Undue Influence CASES
In English law, undue influence occurs when a party enters into a contract or transaction due to pressure or manipulation, undermining their free will and genuine consent.
Definition and Principles
Undue influence involves exploiting a position of trust, authority, or power to unfairly persuade another party into contractual arrangements. The resulting agreements can be voidable by the influenced party.
Categories of Undue Influence
- Actual Undue Influence: Requires clear proof of improper pressure or coercion.
- Presumed Undue Influence: Arises automatically where a relationship inherently involves trust and confidence, shifting the burden of proof to the influencing party to show fairness.
Relationships Commonly Affected
- Solicitor-client
- Doctor-patient
- Parent-child
- Trustee-beneficiary
Remedies
Contracts formed under undue influence can be rescinded, restoring parties to their pre-contractual positions.
Practical Importance
Recognising undue influence protects individuals from exploitation, ensuring contractual agreements reflect genuine, voluntary consent.
Home » Undue Influence
Homeowners in financial difficulty entered a 'sale and rent back' scheme, selling their property at a significant undervalue. They sued the lenders, alleging they had constructive notice of undue influence. The court held one lender was put on inquiry, but another was not. Facts The claimants, Mr and Mrs Beesley, were homeowners in financial difficulty facing repossession. They entered into a ‘sale and rent back’ scheme promoted by New Century Group Limited (‘NCG’). In December 2005, they sold their property, valued at £325,000, for a stated price of £180,000 to Ms Wilkinson, a nominee for NCG. The Beesleys only received
In eight conjoined appeals, wives mortgaged their homes to secure husbands' business debts. The House of Lords clarified the doctrine of undue influence and set out practical steps a bank must take to ensure the wife's consent is properly obtained. Facts The case comprised eight conjoined appeals, each involving a similar factual pattern. A wife charged her interest in her home, often the matrimonial home held in joint names, as security for a loan or overdraft facility provided by a bank to her husband or a company through which he operated his business. The businesses later failed, and the bank
Mrs Morgan co-signed a mortgage over her home to secure her husband's business loan, advised by the bank manager. She later claimed undue influence. The House of Lords ruled that to set aside a transaction for presumed undue influence, a 'manifest disadvantage' must be proven. Facts Mr and Mrs Morgan were the joint owners of their matrimonial home. Mr Morgan’s business encountered financial difficulties, and a previous lender was seeking possession of the house. To prevent this, National Westminster Bank Plc agreed to provide a short-term bridging loan, conditional upon a legal charge over the home. Mrs Morgan was hesitant
An elderly farmer guaranteed his son's company's debts to a bank, using his farmhouse as security. The Court of Appeal set aside the transaction, finding a relationship of confidentiality had been breached, establishing the principle of undue influence through inequality of bargaining power. Facts Mr Herbert Bundy, an elderly farmer, was a long-standing customer of Lloyds Bank, as was his son’s plant-hire company. The company fell into severe financial difficulty. Over time, Mr Bundy had provided increasing guarantees for his son’s business overdraft, secured against his sole asset, his farmhouse. Finally, the bank’s assistant manager, Mr Head, visited Mr Bundy
A junior employee provided an unlimited guarantee over her flat for her employer's business debts. She received no benefit and no independent advice. The court set aside the transaction for undue influence, finding the bank failed its duty of inquiry. Facts Miss Andrea Burch, a 21-year-old junior employee, worked for a travel company owned and run by Mr Andrea Pelosi, a man she trusted. At his request, she agreed to provide security for the company’s overdraft with Credit Lyonnais Bank Nederland NV. She executed a legal charge over her flat, securing an unlimited, all-monies guarantee for all the debts of
A husband pressured his wife to remortgage their home for his stock market speculation. The loan application falsely stated the funds were for a holiday home. The House of Lords held the mortgage was enforceable as the bank had no notice of the husband's undue influence. Facts Mr and Mrs Pitt were joint owners of their matrimonial home. Mr Pitt, wishing to speculate on the stock market, pressured his wife into agreeing to a remortgage of the property for £150,000 with the plaintiff, CIBC Mortgages plc. The loan application, prepared by Mr Pitt, falsely stated that the purpose of the
Facts Mr. and Mrs. O’Brien were joint owners of their matrimonial home. Mr. O’Brien’s company, in which Mrs. O’Brien had no interest, required an increased overdraft facility from Barclays Bank. The bank agreed, on the condition that it was secured by a second charge over the O’Briens’ home. Mr. O’Brien misrepresented the nature of the transaction to his wife, falsely stating that the security was limited to £60,000 and would be released within three weeks. In reality, the charge was unlimited in amount and duration, securing all liabilities of the company, which eventually reached £154,000. Bank staff were instructed to
Facts In 1868, the claimant, Miss Allcard, a woman of approximately 35 years, was introduced to the defendant, Miss Skinner, who was the lady superior of a Protestant institution known as the ‘Sisterhood of St. Mary at the Cross’. The sisterhood was a voluntary association of women dedicated to charitable work among the poor. In 1871, Miss Allcard became a full member of the sisterhood, taking vows of poverty, chastity, and obedience. The vow of poverty required members to relinquish all their property, though not necessarily to the sisterhood itself. The rules of the order stipulated that members could not
