Undue Influence Flashcards
Types of undue influence
- Actual Undue Influence Class 1 Williams v Bayley - Presumed undue influence Class 2A (Relationships by Trust and confidence) e.g.: Parent and Child, Guardian and Ward, Religious Adviser and Disciple, Doctor and Patient, Solicitor and client, etc. See O’Brien Case Class 2B Tate v Williamson
In Pao On v Lau Yiu Long (1980) what factors did Lord Scarman consider relevant to
the determination of whether or not a person acted voluntarily and not subject to
economic duress?
Choose one answer.
a. An extension (of the categories of duress) capable of covering the present case,
involving ‘lawful act duress’ in a commercial context in pursuit of a bona fide
claim, would be a radical one with far-reaching implications. It would introduce
a substantial and undesirable element of uncertainty in the commercial
bargaining process.
b. It is crucial to establish a strong causative link where pressure comes from one
party and the other party feels compelled to act on their instruction.
c. It is material to inquire whether the person alleged to have been coerced did or
did not protest; whether, at the time he was allegedly coerced into making the
contract, he did or did not have an alternative course open to him such as an
adequate legal remedy; whether he was independently advised; and whether
after entering into the contract he took steps to avoid it.
d. The respondent has to demonstrate that they did not force the claimant to
enter into the contract and they should do this by providing evidence of the
claimant’s careful and deliberate signature upon the contract.
e. Don’t know.
.
Question 1
Which of the following statements provides the most appropriate definition of
duress?
Choose one answer.
a. Where one party (A) explains to the other party (B) that it would be nice of them
to enter into the contract because otherwise they (A) will be upset.
b. Where one party (A) threatens the other party (B) with physical injury if they do
not enter into the contract.
c. Where one party (A) feels they have to enter into a contract with the other party
(B) otherwise they (A) will not be able to afford to buy a new car.
d. Where one party (A) decides to enter into a contract with the other party (B)
because the partner of the party (A) has said it is a very good deal.
e. Don’t know
.
Question 3
Which of the following statements explains how the law of contract defines actual
undue influence?
Choose one answer.
a. This is where the complainant can prove that the other party’s positive exercise
of actual pressure induced them to agree to the contract.
b. This is where the complainant suggests that because she is married to the man
who asked her to sign a set of mortgage papers then this must be actual undue
influence.
c. This is where one party places trust and confidence in another and so tends to
rely on the suggestions of the other party without seeking independent advice.
d. This is where the complainant argues that her employer asked her nicely to
mortgage her flat as security for the overdraft extension of her employer’s company.
e. Don’t know.
.
Question 4
Which of the following statements summarises how the guidelines offered by Lord
Nicholls in Royal Bank of Scotland v Etridge (No 2) (2001) would help a bank to avoid
a transaction being set aside on the basis of undue influence on a wife following a
husband’s attempts to persuade his wife to stand surety for his debts?
Choose one answer.
a. When the husband realises that his wife is keen to stand surety for his debts
then he should ask his own solicitor to reply truthfully and honestly to any
questions that his wife may have about the transaction and if the bank believe
the wife does understand then they will continue with the transaction.
b. The wife should write to the bank and explain that she wants to stand surety for
her husband’s debts and her husband has told her what the ramifications are of
her co-operation. Then the bank should send one of their own legal advisers to
the couple’s home and speak to them jointly about the potential consequences
of default.
c. Once the bank become aware that a wife is agreeing to stand surety for her
husband’s debts then they should make sure the wife has had the ramifications
of her decision explained to her so that she understands what could happen in
default. The bank must make sure the solicitor instructed is competent and they
will be held responsible for any deficiencies in the advice given.
d. Once a bank has been put on inquiry that a wife offers to stand surety for her
husband’s debts then they must take reasonable steps to satisfy themselves that
the practical implications of the proposed transaction have been explained to
the wife in a way which is coherent and comprehensible so that she can enter
into the transaction with her eyes open. The bank should rely upon a solicitor
to have confirmed that they have advised the wife of the significance of the
transaction and should notify the bank that they have done this.
e. Don’t know.
.
Question 5
Which of the following statements correctly explains the remedies available in a situation where the bank seeks to enforce its charge over a matrimonial home in circumstances where a wife, subject to undue influence, gave the charge as a guarantee of her husband’s business debts?
Choose one answer.
a. A contract which is affected by undue influence will be compensated with
damages where the courts will instruct the bank to pay the wife a sum of money
to refund her for the bill she incurred for the original independent advice.
b. A contract which is affected by undue influence is voidable which means that
the wife will have to bring an action for rescission to avoid it.
c. A contract which is affected by undue influence is void from the outset.
d. A contract which is affected by undue influence will be rectified which means
the courts will look at the original documentation and ask another solicitor to
advise the wife as to the consequences of her decision and then the bank can
receive confirmation that the wife now understands the consequences of her
action.
e. Don’t know.
