction she is entering into.
 To do this, bank can rely on the confirmation from a solicitor acting for the wife/partner by
giving appropriate advice.
 If the banks doesn’t do this, the bank is deemed to have notice of any undue influence
exerted by the husband and the resulting contract will be set aside.

Question 4

Lloyds Bank v Bundy

Answer 4

Fact:
 Def was a farmer and he and his son had banked with the Clm for many years.
 The son initially set up a company and the Def mortgaged his farm to the value of £1500 in
order to guarantee the Company’s OD.
 But over the years, the mortgage had been increasing several times and each time this
happened the banker would say that his son’s business is about to fail unless he increased
the OD and presented the Def with papers to sign, which increased the mortgage.
 When the son’s business failed, the Clm tried to recover £16,000 and Def argued that they
had entered the contract under undue influence.
Held:
 The additional guarantees, amounting to £14,500 should be set aside.
 The bank had breached its duty of care to the Def by not advising to get independent advice
as to the wisdom of his actions.
 By following his banker’s advice (whom he trusted), the Def risked losing all his personal
assets.
 The Def had entered into these arrangements as a result of undue influence.