Undue influence Definition Improper pressure, falling short of duress (as duress requires a specific threat), which makes a person enter a contract that they would not otherwise have entered. Example Y Andy owns his own business. Y The business gets into financial difficulty. Y Andy needs to raise money. Y He persuades his wife, Belle, to let him use their matrimonial home (joint ownership) as security for a loan. Y The business fails. Y The bank (lender) seeks possession of the home. Y Did Andy "unduly influence" Belle? Classes of undue influence + Actual undue influence- RBS v Etridge (2001)- Lord Nicholls- it comprises overt acts of improper pressure or coercion. * Presumed undue influence- where undue influence is presumed from relationships, and the transaction is one that requires explanation. Actual undue influence Y Here, the claimant must prove, on a balance of probability, that in relation to a particular transaction, undue influence occurred. Y There do not have to be any previous history of such influence. À BCCI v Aboody [1992] 4 All ER 955 ^ Wife signed a document to use their house as collateral for the husband to secure a loan for his business. ^ Wife was 20 years younger and usually signs any document her husband places in front of her.
À In the last transaction, husband burst in the room where wife was listening to independent advice from a solicitor and had a row with the solicitor, leading wife to burst into tears. À CA held there was undue influence but did not set the contract aside because it was not disadvantageous to wife. À SC overruled that decision. Where there is undue influence, agreement will be voidable regardless of whether it was not disadvantageous ^ Williams v Bayley [1866] LR 1 HL Y Son forged father's signature to obtain promissory note from bank. Y Bank threated father to prosecute son unless he agrees to pay back the sum. Y Court rescinded the contract. Libya investment v goldman sachs [2016] Y Libya was subject to economic sanctions and accrued a lot of oil revenue. It set up a Libya Investment Authority (LIA) to invest the asset for the benefit of its citizens, and called for bids. Y Defendant won, but had a different agenda which put Libya in a disadvantaged position. Y Libya thought they were investing in shares, but defendant was investing in exposures, which meant that if the share price increased, they will pay LIA but if it does not, they will keep the premium. Y LIA were losing and sued claiming actual undue influence on grounds of having a relationship of trust and confidence in the defendant. Y Held: No actual undue influence. No relationship of trust as claimed existed. Defendant bided like any other bank, and that did not place them in a different category as other bank Presumed undue influence Y Relationships of presumed influence ie where one party is presumed to repose trust and confidence in the other party