Welcome.
I will continue with my write up on the scenarios that make it necessary to terminate a contract.
Today, I will be writing about the other types of ways aside from misrepresentation and mistake that I have already written about.
Read my previous post here.
I proceed.
3. Duress
and Undue Influence:
This
occurs when improper pressure was brought upon a person entering into a
contract. This could be by threat or bodily harm.
Below
are the scenarios in which a duress and undue influence can occur;
ACTUAL UNDUE
INFLUENCE
Williams
v Bailey (1866)
Facts
A son forged his
father's signature on promissory notes and gave them to their bankers.
At a
meeting of all the parties at the bank, one of the bankers said to the father:
"If the bills are yours we are all right; if they are not, we have only
one course to pursue; we cannot be parties to compounding a felony."
The
bank's solicitor said it was a serious matter and the father's own solicitor
added, "a case of transportation for life."
After further discussion
as to the son's financial liability the bank's solicitor said that they could
only look to the father.
The father then agreed to make an equitable mortgage
to the bank in consideration of the return of the promissory notes.
The father
succeeded in an action for cancellation of the agreement.
Holding
It was held by
Lord Westbury that the security given for the debt of the son by the father
under such circumstances, was not the security of a man who acted with that
freedom and power of deliberation that must be considered as necessary to
validate a contract to give security for the debt of another.
PRESUMED UNDUE
INFLUENCE
Allcard v
Skinner (1887)
Facts
In 1867 an
unmarried woman aged 27 sought a clergyman as a confessor.
The following year
she became an associate of the sisterhood of which he was spiritual director and
in 1871 she was admitted a full member, taking vows of poverty, chastity and
obedience.
Without independent advice, she made gifts of money and stock to the
mother superior on behalf of the sisterhood.
She left the sisterhood in 1879
and in 1884 claimed the return of the stock. Proceedings to recover the stock
were commenced in 1885.
It was held by
the Court of Appeal that although the plaintiff's gifts were voidable because
of undue influence brought to bear upon the plaintiff through the training she
had received, she was disentitled to recover because of her conduct and the
delay; delay defeats equity.
BCCI v Aboody [1989]
Facts
A husband and
wife owned a family company and the company's liabilities to its bank were
secured, among other things, by charges of the wife's house.
The bank sought to
enforce the securities and the wife pleaded actual undue influence by the
husband.
Although the judge found that such influence had been established, he
refused to set aside the charges as it had not been proved that they were
manifestly disadvantageous to the wife.
Held
It was held by
the Court of Appeal that manifest disadvantage for the purposes of the doctrine
of undue influence had to be a disadvantage which was obvious as such to any
independent and reasonable person who considered the transaction at the time
with knowledge of all the relevant facts.
The fact that the complaining party
had been deprived of the power of choice (eg because his will had been
overborne through the failure to draw his attention to the risks involved) was
not of itself a manifest disadvantage rendering the transaction unconscionable.
Furthermore, since the giving of a guarantee or charge always involved the risk
that the guarantee might be called in or the charge enforced, the question
whether the assumption of such a risk was manifestly disadvantageous to the
giver of the guarantee or charge depended on balancing the seriousness of the
risk of enforcement to the giver, in practical terms, against the benefits
gained by the giver in accepting the risk.
There were no
grounds for disagreeing with the judge's conclusion that on balance a manifest
disadvantage had not been shown by the wife in respect of any of the six
transactions, since although there were substantial potential liabilities and
the family home was at risk as a result of the transactions, that was
counterbalanced by the fact that the loans gave the company a reasonably good
chance of surviving, in which case the potential benefits to the wife would
have been substantial.
Moreover, the evidence established that the
wife would have entered into the transactions in any event and accordingly it
would not be right to grant her equitable relief as against the bank. The
wife's appeal was therefore dismissed.
Re Craig
(deceased) [1971]
FactsC, an old man of
84 years whose wife had died, employed Mrs. M as secretary/companion.
From the
beginning she occupied a position of trust, and in addition to running the
house she took a confidential part in running C's affairs.
From the time of Mrs.
M's employment and C's death (January 1959 - August 1964) he gave her gifts
worth £28,000 from his total assets of £40,000.
Held
It was held by
the Chancery Division that (1) All the gifts complained of were such as to
satisfy the requirements to raise the presumption of undue influence, namely,
that they could not be accounted for on the ground of the ordinary motives on
which ordinary men act, and secondly, that the relationship between C and Mrs M
involved such confidence by C in Mrs M as to place her in a position to
exercise undue influence over him. (2) Mrs M failed to discharge the onus on
her of establishing that the gifts were only made after 'full, free and
informed discussion' so as to rebut the presumption of undue influence. The
gifts would, therefore, be set aside.
Re Brocklehurst
(deceased) [1978]
Facts
Brocklehurst was
a strong-minded, autocratic and eccentric old man who was used to commanding
others and had served in the army in positions of command.
He was impulsively
generous. When he was in his eighties he lived alone and became friendly with
the owner of a local garage.
They had a common interest in shooting and B
permitted the defendant to shoot rabbits on the estate.
B wrote to the
defendant saying that he wished to give him the shooting rights over his estate
and pressed the defendant to instruct a solicitor to draw up a lease.
B
executed the lease. After B died, his executors brought an action against the
defendant to have the lease set aside on the ground of undue influence.
Held
The
Court of Appeal upheld the lease.
The Court of
Appeal held that the nature of the relationship between the deceased and the
defendant was not one of confidence and trust such as would give rise to a
presumption of undue influence on the part of the defendant, for the evidence
established that the relationship was one of friendship and did not indicate
that it was such that the defendant had been under a duty to advise the
deceased or had been in a position of dominance over him; on the contrary, it
was the deceased who had tended to dominate the defendant.
But even if the
relationship had been one that gave rise to a presumption of undue influence,
the defendant had rebutted the presumption for in the circumstances the
presumption was rebut-table not only by proof that the deceased had been
independently advised about the leases but also by proof that the gift of the
leases had been the spontaneous and independent act of the deceased.
O' Sullivan v Management Agency & Music Limited [1985]
Facts
The plaintiff
sought to set aside for undue influence a number of
management, sole agency,
recording and publishing agreements and transfers of copyright.
The defendant
argued that the appropriate remedy, namely restitutio in integrum, was
inapplicable in the circumstances because the agreements had all been performed
and the parties had irrevocably altered their positions, and that therefore the
plaintiff was limited to obtaining damages instead of reconveyance of the
copyrights and delivery up of the master tapes.
Held
The Court of
Appeal held that the plaintiff was not barred from having the contracts set
aside by the fact that restitutio in integrum was impossible because the
contracts had been performed.
A contract entered into by a person in breach of
a fiduciary relationship could be set aside in equity even though it was
impossible to place the parties in the precise position in which they had been
before, provided the court could achieve what was practically just between the
parties by obliging the wrongdoer to give up his profits and advantages, while
at the same time compensating him for any work he had actually performed under
the contract.
In my next write up, I will write about void and illegal contracts with examples of cases as usual.
Your comments and questions are welcome.
