Duress and undue influence

Question 1

What 3 things can duress be directed towards?

Answer 1

1. person
2. property
3. economic/ business interests

Question 2

Does the finding of duress make a contract void or voidable?

Answer 2

voidable -> innocent party can choose to rescind the contract

Question 3

Physical threats to a person which contribute to their decision to enter into the contract amounts to duress to the person.

Who holds the burden of proof?

Answer 3

Party exercising physical pressure must prove that that their pressure did not contribute to the reason for entering into the contract.

Question 4

In order for there to be economic/ business interest duress, 3 elements are required - what are these?

“do this or else”

Answer 4

1. Pressure resulting in a lack of choice; no practical alternative other than to assent to the contract terms
2. Pressure must be illegitimate

possible factors:
i. threatened breach of contract
ii. pressure applied in bad faith
iii. did the victim protest?
iv. did the victim take action to terminate or perform the contract after pressure?
v. did victim have access to independent advice?

3. Pressure was a significant cause for entering into the contract

but-for test

Question 5

If there is duress for a variation in contract, will the whole contract be rescinded?

Answer 5

no, just the variation

Question 6

Will there be economic duress:

• Supplier forces company to pay extra for an earlier delivery
• company has no choice but to pay the money

Answer 6

no -> there has been valid consideration in the form of a practical benefit due to the earlier delivery

Question 6

what is the difference between duress and undue influence?

Answer 6

Undue influence doesn’t involve a direct threat, like duress does. Instead, it involves excessive pressure by the party in the dominant position on the party in the inferior position. It’s important to note that persuasion alone is not undue influence.

Question 7

Is undue influence an equitable remedy?

Answer 7

Yes, at court discretion

Question 8

What are the 3 main types of undue influence?

Answer 8

1. actual -> obvious on the facts
2. presumed
3. Constructive

Question 9

When will there be presumed undue infleunce?

Answer 9

1. fiduciary relationship/ relationship of trust and confidence
2. transaction needs an explanation -> contract is not for parties’ benefit/ risky

Question 10

If there is constructive notice of undue influence - what does this mean for the transaction?

Answer 10

voidable

Question 11

What is the 2-part test to establish if there is a constructive notice?

Answer 11

Transaction is:

1. not to the financial advantage of the victim (e.g spouse pressure to offer house as security for bank loan)
2. Substantial risk of undue influence

Question 12

In order to avoid constructive notice (e.g. for a bank), what steps must be taken?

Answer 12

Reasonable steps to ensure other party to the contract entered into it freely and with all knowledge of the facts.

E.g:

1. private meeting
2. Written confirmation from a solicitor