SEM 2, LECT 7 - UNDUE INFLUENCE - CONTRACT, 07/02/2020 O Equitable doctrine. O Involves "undue" pressure on a contracting party. O Current approach is based on · Evidence of "actual" pressure · "Presumptions" from relationships 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 - Andy owns his own business. - The business gets into financial difficulty. - Andy needs to raise money. - He persuades his wife, Belle, to let him use their matrimonial home (joint ownership) as security for a loan. - The business fails. - The bank (lender) seeks possession of the home. - Did Andy "unduly influence" Belle? Classes of Undue Influence - Actual and presumed 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 - Here, the claimant must prove, on a balance of probabilities, that in relation to a particular transaction, undue influence occurred. - There does not have to be any previous history of such influence. o BCCI v Aboody [1992] 4 All ER 955 " Overt act of pressure from husband o Williams v Bayley [1866] LR 1 HL o Libya Investment v Goldman Sachs [2016] Presumed Undue Influence - Relationships of presumed influence ie where one party is presumed to repose trust and confidence in the other party - The law automatically presumes trust and confidence in certain relationships: o Parent/minor child, doctor/patient, solicitor/client, religious leader/follower
o Note: does not include husband/wife o The presumption of influence here is irrebuttable. o Allcard v Skinner(1887) 36 Ch D 145 - Influence can also be presumed from the relationship itself ie the relationship has developed in a way that has created "trust and confidence"- evidence is needed to prove this relationship - Examples- Bank/customer, Husband/wife, Employer/employee - The presumption here is rebuttable - Credit Lyonnais Bank v Burch [1997] 1 All ER 144 "Need for Explanation" - If there is a transaction that needs explanation- then undue influence will be presumed - Example-Solicitor buys a house from a client at a price under its value. - Example-Wife agrees to use her house as guarantee for a loan to be used solely for her husband's business. - Allcard v Skinner - Smith v Cooper [2010]- Lloyd LJ- to rebut the presumption, defendant must not just show that there is a reasonable explanation for the transaction, but that the claimant made the decision free from influence. Rebutting the Presumption of Undue Influence - You need to provide evidence that the "influenced person" entered the transaction with a full understanding of its consequences and received independent legal advice before acting. Undue Influence and Third Parties - Husband persuades Wife to use house for loan; bank grants loan; business fails; Wife resists repossession on basis of