C O N T R A C T L AW I I

( L AW 6 1 0 0 4 )
E N G L I S H L AW:
UNDUE INFLUENCE

DR JENITA KANAPATHY (SCHOOL OF LAW & GOVERNANCE) 1

 1. INTRODUCTION
1. Undue influence is an equitable doctrine that applies in situations not covered by
common law duress.
2. Like duress, undue influence renders a contract voidable at innocent party’s option, i.e.,
the innocent party may choose to rescind the contract or set up undue influence as a
defence and counterclaim for rescission. The innocent party may, of course, choose to
affirm the contract, in which case, he loses the right to rescind.
3. The doctrine operates largely through the application of rebuttable presumptions.
4. “Influence” in itself is perfectly acceptable: it is only when it becomes “undue” that the
contract becomes voidable at the innocent party’s option.
5. There is no precise meaning or definition of “undue influence” but it roughly means
that the influence by one party over the other is such that the latter agrees to contract
with the former, something which he would not have done if not for the influence.

DR JENITA KANAPATHY (SCHOOL OF LAW & GOVERNANCE) 2

 Case law shows that there is no
single focus of the doctrine. Several
different rationales are found in
case law:

2. FOCUS OF • State of mind of innocent party – impairment of

innocent party’s decision-making process caused by

THE excessive reliance or dependence on defendant

(similar to overborne will theory in duress).

DOCTRINE
• Defendant’s conduct – some wrongful conduct; abuse
of position of confidence; exploitation; advantage
taking (similar to illegitimate pressure theory in
duress).
• Both elements mentioned above.
• Public policy. -the principle that injury to the public
good is a basis for denying the legality of a contract
or other transaction.

DR JENITA KANAPATHY (SCHOOL OF LAW & GOVERNANCE) 3

3 . T R A D I T I O N A L C AT E G O R I S AT I O N
O F U N D U E I N F LU E N C E
Case law has categorised undue influence into:
1. Actual or Class 1 Undue Influence
2. Class 2A Presumed Undue Influence - cases where the mere
existence of a ‘special relationship’ between the parties, gives rise
to a presumption of influence. (parent-child, guardian-ward,
trustee-beneficiary, solicitor-client, medical adviser-patient).
3. Class 2B Presumed Undue influence - cases where there is no
special relationship, but the facts show a past history of one party
having placed trust and confidence in the other which gives rise to
a presumption of influence in respect of the transaction in question.

DR JENITA KANAPATHY (SCHOOL OF LAW & GOVERNANCE) 4

 Treitel, The Law of Contract (13ed, para 10-015):
“…cases in which one party had induced the other to
enter into the transaction by actual pressure which
4 . AC T UA L equity regarded as improper but which [does] not
amount to duress at common law because no element
UNDUE of violence to the person was involved…

I N F LU E N C E …no further requirement…[either] that the transaction

be shown to be to the manifest disadvantage of the
party seeking to set it aside or that the transaction
must be one that ‘calls for an explanation’ by the
other party.”

DR JENITA KANAPATHY (SCHOOL OF LAW & GOVERNANCE) 5

 AC T UA L U N D U E I N F LU E N C E
Richard Stone, The Modern Law of Contract, 10e, p.353: “In relation to actual
undue influence, the claimant must prove, on the balance of probabilities, that in
relation to a particular transaction, the defendant used actual influence. There is
no need here for…a previous history of such influence. It can operate for the
first time in connection with the transaction which is disputed.”

“some unfair and improper conduct, some coercion from outside, some
overreaching, some form of cheating” (per Lyndley LJ in Allcard v Skinner
(1887) 36 Ch D 145, CA).

DR JENITA KANAPATHY (SCHOOL OF LAW & GOVERNANCE) 6

 R o ya l B a n k o f S co t l a n d v E t r i d g e (No. 2) [2002]
2 AC 773, HL

Lord Hobhouse set out the following elements of actual undue influence:
(1) It is an equitable wrong committed by the dominant party against the
other.
(2) It must be unconscionable for the dominant party to enforce his legal
rights against the other.
(3) There must be some express conduct overbearing the other party’s will.
(4) Actual undue influence does not depend upon some pre-existing special
relationship of influence between the two parties.
- Williams v Bayley (1866) LR 1 HL 200

DR JENITA KANAPATHY (SCHOOL OF LAW & GOVERNANCE) 7

 Effect of Actual Undue Influence by a non-party

1. Scenario: Bob unduly influences Charlie to enter into a contract with Joe. Bob is
not a party to the contract between Charlie and Joe.
2. Issue: Can Charlie avoid his contract with Joe on grounds that Bob unduly
influenced him?
3. Yes, but only if:
(a) Charlie can prove that Bob did exert actual influence on him; AND
(b) EITHER the third party (Bob) is the agent of the party seeking to enforce the
contract (Joe) OR
(c) the party seeking to enforce the contract (Joe) has KNOWLEDGE OR
CONSTRUCTIVE NOTICE of the undue influence exerted by the third party (Bob)
(See: CIBC Mortgages Plc v Pitt [1994] 1 AC 200, HL)

DR JENITA KANAPATHY (SCHOOL OF LAW & GOVERNANCE) 8

 5. CLASS 2A & CLASS 2B PRESUMED UNDUE
I N F LU E N C E
CLASS 2A CLASS 2B
1. Test of influence: whether one party (X) placed 1. Same as Class 2A.
confidence in another (Y) who is in a position of
dominance?
2. Where X and Y have a “special relationship”, 2. X and Y do not have a “special
the law presumes that X placed confidence in Y relationship”.
i.e. that Y did exercise influence over X.

