Undue Influence

Question 1

Undue influence, like duress, makes a contract..

Answer 1

…voidable.

Question 2

The one remedy for undue influence is…

Answer 2

…rescission and the same bars apply as for duress.

Question 3

Like duress, there is no remedy for…

Answer 3

…damages.

Question 4

Undue influence consists not of threats or violence but of influence which goes beyond what is regarded as…

Answer 4

…acceptable.

Question 5

The approach adopted by the law is to identify relationships which are unequal and then to consider whether the transaction resulted from the dominant person….

Answer 5

…abusing that relationship.

Question 6

With regards to actual undue influence the ** must prove that the *** used undue influence.

Answer 6

…claimant

…defendant

Question 7

What case illustrates actual undue influence?

Answer 7

Daniel v Drew - the evidence of the innocent party (supported by a witness) was preferred to that of the influencing party (who was found to be ‘not completely credible’).

Question 8

For undue influence to be presumed, there must be (two things)…

Answer 8

…a fiduciary relationship (i.e. a relationship of trust and confidence) and the transaction must be one that calls for an explanation (Royal Bank of Scotland v Etridge).

Question 9

In certain categories of relationship (eg solicitor and client, doctor and patient), it is irrebuttably presumed that one party places trust and confidence in the other. Which relationship is excluded from this?

Answer 9

…co-habiting partner or husband and wife.

Question 10

In any case, such as husband and wife, where the relationship is not presumed to be one of trust and confidence, the innocent party will have to…

Answer 10

…prove this.

Question 11

The presumption of undue influence is rebuttable. For example, it could be rebutted if there was evidence to show that the innocent party had taken…

Answer 11

…independent legal advice.

Question 12

Barclays Bank v O’Brien introduced the idea of notice, ie if the creditor had actual or constructive notice of the debtor’s impropriety, it would be ** with it, and any security contract obtained as a result would be **.

Answer 12

• **tainted

* ** voidable

Question 13

The creditor will have constructive notice if it ought to have been put ** of the risk of undue influence by the debtor and it did not take ** to ensure that the surety was aware of the implications of what she was signing.

Answer 13

• *on inquiry

* * reasonable steps

Question 14

Bank should be regarded as put on inquiry in every case where the relationship between a surety and debtor is…

Answer 14

..non commercial.

Question 15

In RBS v Etridge - in any case where the relationship between the debtor and surety is non-commercial a creditor should be put on inquiry. The judge also said in that case where a wife acts as surety for her husband and is not herself *** from the loan then the bank should also be put on inquiry.

Answer 15

***benefitting

Question 16

In Royal Bank of Scotland v Etridge - The bank can satisfy the requirement to take reasonable steps if it insists that the wife attend a private meeting with a representative of the bank at which she is:

Answer 16

▪ told of the extent of her liability as surety;
▪ warned of the risk she is running; and
▪ urged to take independent legal advice.
(In exceptional cases, the bank, to be safe, has to insist that the wife is separately advised (see Credit Lyonnais v Burch).

Question 17

Credit Lyonnais Bank Nederland NV v Burch [1997] The decision in Burch demonstrates that in some circumstances it will not be enough for a creditor to urge a surety to take independent legal advice. It must …

Answer 17

…insist that the surety does so, or otherwise not take the proposed security.