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Undue Influence 1 Notes

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Undue Influence
Equitable doctrine. Two main elements: relationship of trust + transaction must not have been explicable in terms of the ordinary motives on which people act.
Courts have tended to adopt a fact-based approach rather than setting strict doctrinal limits.
There is debate as to the scope of undue influence itself, is there a need for wrongdoing as suggested in R v AG England and Wales, or not, as suggested by
Pesticcio v Huet [2004].
M Chen-Wishart, Contract Law (2nd edn OUP, Oxford 2008) 342
Undue influence 'is concerned with the exploitation of a relationship of influence to obtain an undue advantage'.
Tate v Williamson (1866-67) LR 2 Ch App 55 (Ch) 61
'Wherever two persons stand in such a relation that, while it continues,
confidence is necessarily reposed by one, and the influence which naturally grows out of that confidence is possessed by the other, and this confidence is abused, or the influence is exerted to obtain an advantage at the expense of the confiding party, the person so availing himself of his position will not be permitted to retain the advantage, although the transaction could not have been impeached if no such confidential relation has existed'.
Rationale
Defendant-Sided
The philosophical/ normative basis of the doctrine is the defendants reprehensible conduct.
The dominant view, found in many recent leading cases, including Royal Bank of
Scotland plc v Etridge (No2), is that undue influence is about the defendant's reprehensible conduct in inducting the claimant's agreement to the transaction.
Lord Nicholls' leading judgement explains that the doctrine seeks to 'ensure that the influence of one person over another is not abused. In everyday life people constantly seek to… persuade those with whom they are dealing to enter into transactions, whether frat or small. The law has set limits to the means properly employable for this purpose… if the intention was produced by an unacceptable mans, the law will not permit the transaction to stand'.
BUT this doesn't explain/cover all cases of undue influence i.e. Allcard v
Skinner. (No suggestion of ulterior motive of mother superior nun.)

Claimant-Sided
In 'On the Nature of Undue Influence', Birks and Chin argue that undue influence is concerned with the claimant's defective consent in the sense of their
'excessive' or 'morbid dependency'. He or she 'lacks the capacity for selfmanagement'; their judgement is 'markedly substandard' or 'impaired to an exceptional degree'. Counterpoint uncertain and contrary to authority. It is impossible to draw the line between appropriate and inappropriate levels of dependency. A relationship of influence is a broad and potentially encompasses anyone you like, love, respect, work with,
or can be said to share a common cause with. It is only when your transaction with that person is disastrously imbalanced against you that the question of undue influence rises.
Unrealistic: it is unrealistic to say that the novice in Allcard v Skinner lacked autonomy or that her consent was 'impaired'. As Lord Nicholls said in Etridge,
the victim's consent is only deemed to be defective when the trusted party has acted unacceptably.
Trusting is not pathological: undue influence claimants may be naïve, romantic or idealistic, trusting and even altruistic, but they should not be regarded as thereby 'subnormal'. When the nun gave away all her possession, she did not lack autonomy - she exercised it. There is nothing intrinsically wrong with the use of influence.

