Plaintiff’s husband got a bank, Defendant, to pay off its mortgage in return for a new one provided by Defendant that had “unlimited mortgage” on Plaintiff’s husband’s part i.e. it would cover all of the husband’s liabilities to the bank.
Defendant only agreed to put up the house as collateral for the loan on the assertion by the bank manager that the husband would not be allowed to borrow for business purposes and could only borrow for paying off the existing mortgage. This was incorrect but BF.
When Defendant began repossession proceedings, Plantiff claimed undue influence by the bank.
HL rejected this claim.
The relationship was purely one of a commercial nature and not one of “trust and confidence”.
There are many relationships where one party relies on the other closely, but do no lead to presumption of undue influence e.g. husband and wife.
Lord Denning was wrong to say (above) that the law grants relief where there has been an “inequality of bargaining power”. This is because undue influence can also cover cases of gifts, where there is no bargaining.
If Denning is right (that there has to be unequal bargaining positions and therefore there has to be a bargain) undue influence couldn’t cover gifts, which would be unfair. Bargaining power inequality is relevant in determining whether there has been undue influence, but is not the basis of the principle.
Regulating unequal bargaining power is parliament’s job and has been undertaken by various pieces of legislation (see below).
Contract law notes fully updated for recent exams at Oxford and Cambrid...
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Contract Law | Royal Bank Of Scotland V Ettridge Notes (3 pages) |
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