Registration Numbers

SB/ACC/21/0065
SB/ACC/21/0098
SB/ACC/21/0100
SB/ACC/21/0045
SB/ACC/21/0151
SB/ACC/21/0103
SB/ACC/21/0140
SB/ACC/21/0056
SB/ACC/21/0042
SB/ACC/21/0116
 Undue influence
Presentation outline
Influence connotes the power or ability to affect another’s character, beliefs or action through
admiration, example, relationship, office, fear etc.
Undue influence is an equitable defense to avoid a contract where the relationship between the
contracting parties is such that one party, being the dominant party, will presumably or in fact
have taken advantage of his dominant position over the servient party.
Undue influence deals with the improper manipulation of a contracting party.
Undue influence makes a contract voidable, not void ab initio.
The issue of undue influence was recently litigated in the case of Malousek V Meyer (2021)
Difference between duress and undue influence is that duress is a form of force violence or
threat of imprisonment intended to force a person to enter into a contract which the person does
not want to or condition or the terms of unfavorable to the person but undue influence there is no
use of force or threat of injury but a stronger personality dominates the will of the weaker party.
Undue influence is based on the misuse of a relationship of a trust or confidence between the
parties.
How do you determine undue influence?

Undue influence is determined by a two-stage test. Firstly, is there a special relationship between
the parties, and if so, did the dominant party take advantage of their position of power to
influence the other party to enter into the agreement?

How can I avoid undue influence when signing contracts?

The easiest way to avoid causing or being a victim of undue influence when entering into any
contract is to receive legal advice.

Therefore, the plaintiff may:

• Repudiate the contract once the undue influence ceases to operate on him or
• Affirm the contract by express words or unequivocal acts.
Types of undue influence
• Lord Browne-wilkinson identified two distinct classes of undue influence in Barclays
Bank Plc V O’brien 1994
 Presumed
  Actual
PRESUMED UNDUE INFLUENCE
When there is a relationship of trust, confidence, or fiduciary duty between two people, with one
person being in a position of power over the other, the law will presume that the powerful person
has used their influence to get the other person to agree to something that is beneficial to them.
Examples of such relationships include lawyers and clients, trustees and beneficiaries, doctors
and patients, and parents and children.

In Dabu V Anobah [1965], the appellant’s claim of undue influence did not impress the high
court. The appellant did not in fact belong to the protected class.
However, to belong to the protected class does not mean that the contract with the presumed
dominant party will automatically be set aside for the following two reasons:
o Certain relationships presume the existence of undue influence. But evidence may be led
to rebut the presumption of the existence of undue influence.
Case: Huyton SA v Peter Cremer GmbH & Co [1999] 1 Lloyd’s Rep 620.
o Also, undue influence makes a contract voidable, not void; and by words and deeds, the
party who was prevailed upon under the undue influence may, once those influences
cease, affirm the contract. If so, a party is not entitled to approbate and reprobate.
Case: Lloyds Bank V Bundy [1975] QB 326
• Facts: Bundy, was an elderly farmer whose only asset, a farm house, was used as security
for his son’s company’s indebtedness to the bank. Bundy, his son and son’s company
were all customers of the bank. When the company run into further difficulties, the new
bank manager went to see Bundy at home with completed forms for further guarantees.
He told Bundy the bank could only support the son if further guarantees were executed.
Bundy then extended the guarantee and with it the charge over his property. Eventually
the son’s company failed and the bank sought to enforce the security.
• Held: Bundy had placed confidence in the bank for financial advice. The bank being
interested in the transaction should have advised him to seek independent advice and
could not rebut the presumption of undue influence.
• If the terms of the contract are so overwhelmingly tilted in favor of one party and against
the other that the court’s first reaction is to presume that the bargain was not between
approximately equal parties exercising their free wills but some overriding influence was
brought to bear by a dominating party over a subservient party.
However, the presumption that the bargain is tainted by undue influence can be rebutted by
evidence to the contrary

ACTUAL UNDUE INFLUENCE

 • Actual undue influence occurs when one person claims that they were forced to enter
into a contract with another person against their will, due to the influence of a third party.
This means that the person did not freely agree to the contract, and that the third party
had a dominant role in the agreement. The contract does not have to appear one-sided
for this to be true CASE: UCB Corporate Service V Williams

• UCB Corporate Service V Williams

• Facts: the defendant’s husband has been a partner in a business to which the claimant had
lent money, secured in part on the home jointly owned by the defendant. The defendant
signed a charge without having been told the full extent of the liability. The signature was
executed in the presence of all the other partners and witnessed by the solicitor of the
partnership. The charge secured all debts present and future of the partnership and
provided for joint and several liability of all the partners. The business was unable to
repay the loan and became bankrupt. UCB sought to enforce the charge and defendant
raised undue influence and misrepresentation in her defense.
• The contract was set aside for undue influence and fraudulent misrepresentation.

Remedies of undue influence

The most common remedy for victim of undue influence or unconscionable conduct is
rescission.
Rescission refers to avoiding or setting aside the contract