.
Barton v Armstrong
Barton v Armstrong, is a Privy Council decision on duress in Australian and English contract law. The court held that a person who agrees to a contract under physical duress may avoid the contract, even if the duress was not the main reason for agreeing to the bargain.
The Sibeon & The Sibotre
Occidental Worldwide Investment v Skibs (The Sibeon & The Sibotre) [1976] 1 Lloyds Rep 293
The defendants chartered two vessels from the claimant. The defendants told the claimants that they would go bankrupt if they did not lower the cost of charter. This was completely untrue. The claimants feared that they would lose valuable customers and they were also were owed substantial amounts of money by the defendant which they feared they would lose if the defendants did become insolvent. The claimants therefore agreed to renegotiate the contract to lower the cost of charter. They later sought to have the renegotiated contract set aside.
Held: Whilst recognising that it would be possible to render a contract voidable for economic duress, it was not established in this case. To amount to economic duress there had to be a coercion of the will so as to vitiate consent. Commercial pressure was not sufficient.
Note: This was the first case where economic duress was recognised as giving rise to a cause of action. More recent cases look to absence of choice rather than coercion of the will vitiating consent. See: The Universe Sentinel
North Ocean Shipping v Hyundai Construction (The Atlantic Baron) [1979] QB 705
North Ocean Shipping v Hyundai Construction (The Atlantic Baron) [1979] QB 705
The defendants agreed to build a ship for the claimants for a certain price specified in US dollars. After entering the contract the US dollar was devalued by 10%. The defendants threatened not to complete unless the claimants paid an additional 10% on the contractually agreed price. The claimants had a valuable charter lined up so agreed to pay the additional sums and did pay them without protest. 8 months after delivery of the ship the claimants brought an action to recover the additional sums paid.
Held: The contract was voidable for duress, however, since the claimants had left it so long in bringing their claim they had affirmed the contract and lost their right to rescind.
The Universe Sentinel
Universe Tankships v International Transport Workers Federation, The Universe Sentinel [1983] 1AC 366 House of Lords
The ITWF blacked a ship, The Universe Sentinel, to prevent it from leaving port. They made several demands in relation to pay and conditions and also demanded the ship owners pay a large sum of money to the Seafarers International Welfare Fund. The ship owners agreed in order that the ship could leave port and then sought to recover the sum paid to the welfare fund.
Held: The money had been extracted under economic duress and could be recovered. The House of Lords held that earlier case law had been wrong to look at coercion of the will so as to vitiate consent. During an analogy with the defence in criminal law where it is recognised that a defendant acting under duress has the intention to commit the offence but is excused from the crime because they had no choice but to submit.
Accordingly two elements of duress were identified:
- Compulsion of the will - absence of choice
- Illegitimacy of the pressure
CTN Cash & Carry v Gallagher [1994] 4 All ER 714 Court of Appeal
CTN Cash & Carry v Gallagher [1994] 4 All ER 714 Court of Appeal
The defendants sent a consignment of cigarettes to the wrong address. The cigarettes were then stolen. The defendant mistakenly believed that the cigarettes were at the claimant’s risk and sent them an invoice. The defendant threatened to withdraw the claimant’s credit facility unless the invoice was paid. The claimants needed the credit facilities and so paid the invoice and then sought to reclaim the money on the grounds of economic duress.
Held: The threat to withdraw credit facility was lawful since under the terms of the credit agreement credit could be withdrawn at anytime. Therefore the threat was legitimate and consequently, economic duress could not be established.
Allcard v Skinner (1887) 36 Ch D 145
Allcard v Skinner (1887) 36 Ch D 145
In 1867 an unmarried woman aged 27 sought a clergyman as a confessor. The
following year she became an associate of the sisterhood of which he was
spiritual director and in 1871 she was admitted a full member, taking vows of
poverty, chastity and obedience. Without independent advice, she made gifts of
money and stock to the mother superior on behalf of the sisterhood. She left the
sisterhood in 1879 and in 1884 claimed the return of the stock. Proceedings to
recover the stock were commenced in 1885.
It was held by the Court of Appeal that although the plaintiff’s gifts were
voidable because of undue influence brought to bear upon the plaintiff through
the training she had received, she was disentitled to recover because of her
conduct and the delay.
Williams v Bayley
Mr Bayley’s son forged his father’s signature on promissory notes and gave them to Mr Williams. Mr Williams threatened Mr Bayley that he would bring criminal prosecution against his son unless he granted an equitable mortgage to get back the notes.
House of Lords upheld the cancellation of the agreement, on account of undue influence. The agreement was cancelled on the ground that he was influenced by threat.
Royal Bank of Scotland v Etridge
