Undue influence is a situation in which one party exerts undue pressure or influence over

another party to force them to take a course of action they otherwise would not have taken. The

House of Lords' judgement in Royal Bank of Scotland v. Etridge established a two-stage

standard for establishing undue influence: the claimant must demonstrate that there is a trust and

confidence-based connection between the parties, and that the transaction was impacted by

actual or suspected undue influence. Contracts that can be terminated for undue influence fall

into two categories: those in which the parties have no relationship and those in which they have.

Class 1, actual undue influence, requires the claimant to substantiate their assertion that the

wrongdoer used undue influence to persuade the complainant to enter into the transaction. The

burden of proof lies on the plaintiff to prove that undue influence did exist and was exerted.

CIBC Mortgages v Pitt confirmed that the transaction does not have to be manifestly

disadvantageous in the case of actual undue influence.

When there is a prior relationship of confidence between two parties to a contract, and the

contract between them is unfavorable to the one who places trust in the other, undue influence

may be assumed to have occurred. This can happen in one of two ways: where a relationship of

trust is automatically presumed to exist, or where it is not. Lloyds Bank v Bundy is an example

of a fiduciary relationship arising on the facts. The claimant and his son frequented the same

bank, and when the son had business difficulties, the father was asked to put up collateral for the

son's overdraft using his own farm as a buffer. The farmer argued that the contract was the result

of undue influence since, despite his long history of banking with Lloyds and his reliance on

their counsel, they made no effort to warn him that giving the order was not in his best interests.
The Court of Appeal agreed that the presumption of undue influence had been raised, and the

bank was unable to rebut the presumption. The idea of undue influence in contract law forbids

one party from using undue coercion or pressure on another party. The key to establishing undue

influence is to demonstrate that the parties had a relationship of trust and confidence, and that

one party used that connection to persuade the other to sign a contract. Individuals should be

aware of their rights and take appropriate action if they feel they have been the victim of unfair

influence. The only way to guarantee that those who are at risk of exploitation and abuse are

adequately protected by our legal system is through vigilance and activism.