OCR- Contract Law-Undue Influence

Undue Influence

OCR A2 Law- Contract Law exam

Class 1-Actual Influence

Williams v Bayley- Father only agreed to put house up for mortgage due to the threat of informing about incidentBCCI v Aboody- although Husband hadn't acted with any improper motive, he had unduly influenced his wife, as she did what ever he said.CIBC Mortgages v PItt- if it deal itself isn't bad, proof of improper pressure makes contract void

Presumption of Undue Influnce

For Presumption there has to be:Class 2(A)- recognised relationship (e.g- doctor, solicitor, parent and child)orClass 2(B)- developed relationship- where one party relies on the otherAnd the deal must be so obviously one sided to one party who must have used their undue influence improperly.Class 2(A)- Allcard v Skinner- gift so unusually largeClass 2(B)- Goldsworthy v BRicknell- parties only known each other for short time but sufficient level of trust for presumption.Lloyds Bank v Bundy- bank couldn't give independent advice whilst protecting own interests.

Deals that are so obviously bad...

Allcard v Skinner- gift so unusually largeMacklin v Dowsett- transaction that needed explaining as so obviously bad for one sideNatwest Bank v Morgan- no manifest disadvantage to Wife signing agreement as probably would loose house anyway

Rebuttal of Presumption

Presumption may be rebutted if the more dominant party can prove that the weaker party were informed that they were entering a bad deal or if they had independant advice.RBSv Etridge- presumption may be rebutted if had independent advice however, up to judge to decide whether person who has had the independent advice is exercising their own judgement or is acting under the undue influence of someone else

Class 3- Constructive Notice

This typically occurs where there is a jointly owned home between a husband and wife and normally the husband wants to borrow money, for debts or business etc. Husband may be concerned wife won't agree so may bully her into agreeing. After a while husband may be unable to pay loan off and when the bank try to force the sale of the house, the wife may argue she didn't fully agree tot he agreement.If the bank can show that the wife had full advice, they can enforce the promise and force the sale of the houseif the bank can't show that the wife had full advice, the courts will say the bank did not have constructive notice of the risk of H's undue influence and therefore cannot force the sale of the houseBarclays Bank v O'Brien- constructive notice- bank should have been aware of the risk of H's undue influence, as he did nto tell his wife the real amount of the loanCIBC Mortgages v Pitt- normal deal between a h and w to buy an asset, no risk to the w and nothing to give the bank constructive notice

RBS v Etridge

This is a landmark case that defined this area of lawWife signed an agreement to use house as security for a loan. Although a bank had provided a solicitor, she regarded it as working more for her husband and was never advised on her own. Bank couldn't enforce agreement as wife successfully claimed undue influence

-a deal where bank weren't aware of the relationship of trust and relianceChater v Mortgage Agency Service- mother relied on son for business maters and it was a transaction that needed eplainin. Son would be unlikely to rebut presumption but as bank not aware of this, nothing to give them constructive notice-a deal where there wasn't full disclosureHewett v First Plus Financial Group- wife didn't know about Husbands affair and Supreme Court ruled she did not agree to the borrowing knowing all the relevant facts-a deal that was so obviously bad even though they got independant adviceBanco Exterior v Thomas- lady was advised deal was bad by solicitor but went ahead anyway, bank could enforce agreement as did all they could to make her aware about the bad deal