Undue Influence Flashcards

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1
Q

‘Undue Influence’ definition

A

Undue influence is ‘where one party takes advantage of a relationship of trust and confidence’

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2
Q

Daniel v Drew

A

Old lady who was afraid of conflict was forced to enter contract by threat of court action

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3
Q

Presumed undue influence

RBS v Etridge

A

If there is a relationship of trust and confidence; and

the transaction calls for an explanation

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4
Q

Certain categories of relationship are irrebuttably presumed to be of fiduciary nature, but not husband/wife

A

Barclays Bank v O’Brien

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5
Q

A transaction that calls for explanation is a transaction that is not readily explicable by the relationship between the parties

A

RBS v Etridge

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6
Q

Effect of Notice

A

‘If lender has actual or constructive notice of the debtor’s impropriety,
lender will be tainted with it. Contract will be voidable’.

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7
Q

Actual Notice

A

Lender sees it happen

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8
Q

Constructive Notice

A

A lender will have constructive notice if:
i. it ought to have to been put on inquiry of risk of undue influence by the
debtor;
and
ii. it did not take reasonable steps to ensure that the surety was aware of
the implications of what they were signing.

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9
Q

Banks are put on inquiry whenever surety-debtor relationship is non-commercial (personal)

A

RBS v Etridge

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10
Q

Difference between a joint advance and a situation where wife stands as surety for husbands debts

A

CIBC v Pitt

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11
Q

Barclays Bank v O’Brien

Reasonable steps to ensure consent properly obtained

A
  1. have a private meeting with the surety (without other person not there)
  2. warn/inform the surety of the risks; and
  3. urge surety to take legal advice
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12
Q

RBS v Etridge No 2

Reasonable steps to ensure consent properly obtained

A

Bank should not be compelled to have a private meeting. May prefer take to be undertaken by independent legal advisor and obtain proof of this legal advice being sought

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13
Q

In extreme circumstances where transactions are particularly disadvantageous to surety, creditor should ensure and insist surety receives independent legal advice and explain full extent of the transaction to them

A

Credit Lyonnais v Burch

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14
Q

If there has been undue influence and the creditor had notice of it…

A

The surety is voidable

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15
Q

Bars to rescission

A
  • delay
  • affirmation
  • impossible to substantially return the goods/services
  • an innocent party (equity’s darling) acquired an interest in the property before it was voided
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