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Undue Influence (Third Party cases (when a second mortgage is taken out, a…
Undue Influence
Third Party cases
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a transaction will not be set aside on the ground of undue influence unless it can be shown that the transaction is to the manifest disadvantage of the person subjected to the undue influence
National Westminster Bank v Morgan The normal relationship between a customer and banker was not one so as to give rise to a relationship of trust and confidence. The wife had not established a relationship of trust and confidence and therefore no presumption of undue influence could arise.
Barclays Bank v O'Brien The defence based on undue influence failed because the wife was held to exercise independence of thought on financial matters and was used to dealing with the family finances whilst her husband was working away. The wife was successful with regards to misrepresentation.
Royal Bank of Scotland v Etridge guidelines re the position of lenders and the duties of solicitors in advising wives in transaction
a solicitor should:
- explain why he has become involved;
- explain the docs and the consequences of signing them;
- point out the seriousness of the risks;
- emphasise that she has a choice;
- check the she wishes to proceed on the terms offered by the bank
to avoid the guarantee or charge becoming voidable, the bank must get a written confirmation from the solicitor providing the independent advice that the wife has been independently advised
Duress
if the contract is established on the basis of violence or threat, or unlawful economic pressure. For duress to succeed there must be "overbearing of the will."
Conditions to be satisfied for the contract to be voidable:
- pressure was exerted on the contracting party;
- the pressure was illegitimate;
- the pressure induced the claimant to enter into the contract
- the claimant had no real choice but to enter into the contract
- the claimant objected to entering into the contract, either before or shortly afterwards
Economic duress one party is force to enter into a contract due to economic pressure Atlas Express v Kafco
North Ocean Shipping v Hyundai Construction The contract was voidable for duress, however, since the claimants had left it so long in bringing their claim they had affirmed the contract and lost their right to rescind.
- one party uses their influence over the other to persuade them to make a contract
- the contract can be declared voidable at the option of the injured party
actual undue influence
claimant can demonstrate that he/she would not have entered into the contract except for the undue influence
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presumed undue influence
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1/ parent & child
2/ religious advisor and disciple
3/ guardian and ward
4/ solicitor and client
5/ trustee and beneficiary
6/ doctor and patient
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