Undue Influence Flashcards
Define Undue influence and how its distinct from duress
Duress is defined as some kind of threat, violent or other action which is used to coerce somebody into doing something against their will. In the context of contract law, this refers to where a party uses duress against the other party in order for them to enter into a contract as a result of improper pressure. This usually occurs due to a relationship between the parties being exploited to gain an advantage.
Duress is based on a threat, whilst undue influence will be based on a relationship that has been exploited.
Explain who has the evidential burden when claiming Actual and presumed undue influence
For Actual undue influence (category 1) the claimant does not have to prove there is an existence of any special relationship.
- The evidential burden they are subject to is proving that their free will to enter a particular contract was overcome, which is not easy to establish
For presumed undue influence; In relation to category ‘2a’, protected relationships, there is no burden on the claimant to prove that the relationship was one that gives rise to presumed influence, but virtue of the relationship this is already proven because there’s an irrebutal presumption of trust and confidence between the parties.
- Therefore, the claimant must simply prove that that party exploited the nature of this relationship.
In category ‘2b’, only if the relationship is one where influence cannot be proved will the claimant have to provide evidence that the relationship was one where influence arose. Following, the courts will assess whether the conduct amounts to undue influence.
Explain the different types/categories of undue influence
The types of undue influence
Lord Browne-Wilkinson identified two distinct classes of undue influence in Barclays Bank Plc v O’Brien [1994] 1 AC 180:
- Actual undue influence
- Presumed undue influence which can be categorised as:
(2a) Protected relationships - pre-determined presumptions as to relationships which will give rise to a presumed influence
(2b) Other cases - relationships in which influence can be presumed, but is not automatically done
Define and explain Actual undue influence
Actual undue influence can be described as acts of improper pressure or coercion such as unlawful threats.
Actual undue influence exists when there has been a positive influence exerted on one party, presumed (or evidential)
Daniel v Drew [2005] - set dead aside under undue influence - threat entirely legal but knew drew was afraid of something and utilised it against her go assert unfair dominance. A witness observed this which is why its actual undue influence.
Define and explain presumed undue influence
Preumed undue influence happens when one party has allowed a relationship of trust and confidence to influence the other party and has failed to ensure that the contract was entered into freely and independently.
The claimant does not have to prove that the undue influence left them with no choice, all that needs to be proven is that they exerted some influence over them, enough so that the transaction was not the exercise of their independent free will.
Royal Bank of Scotland plc v Etridge (No. 2) [2002] which clarified the approach to presumed undue influence; the relationship between the party would give a presumption of influence under which actual and presumed undue influence can be argued to vitiate consent to a contract.
With presumed influence - category 1A relationships theres an irrebuttable presumption that one party has placed trust and confidence in the other (i.e. parents of underage children, doctors and patients etc) but not necessary undue influence, this was for the claimant to prove. Thus in cases of presumed undue influence, all the claimant has to do it prove that one party exploited the nature of the relationship, which is a much lower evidential standard whereas for category 2B they need to demonstrate and show that there was that relationship of trust and confidence that’s been exploited.
I.e. if someones an expert in something and it’s clear someone else has put there trust and confidence in that person that they act in the other party’s best interest. Use the facts to demonstrate why that relationship of trust and confidence exists
Explain the two limbs for proving presumed undue influence
The first limb of presumed undue influence is to prove the existence of a relationship of trust and confidence between the parties.
Once this is established, the second requirement is that the transaction should be of a nature that “calls for an explanation” – i.e. the transaction was such that a presumption of undue influence should be raised –, or that the transaction cannot be explained in any way other than undue influence.
the current test is whether the transaction is ordinary and explainable in the context of the relationship between the parties, or whether there was some concern for the legitimacy of the contract due to its suspicious nature. I.e if it doesn’t make logial sense why someone would agree to something - it prompts questions
How does a party go about rebutting the presumption of undue influence
Once it has been proven by the claimant that there was influence of an undue nature, the defendant may rebut the presumption of undue influence by proving that the claimant entered into the contract freely without influence.
The most common way in which this presumption may be rebutted is where the claimant has undertaken independent advice with regards to the transaction in which undue influence has been claimed. If theres evidence in a scenario to show innocent parties sought out independent legal advice and thus presumption could be rebutted on that basis - Howard v Howard-Lawson [2012]
Can undue influence be actionable against a third party? If so what is the criteria?
It has been confirmed that undue influence by a third party on a claimant may give rise to a claim for undue influence, which can result in the contract between the claimant and the party they are contracting with being voidable.
However, a claim for undue influence under these circumstances may only arise where the contracting party has knowledge that a third party is exercising undue influence on the claimant.
The case of Barclays Bank v O’Brien [1994] confirmed this rule, making reference to the ‘doctrine of notice’. The first category of notice is actual notice, which is clearly easy to prove, where Party A in our example have actual knowledge of the undue influence.
Consider wether its actual or constructive notice, if either are present then its viodable:
- If the third party has actual notice of it (i.e. overhears the undue influence) they have actual knowledge of that undue influence.
- However even if this isn’t satisfied if the contract is reasonably suspicious then it’s likely the third party has responsibility for flagging it and should have known something was wrong based on the circumstances at play (Constructive notice based on reasonable person argument) - Barclays Bank v O’Brien [1994]
In order to prove constructive influence this type of notice, there are two things the courts will consider:
Whether the contracting party/creditor has been “put on inquiry”
If “put on inquiry”, has the contracting party avoided notice of the undue influence?
Being “put on inquiry” refers to where the contracting party should be aware that the contract seems unusual, and therefore should make inquiries as to the nature of the transaction.
In order to avoid notice, and make the relevant inquiries, it is suggested that the contracting party should
privately meet with the claimant, or
that the contracting party should advise the claimant to seek independent advice of some kind particularly if its unfavourable for one particular party.
This would absolve the contracting party of liability, as they may presume that the independent advice given will prevent the operation of undue influence
If the contracting party can absolve themselves via one of these two considerations, the contract will not be voidable for any undue influence and thus liability is absolved.
State examples of relationships in category 2A of presumed undue influence
- Parent and child (but not between a parent and an adult child - Avon Finance Co Ltd v Bridger [1985]
- Solicitor and client
- Doctor and patient
Once the existence of one of these relationships has been established, the claimant must prove that the influence exerted was undue.
The court will assess the evidence and decide whether the transaction was suspicious, and if so, undue influence will be presumed. It is then up to the party who exerted the undue influence to prove no undue influence was exercised.
State examples of category 2B relationships of undue influence
If the relationship does not fall into any of the special relationships within category 2A, if it can be shown that the relationship was based on trust and confidence, it may be presumed to be a relationship of influence.
The difference in comparison with Category 2A is that this presumption is rebuttable by the other party if they prove there was no trust or confidence.
These include;
- Huspand/Wife
- Cohabiters
- Bank/customer
- Comanding officer/soldgier in army