Failure to Protect
It's because of the relationship between the promisor and defendant that means they are under a duty to protect the interests of the promisor, a duty which doesn't exist in the context of normal transactions between strangers. Thus, the defendant has to deal fairly with the claimant and if they don't, the courts refuse to help them enforce the contract. This explanation does not require any active wrongdoing on the part of the defendant, sufficient if they fail to discharge their positive obligation by omission. Nor does it require that the claimant entered into the transaction unfreely.
Lecturer thinks above opinion = defendant sided view just passive.
Could argue that this explanation is paternalistic which is opposed to the general principles of English contract law.
Traditional approaches don't explain:
Allcard v Skinner describes the undue influence doctrine as a 'fetter placed upon the conscience of the [trusted party], and one which arises out of public policy and fair play'.
Etridge, undue influence was described in terms of the defendant preferring 'his own interests' and 'failing to protect the claimant's interests'. Here, the language of advantage-taking and victimisation designate an omission: a failure by the defendant to protect.
Allcard v Skinner,
A young novice nun took a vow and gave all her worldly possessions to the
Mother Superior of the convent.
The rules imposed the most absolute submission by the sisters of the Mother
Superior who was to be regarded as 'the voice of God': they could not seek advice outside the sisterhood without her permission.
The novice eventually left the sisterhood and sought the return of what remained of her gifts.
- Examination: Can question the reasoning in this case as was not really influenced but found that she was. The undue influence doctrine applies equally to gifts and contracts and the gift here was held to be tainted by presumed undue influence, although the court acquitted the Mother Superior of any active exploitation. She did not act selfishly, preferring her own interests. Indeed, she must had regarded it as in the novice's own best interest to be divested of her worldly goods. Nevertheless,
objectively, according to the standards of equity, the parties' relationship, and the resulting improvidence of the transaction to the novice, the Mother Superior failed to do all that she should have to protect the novice's interests.
At the same time, Lindley LJ said that everything she did was 'referable to her own willing submission to the vows she took and to the rules which she approved, and to her own enthusiastic devotion to the life and work of the sisterhood', and that nothing justified 'the inference that she was unable to take care of herself or to manage her own affairs'.
Cotton LJ: May set aside gift if -
Where the Court has been satisfied that the gift was the result of influence expressly used by the donee to cause the gift to be given - type of estoppel.
Where the relations between the donor and donee have or shortly before the execution of the gift been such as to raise a presumption that the donee had influence over the donor - gift to be set aside unless it is proved that the donor
'in fact' exercised independent will - not necessarily any wrongful act but public policy position to avoid relationship being abused.
In this case, this is the second type of case - relationship of Sister and Mother
Superior one of trust and confidence - she had to submit totally to Mother
Superior and had no way to obtain independent advice. She thus could not exercise her own will as an 'entirely free agent'. Even if she had obtained independent advice before joining the sisterhood, that would not have been decisive - was she being unduly influenced at the time when she transferred the property?
Lindley LJ: No pressure 'except the inevitable pressure of the vows and rules'
was 'brought to bear on the Plaintiff' - Mother Superior had not done anything
'wrong'. Can she get the gift set aside?
To get gift set aside:
 Cases where there has been 'some unfair and improper conduct'

There is a policy balance - why should courts save people from their own folly? But at the same time, courts should prevent indiviudals from being exploited by others.

It is hard to define undue influence but religious influence can be particularly 'dangerous' and 'powerful'. The Plaintiff acted in accordance with her vows, which she entered into of her own free will. However, she was 'absolutely in the power of the lady superior'. Lindley LJ particularly noted the inability of the Plaintiff to get external advice - this turned the case in her favour on this point.

However, courts will not set aside all gifts in such a confidential relational setting where there is no independent advice, such as when the gift is small. In such a case, it must be shown that undue influence had indeed been exercised, not that there was just an existence of influence. But if the gift is so large as not to be reasonably accounted for on the ground of friendship, relationship, charity, or other ordinary motives on which ordinary men act, the burden is upon the donee to support the gift.
Held: she was under undue influence and was entitled to have the gift set aside in principle 'once the spell had been broken'.
Bowen LJ: Must distinguish between rights of the donor and the duties of the donee.
Rights of the donor - no duress, no incompetency etc. She had absolute right to deal with her property as she saw fit.
The duties of the donee - 'it is plain that equity will not allow a person who exercises or enjoys a dominant religious influence over another to benefit directly or indirectly by the gifts which the donor makes under or in consequence of such influence, unless it is shown that the donor, at the time of making the gift, was allowed full and free opportunity for counsel and advice outside'.
So long as the Plaintiff was 'fettered by this vow', she was under the 'dominant influence of this religious feeling'. Mother Superior had 'no wrongful desire to appropriate to herself any worldly benefit' but she was still 'a person who benefitted' from it within the rules and so the presumption applies - undue influence in principle.

Proving Undue Influence
Allcard v Skinner sets out two categories of undue influence which, despite the refinements by Etridge, remain substantially intact.
Class 1 Actual Undue Influence. Where the claimant can prove the defendant's positive application of pressure inducing his or her consent to the contract. Exercised in an active way. Requires relational pressure in the form of pressure which is overt in nature.
Class 2 Presumed Undue Influence. From the claimant's proof that he or she was 'in a relationship of trust and confidence' with the defendant (class 2A
covers specified special relationships where the influence is automatically presumed and Class 2B describes relationships outside Class 2A where the existence of influence must be proved); the resulting transaction is manifestly disadvantageous to the claimant. An evidential inference of undue influence is drawn from the facts of the case. Exercised in a passive way.
These two categories do not amount to two different categories of undue influence, but merely two different ways of proving one category of undue influence - Lord Nicholls in Etridge.
Actual Undue Influence (Old Class 1)
This raises a presumption of undue influence which can be rebutted by the defendant's proof that the claimant nevertheless entered the transaction freely
(usually by the proof of the presence of independent advice). The basic idea was that actual undue influence is where the claimant is able to present direct evidence that they were exploited by the defendant, and often that correct evidence that will take a form of active undue pressure.

1. Failure to protect by overt pressure - old actual undue influence

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