The Doctrine of Undue Influence - Essay Example

The Equitable Doctrine of Undue Influence Undue influence is based on the equitable principle that no person may take unfair advantage of the inequalities between him and another party so as to force an agreement on the other party. A contract is said to be induced by undue influence where one of the parties is in a position to dominate the will of another which prevents him from making his judgement freely. Undue influence renders a contract voidable at the option of the aggrieved party. It can be due to actual pressure or under special relationship Actual Pressure This is where the parties are in different levels due to political, economical or social status. A person who seeks to rely on undue influence as a defence must prove that the other party has in fact exerted influence over him and that he would not have entered into the contract. The burden of proof is on the inferior person. Special Relationships These are the confidential relationships which include doctor/patient relationship; advocate/client relationship; religious leader / disciple relationship and the trustee / beneficiary relationship. In these relationships, it is presumed that the superior person would always influence the inferior person. The burden of proof is shifted on the superior person to prove that there had been no undue influence on his part. He must proof that the other party had an independent source of advice and if he succeeds the presumption of undue influence is rebutted. (Gone against). It is the inferior person who then has to proof his position. Husband and wife relations do not raise presumption of undue influence. It must be proved. Where undue influence is proofed, the contract is voidable but the right to avoid the contract is lost if either the third party has obtained rights under the contract or where there has been undue delay on the party entitled to avoid the contract or even where the aggrieved party has affirmed the contract. 1 In the case of Lancashire Loans Ltd Vs Black (1934), the defendant, a young married woman under the influence of her mother entered into a money lending contract for her mother’s benefit. The money lenders knew of this situation and subsequently sued the mother and daughter on a promissory note. It was held that the contract would be set aside as the daughter was under the undue influence of her mother. In the case of Ottoman Bank Vs K.S. Mawani (1965), the defendant signed a guarantee in favour of the plaintiff’s bank, for the money owed by his parent. When sued on the guarantee, he pleaded that he signed the guarantee under the undue influence of his father. It was held that the defence was valid and the defendant was not liable on the guarantee. In the case of, ALLCARD VS SKINNER 1887, there was undue delay on the part of the plaintiff in bringing an action of undue influence. In this case Allcard joined a protestant sisterhood and was requested to surrender her property to the covenant. She did not seek independent legal advice. She surrendered her properties towards the vows of poverty. She later left the covenant and some years later sued to recover the worth of her property. It was held that though presumption of undue influence had not been rebutted, she could not recover the monies due to the delay in avoiding the contract. Delay defeats equity. Though related, undue influence and duress slightly differ in that under duress actual or threatened violence to one of the parties to a contract is deemed to have been used. Duress also entails threats of criminal prosecution, threats of imprisonment or dishonour of a member of a family. Before equity came to apply, a threat of imprisonment was not considered as duress unless it was unlawful under common law. But under equity whether a threat to imprisonment is lawful or not the contract is still voidable. 2This was held in the case of kaufman vs gerson, 1904. In this case, Gerson’s husband embezzled some money entrusted to him by his employer, Kauman. Kauman then threatened Gerson that he would initiate criminal proceedings against him unless Gerson paid the whole sum of money out of her own property which she agreed to do to save her husband’s honour. But she failed to live to her promise which made the plaintiff to sue her. It was held that the promise was not binding on her as it was obtained under duress. Gumming Vs Ice, 1874 In this case, the defendant was admitted into a private lunatic asylum. She made a promise to make certain arrangements as regarded her property. This was in favour of the plaintiff and in return she was to benefit from the suspension of a commission of lunacy that was being held upon her. It was held that the agreement was obtained under the fear of confinement in the asylum. It was therefore not binding on her. If a suit of duress is to be actionable, it must be related to one person and not to his goods only. In Skeate Vs Beale, 1804, the defendant, a tenant, agreed that if the plaintiff (his landlord) would quash a distress, he would clear all his rent arrears. The defendant was not to keep his promise rather pleaded that he agreed to do so under duress as there were threats from the plaintiff aimed at selling all of his goods unless the promise to pay was kept. The plea was disallowed by the court and it was held that he was liable on the contract Duress renders the contract voidable. For an action against duress to succeed, it must be calculated to produce fear or loss of life or bodily injury as a means of forcing the victim to enter into the contract. The threat must be illegal i.e. it must be a threat to commit a crime or a tort. 3 CONCLUSION The doctrine of undue influence is important in protecting the rights of the minority in special relationships. The weakness of this doctrine is that it presumes that it is the superior person who always influences the inferior. A contract can be valid with all the essential elements of a valid contract being satisfied but if it has been influenced by undue influence, then it becomes voidable at the option of the aggrieved party. TABLE OF STATUTES 1. Lancashire Loans Ltd vs. Black 1934 1 KB 380 2. Ottoman Bank vs. K.S Mawani 1965 1 KB 439 3. Allcard vs. Skinner 1887 36 ChD 145 4. Kaufman vs. Gerson 1904 1 KB 591 5. Gumming vs. Ice 1874 1 QB 623 Reference Emanuel, S. L. (2004): Fundamental of Business Law, 4th Edition, London, Educational Publisher Read More