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Law Notes Contract Law Notes

Undue Influence Notes

Updated Undue Influence Notes

Contract Law Notes

Contract Law

Approximately 1511 pages

Contract law notes fully updated for recent exams at Oxford and Cambridge. These notes cover all the LLB contract law cases and so are perfect for anyone doing an LLB in the UK or a great supplement for those doing LLBs abroad, whether that be in Ireland, Hong Kong or Malaysia (University of London).

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Undue Influence

Requirements for Undue Influence

Failure to protect from overt pressure (Actual undue influence)

  • Where C can prove that D’s positive application of pressure induced his consent to the contract

    • Essentially it involves Relational Pressure

      • E.g. Langton v Langton - Threats to abandon if contract not signed

      • OR Morley v Loughlan - where X exerts exclusive control, secrecy and exclusion of others who might dilute X’s influence on C (cults)

      • OR Drew v Daniel - where X bullies, confronts or harasses C per.

        • Proof of this sort of overt pressure is sufficient to prove undue influence

    • Per CIBC Mortgages Plc v Pitt [1994]: There is no need to prove a relationship of influence or any manifest disadvantage

Presumed undue influence

  • Royal Bank of Scotland v Etridge [2001]:

    • Lord Nicholls: C must prove two things

      • 1. That C put trust and confidence in the other party in relation to the management of financial affairs

      • 2. And a transaction that calls for explanation

        • This will lead to a rebuttable presumption of fact of undue influence

          • and shift the burden of proof to the party relying on the contract to prove that this inference should not be drawn

    • Chen Wishart: Is important to note that the court is not saying that D has exercised undue influence

      • Merely that he has preferred his own interests and failed to safeguard the claimants

  • 1. A relationships of trust and influence

    • Automatic Presumptions (legal irrebuttable presumptions)

      • Royal Bank of Scotland v Etridge [2001]:

        • Lord Nicholls:

          • Which relationships will be recognised is undefined

            • However, if you fall into some of the most common ones then this will be enough to show trust and confidence on its own

      • Chen Wishart: Fairly obvious what these might be:

        • E.g. Doctor and patient

        • Solicitor and client

        • BUT NOT husband and wife

          • Royal Bank of Scotland v Etridge [2001]:

            • Lord Nicholls: Husband and wife does not fall into this category, however,

              • as nothing unusual in a wife, with motives of affection, conferring financial benefits on her husband.

                • therefore must be proved that there was sufficient trust and confidence in the normal way.

      • Chen Wishart: before Etridge, there was a misconception that these designated relationships raised a presumption of undue influence

        • In fact, the designated relationships merely show a relationship of trust and influence

          • You also need to show a questionable transaction to get a presumption of undue influence.

    • Relationships that have to be proved first

      • Must be expectation from C’s side that D will give conscientious advice

      • D must know of the relationship of trust and have participated in it

      • Past dealings between C and D must show trust and confidence in D

        • But there need not be blind, unquestioning trust by C or a dominating influence by D

          • Cheese v Thomas [1994]:

            • Nichols VC:

              • Case is one of joint venture agreed by the parties, not an aggressive one.

          • Burrows: also tells us that while the conduct of D is irrelevant to whether there is undue influence

            • It may have an effect on the remedy given

        • Could also arise even in a one off dealing:

          • Tufton v Speroni: T, person with no business experience, wished to set up a Muslim culture centre. S (person with business experience) sold his house to T for double the price and with a number of onerous reservations to himself.

            • Evershed MR: if a number of persons join together for the furthering of some objective,

              • Not unreasonable to conclude that in matters related to the objective, each person reposes confidence in the others

                • and therefore has influence which grows naturally out of confidence

      • Unfairness of the transaction may provide evidence of a relationship of influence

        • Credit Lyonnais v Burch [1997]: A young employee gave a personal guarantee on her flat to secure her employer’s existing debt. There was no real evidence of a relationship of influence.

          • Millet LJ: mere fact that transaction is manifestly disadvantageous to one party is insufficient alone to give rise to undue influence.

            • But, where obtained in a relationship easily capable of developing into one of trust and confidence (e.g. young employee and employer)

              • nature of the transaction may suggest that such a development has taken place.

        • But not necessarily if there is an explanation for this

          • Re Brocklehurst’s Estate [1978]: old aristocrat w/o independent advice, gave a garage proprietor a 99 year lease of shooting rights over estate, vastly decreasing its value.

            • Held no relationship of trust and influence between the parties

              • And gift made for reason that donor wished to decrease value of estate before it was inherited by detested nephew.

  • 2. A transaction calling for explanation

    • Chen Wishart: Far from every transaction conducted through a relationship of trust and influence will need to be set aside for undue influence

      • It is the improvidence of the transaction which will enable the party to set aside the transaction

    • Royal Bank of Scotland v Etridge [2001]:

      • Lord Nicholls:

        • While it is not necessary for the purposes of undue influence for a person to suffer detriment

          • Questions of undue influence will not usually arise where the transaction is innocuous.

        • It will normally only be considered where the transaction was disadvantageous either from the outset or as matters turned out.

    • When does a transaction call for explanation? A combination of factors:

      • When it impacts on C’s future autonomy

        • Chen Wishart: In Allcard v Skinner (1887), shown that giving all of property to Y meant that X had no money herself afterwards to live on.

      • When the transaction is inconsistent with the nature of the parties’ relationship:

        • Royal Bank of Scotland v Etridge [2001]:

          • Lord Nicholls:

            • The transaction must not be readily explicable from the relationship of the party

              • This second element being necessary to keep the law from being too broad

                • Cos clearly absurd if every transaction...

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