Undue Influence Flashcards
When does undue influence exist?
Where ‘a person’s consent to a transaction was produced in a way such that the consent ought not fairly be treated as the expression of their free will’
What are the two forms of undue influence?
1) overt acts or improper pressure or coercion such as unlawful threats (similar to duress)
2) situations where one party has influence or ascendancy over the other and the first party takes advantage of that influence or ascendancy. There may be no specific or overt act of pressure or coercion
What needs be proved if behaviour constituting undue influence is deceitful or fraudulent?
Just needs to be proved by the innocent party was a factor in inducing them to enter into a contract
What needs be proved if behaviour constituting undue influence is NOT deceitful or fraudulent?
Likely needs to be proved that innocent party would not otherwise have entered into the contract
What relationships give rise to an irrefutable presumption that one party has influence over the other?
- parent and child
- guardian and ward
- trustee and beneficiary
- solicitor and client
- doctor and patient
What is required for undue influence through taking advantage of influence or ascendancy in a relationship?
Must be proved that there is a relationship of influence/ascendancy
AND
That relationship has been taken advantage of
How does a party prove that has been a victim of undue influence through relationship that has been taken advantage of?
Party must prove:
- there was a relationship of trust and confidence
and
- transaction which requires explanation
This will be enough for court to determine transaction was product of undue influence unless other party can prove otherwise
When will a transaction require explanation?
If it does not fit with what would usually be expected in the relationship concerned - may be suspicious type of transaction or be for a suspicious high value
If a transaction has been explained to someone through independent legal advice can there still be undue influence?
Yes - possible consent is still only being given as a result of undue influence
What limits are there on equitable relief for undue influence?
Court has discretion in setting aside contract.
May not do so if innocent party has delayed making claim OR if claimant comes in bad faith
When will third parties be affected by undue influence potentially?
Third parties will only be affected where they have actual notice of the undue influence or if a transaction carries a risk of undue influence.
When are banks put on notice in relation to surety transactions?
Banks should be put on notice in every case where the relationship between surety and debtor in non-commercial
How can a third party prevent a claim of undue influence?
If they take reasonable steps to ensure the party at risk is not being unduly influenced
What are reasonable steps to prevent someone being unduly influenced?
a) no obligation for creditor to see person at risk of influence - enough that solicitor has confirmed they have advised person
b) creditor must provide solicitor with sufficient information regarding transaction for them to fully advise person at risk of being unduly influenced
c) if creditor is aware the person may have been misled, they must tell solicitor that
What must solicitor do when advising someone who is at risk of being unduly influenced in a transaction?
Should warn them their involvement may be relied upon by creditor to counter allegations of undue influence
Advise:
i) explanation of documents and their practical consequences, including the risk that the wife may lose her home
ii) seriousness of the risk, including duration and terms of security and wife’s assets and means
iii) fact that wife has a choice
