Undue influence is a process whereby parties who have entered into a contract can be released if they entered into the contract under the influence of another, whether this was intentional or not.
A contract which has been entered into under undue influence occurs when one party uses their influence to persuade another to enter into a contract to the detriment of the influenced party. If undue influence can be proved the contract can be void by the innocent party and the remedy is rescission.
With undue influence there are two main elements to consider. The first is actual undue influence which is where proof has been provided that the defendant influenced the claimant to encourage them to enter the contract. The second is presumed undue influence.
This is further split into two parts;
- Deemed relationship of influence where influence has been deployed and relationship of influence in fact where the claimant placed their confidence and trust in the party and therefore the inference of being influenced is there.
- Where presumed undue influence is applied, there are several classes of ‘relationship’ through which the presumption of influence can be applied including parents, children, guardians, religious advisors, solicitors, doctors and patients.
Obtaining Independent Advice
In situations involving these groups of people, the burden of proof rests with the first person such as the ‘expert’ like a doctor, solicitor or parent. The leading party has to prove that the other party fully understood what they were doing or they made the decision to enter into the contract independently.
One of the major influencing factors in identifying whether the second party was influenced or acting independently was to determine whether they obtained independent advice.
The second category relates to a relationship which does not fit into those outlined above such as a doctor, solicitor etc. If there is an issue the onus shifts to the defendant to prove that they did not influence the individual to enter into the contract.
Perhaps one of the main difficulties is the boundaries of what is deemed to be legitimate persuasion. If it was not permitted to persuade or encourage people to enter into a contract, then normal sales processes would be extremely difficult, if not impossible.
Influence alone is quite acceptable, but when it evolves into undue influence the law can be applied. However, an individual must be absolutely clear about understanding the concept before they can apply it in a court of law.
Influence can be undue when the balance of power is used incorrectly by the influencer. Additionally, the term can also be applied when the party who has been influence has lost their independence when reaching a decision as to whether or not to enter into the contract.
Often when there is a case relating to undue influence the terms claimant and defendant will be used interchangeably. If the case is claimant focused, undue influence will be used to determine whether the claimant acted independently when entering into a contract.
If on the other hand it is defendant focused, the claim will focus on whether the defendant has deliberately taken advantage of the weaker position of the claimant. The courts will weight up the facts and determine whether influence was used inappropriately and should be classed as ‘undue’.
The only instance where the law will intervene is where there is a relationship between both parties who entered into a contract and there was some kind of inequality. The law will look at the process by which the transaction was initiated rather than the contents of the transaction.
Actual Undue Influence
If a claimant wants to pursue a case under ‘actual undue influence’, they must be able to provide proof, that on the balance of probabilities the defendant applied undue influence during the transaction. The remedy for actual undue influence is to set aside the contract.
Undue influence is often used in the probate sector and is one of the most common reasons for a dispute over a will or when a will is contested. Often when a will is contested the individual will submit what is known as a capacity challenge. This means that someone who had full mental capacity would not be swayed by undue influence, coercion or manipulation. In the majority of cases the burden of proof rests with the individual contesting the will, with undue influence being extremely difficult to prove.
Undue Influence Law
In English law, undue influence is a form of contract and property law which enables a contract to be set aside. In order to submit a challenge to any type of contract as being entered into under undue influence, it is not possible to simply demonstrate that one individual was influenced by another. There must be questionable actions about the influence that has been applied. If a claimant wants to apply to have a contract set aside on the grounds of undue influence, they only need to establish that the undue influence was a factor in their decision to enter into the contract.
Where it is found that a transaction or contract was entered into after the individual had been unduly influenced, the contract will be voidable rather than void. The claimant can exercise their right to rescind the contract. Nevertheless, there are often bars to rescission which include;
Affirmation – If the contract is affirmed
Restoration – In some instances it may be impossible to restore the parties to the position they were in had the contract not been entered into. Where this is the case, the court will apply what is known as ‘practically just’ which is usually an award of money to the claimant which would restore them back to their original position
Delay – Any claimant hoping to make an undue influence claim must do so within a reasonable timeframe
Parties involved cannot claim damages for undue influence and where courts state that rescission is not possible, the claimant may be awarded ‘equitable compensation’
It is important that if you have entered into a contract and it has resulted in a situation to your detriment, you seek professional legal advice from a qualified solicitor.
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