Undue Influence in Mortgages - Literature review Example

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This paper "Undue Influence in Mortgages" presents an equitable doctrine, which affords protection to the susceptible against abuse. In Barclay’s Bank v O’Brien, the Court of Appeal had invoked the law relating to misrepresentation and undue influence…
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Undue Influence in Mortgages
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Download file to see previous pages  The Court viewed the matter before it in the light of equity, which provides special protections for a married woman who had acted as a surety for her husband’s debts. If the creditor knew about the relationship between the surety and the borrower then it could not enforce the obligation of surety. The Court also pointed out that the creditor had failed to take measures that would ensure that the surety had given informed consent to the transaction.

The bank officials did not follow the guidelines set out in the covering letter and failed to furnish her with any information regarding the documents or the overdraft facility to be availed by her husband. The document had contained a clause that had recommended the obtention of independent legal opinion, regarding the documents, before signing it. She failed to follow that recommendation and signed on the document. She did not read the contents of the document prior to signing it.

In its ruling, the Court held that the plaintiff Bank did not utilize Mr. O’Brien as its agent. There was no apparent undue influence and even if such undue influence had occurred, the Bank had no knowledge about it. As such there was no possibility for the Bank to know the circumstances under which Mrs. O’Brien had been persuaded to sign the documents.

The House of Lords dealt with the case along the lines of undue influence in some specific relationships. As had been established in the case of National Westminster Bank plc v Morgan3, the husband and wife relationship does not fall under the category 2A of undue influence. Instances, where the wife establishes that she had vested her trust and confidence in her husband, are referred to as category 2B of undue influence.

In Aboody4 the Court set out the requirement of apparent disadvantage to the surety under actual and presumed undue influence circumstances. However, the in CICB Mortgages v Pitt the House of Lords had opined that apparent disadvantage is applicable only to cases of presumed undue influence. ...Download file to see next pagesRead More
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