Undue influence and Duress Flashcards
3 types of duress
1- duress to the person (ie. actual or threatened violence, influencing the decision to enter into the contract, albeit not decisive factor)
2- duress to property (ie. seizure or damage or threat to do so to owner’s property)
3- economic duress (ie. caused by illegitimate pressure)
Legal effect of duress
Contract is VOIDABLE
Remedy is rescission or set aside
Who carries the burden of proof for duress to the person?
BoF is on the D to show no duress
Test to establish duress to property/good
BUT FOR
Elements of Economic Duress
1- pressure
2- lack of practical choice for the victim (ie. no practical alternative but to acquiesce)
3- pressure is illegitimate
4- constitutes a significant cause inducing the claimant to enter into the contract (ie. BUT FOR test - must be a decisive factor)
5- victim must protest at the time and not affirm
Illegitimate pressure for duress indicative factors
1- actual/threatened breach of contract
2- bad faith
For economic duress, the victim must protest and must not affirm the contract.
What does it mean?
1- protest:
V should demonstrate evidence of protest at the time alleged duress was exerted, must protest immediately/imminently
2- affirmation
Unless the victim takes immediate/prompt action once the pressure has ceased, they will have affirmed the contract.
What are the questions to ask for establishing illegitimate pressure amounting to duress?
- Has there been a threatened breach of contract?
- Was the pressure applied in good or bad faith?
- Did the victim protest?
- Did the victim affirm?
When will undue influence be established?
Where the contract results from the overt acts of improper pressure or coercion OR where there is an influence/ascendancy between parties that is taken advantage of.
‘a person’s consent to a transaction was produced in a way such that the consent ought not fairly to be treated as the expression of their free will’. -
what does this constitute?
undue influence
Overt acts of improper pressure or coercion - what should be proved to establish undue influence?
It is necessary only for the innocent party
to establish that the undue influence is a factor in inducing the claimant to enter into the contract.
Must show
-fraudlent/deceitful behaviours (need only be one of the reasons);
OR
- if unclear, ‘but for test’ applies (needs to be significant/decisive factor)
Proof of taking advantage of influence or ascendancy in a relationship
Burden?
Establishing the relationship?
BoF on person alleging the undue influence to prove:
- relationship of trust and confidence; and
- influence (by transaction requiring explanation)
Relationship:
- of dependence
- of trust and confidence
- where one party is vulnerable
Irrebutable presumptions of relationship of influence or ascendancy of which advantage is taken, are:
1- parent-minor child
2- guardian-ward
3- trustee-beneficiary
4- solicitor-client
5- doctor-patient
If a party can show a relationship of trust and confidence and a transaction which calls for an explanation, then (…)
undue influence is inferred, UNLESS the other party can establish to the
contrary.
Undue Influence and third parties (mortgages on matrimonial home)
Spouse must establish that unfair advantage is taken.
A creditor/bank will be put on notice for undue influence if:
1- transaction not financially advantageous to the innocent party
2- substantial risk in these types of transactions that the non-innocent party has committed a legal or equitable wrong
Note that a creditor is always pur on notice where the relationship between surety and debtor is non-commercial.
What should the bank/creditor do when put on notice?
Follow Etridge Guidelines
Bank should ensure that spouse have gotten independent legal advice and be warned of the risks.
What if the solicitor fails in his duty to the spouse following Etridge Guidelines?
Negligence action will be taken against the solicitor.
But no recourse will be available to the lender/creditor.
