Duress & Undue Influence Flashcards
(24 cards)
What are the three types of duress recognised in contract law?
Duress to the person
Duress to property
Economic duress
What is duress to the person and what is the causation test?
It involves actual or threatened violence. Duress will be found if such threats are one factor influencing the party’s decision to contract
What is duress to goods/property?
It involves threats to seize or damage property. The causation threshold is stricter: it must be shown that but for the duress, the contract would not have been entered into
What are the three elements of economic duress?
(a) Lack of practical choice
(b) Illegitimate pressure
(c) The duress was a significant cause of entering the contract (i.e. ‘but for’ test)
What is the legal effect of economic duress?
The contract is voidable. The remedy is rescission, which restores parties to their pre-contractual positions
What does ‘lack of practical choice’ mean in economic duress?
The party had no realistic alternative but to submit to the demand
What factors determine whether pressure is illegitimate?
Threatened breach of contract
Bad faith
Protest at the time
Whether the victim affirmed the contract
When is pressure not considered illegitimate?
When it is exerted in good faith, such as seeking clarification of terms or safety assurances
Why is protest important in claims of economic duress?
A party who does not protest or delays in challenging the contract may be deemed to have affirmed the contract
What is the causation test for economic duress?
The pressure must be a but for cause of the contract – i.e. the contract would not have been entered into without it
How is economic duress linked to consideration in contract variations?
Even if practical benefit provides consideration, a variation obtained through duress will not be enforceable.
What is undue influence?
It exists where consent is not the result of free will but has been obtained through coercion or abuse of influence
What are the two types of undue influence?
Overt acts of improper pressure (similar to duress)
Abuse of a relationship of influence or ascendancy
How is causation established in undue influence?
If deceit/fraud is involved, it is enough to show the influence was one factor. If not, a but for test may apply.
What is a relationship of influence or ascendancy?
A relationship where one party trusts/confides in another, or is vulnerable. Some are irrebuttably presumed
Are husband and wife relationships irrebuttably presumed?
No. Such relationships require evidence to prove influence was exercised unduly.
How can undue influence be inferred?
By showing:
A relationship of trust and confidence
A transaction requiring explanation
What happens if these inferences are shown?
The burden shifts to the other party to disprove undue influence. If they fail, undue influence is established
What is the equitable remedy for undue influence?
Rescission – the contract may be set aside. However, the remedy is discretionary.
When might relief be refused?
Delay (‘delay defeats equity’)
Misconduct by the claimant (‘clean hands’ doctrine)
Can undue influence by a third party (e.g. spouse) affect a contract with a bank?
Yes, if the bank had actual or constructive notice of the undue influence.
What is constructive notice in this context?
When the bank is put on inquiry due to the nature of the relationship and transaction, and fails to take reasonable steps to ensure consent was freely given – constructive notice applies to all non-commercial relationships.
What are the reasonable steps a bank must take to avoid constructive notice?
Advise the party to obtain independent legal advice
Provide the solicitor with full transaction details
Confirm the advice was properly given
What should a solicitor explain to the surety (e.g. spouse)?
Nature and effect of the documents
Seriousness and risks involved
That the decision is voluntary