3. Proof of existence (by X) of such special 3. However, if the victim (X) proves that he/she
relationship (with Y) is sufficient to raise the did actually repose trust and confidence in
presumption of influence (by Y). The categories the other (Y) in the past, in particular in
of recognised “special relationships” is not relation to financial matters, influence is
closed, BUT wife (X) and husband (Y) are NOT presumed.
regarded as being in a special relationship.

DR JENITA KANAPATHY (SCHOOL OF LAW & GOVERNANCE) 9

 CLASS 2A & CLASS 2B PRESUMED
U N D U E I N F LU E N C E
CLASS 2A CLASS 2B
4. But the mere existence of influence is not 4. Same as in Class 2A.
enough: to raise the presumption of undue
influence “…something more is
needed…something which calls for an
explanation [by the dominant party].

5. At this stage the court will examine the 5. Same as in Class 2A

nature of the transaction sought to be
avoided and decide whether an explanation
is needed. If yes, there arises a rebuttable
presumption of undue influence.

DR JENITA KANAPATHY (SCHOOL OF LAW & GOVERNANCE) 10

 CLASS 2A & CLASS 2B PRESUMED
U N D U E I N F LU E N C E
CLASS 2A CLASS 2B
6. The dominant party must then provide 6. Same as in Class 2A.
explanation in order to rebut the presumption of
undue influence.
“When that something more is present, the greater
the disadvantage to the vulnerable person, the more
cogent must be the explanation before the
presumption will be regarded as rebutted.”

However, “disadvantage” is not a necessary

ingredient of presumed undue influence.

DR JENITA KANAPATHY (SCHOOL OF LAW & GOVERNANCE) 11

 CLASS 2A & CLASS 2B PRESUMED
U N D U E I N F LU E N C E
CLASS 2A CLASS 2B
7. The court must then consider, based 7. Same as in Class 2A.
on all the evidence, including the
explanation given by the dominant
party, whether the presumption of
undue is rebutted. If the presumption
is not rebutted, then undue influence
is proven, and the transaction may
be set aside.

Allcard v Skinner (1887) 36 Ch D 145, CA

DR JENITA KANAPATHY (SCHOOL OF LAW & GOVERNANCE) 12

 Effect of Presumed Undue Influence by a non-party

1. Scenario: Husband (H) influences wife (W) who has always placed confidence in him in
money matters in the past (i.e. a Class 2B situation) to sign a guarantee with a bank (B) as
security for H’s debt owed to B.
2. Issue: When B seeks to enforce the guarantee against W, can W raise H’s influence as a
defence and have the guarantee set aside:
3. Answer: Yes, as in the case of actual undue influence, such a contract may be avoided
where the undue influence is exerted on one party to the contract by a third-party if
(a) undue influence by the third party (H) is first established; AND
(b) the third party (H) was acting as the other party’s (B’s) agent OR
(c) if the other party (B) had KNOWLEDGE OR CONSTRUCTIVE NOTICE of the undue
influence exerted by the third party (H). (See: Barclays Bank plc v v O’Brien [1994] 1 AC
180; Royal Bank of Scotland v Etridge (No. 2).

DR JENITA KANAPATHY (SCHOOL OF LAW & GOVERNANCE) 13

 Barclays Bank plc v O’Brien [1994] 1 AC 180, HL

1) A creditor (e.g. a bank) is put on inquiry when a wife (W) stands surety for her husband’s
(H’s) debt if (i) the transaction is on the face of it not advantageous to W; and (ii) there is a
substantial risk that H had, in procuring W to act as surety, committed a legal or equitable
wrong that entitles W to set aside her transaction with the creditor.
2) Where a creditor is put on notice of the risk of misrepresentation or undue influence by the
principal debtor (H), the obligation of the surety (W) will be unenforceable if (i) undue
influence, misrepresentation or some other legal wrong by the principal debtor (H) with
regard to the surety (W) is proven; and (ii) the creditor has failed to take reasonable steps
to be satisfied that the surety entered into the obligation freely and with knowledge of
the true facts.
3) The creditor will normally be regarded as having taken reasonable steps (so that the
security transaction remains enforceable) if the creditor has (i) warned the surety (not in
the presence of the principal debtor) of the amount of the surety’s potential liability and
risks involved; and (ii) advised the surety to take independent legal advice.

DR JENITA KANAPATHY (SCHOOL OF LAW & GOVERNANCE) 14

Royal Bank of Scotland v Etridge (No. 2) [2002] 2 AC
773, HL

1) Banks are ‘put on inquiry’ in every case where the relationship

between the surety and the debtor is non-commercial.
2) The House of Lords provided detailed guidelines to be followed
by banks when dealing with sureties. Failure to follow these
guidelines could mean that the bank has constructive notice of
the 3rd party undue influence, and the security would be
unenforceable as against the unduly influenced surety.

DR JENITA KANAPATHY (SCHOOL OF LAW & GOVERNANCE) 15

 7 . R EBUTTING UNDUE INFLUENC E

1. The party seeking to enforce a transaction against whom undue influence is prima
facie proven, must adduce sufficient evidence that would satisfy the court that the
transaction was due to the other party’s FREE EXERCISE OF INDEPENDENT WILL
(See: Allcard v Skinner).
2. Thus, whether undue influence has been rebutted is a question of fact to be
decided by the court having regard to all the evidence in the case.
3. The most usual way to try to rebut undue influence is by showing that the victim
had independent advice from a third party before entering the transaction.
However, getting independent advice does NOT NECESSARILY rebut the
presumption. It is only one of the pieces of evidence to be taken into account.
(See: Royal Bank of Scotland v Etridge (No. 2); R v AG for England and Wales [2003]
UKPC 22, PC.)

DR JENITA KANAPATHY (SCHOOL OF LAW & GOVERNANCE) 16

 8 . R E M E D I E S F O R U N D U E I N F LU E N C E

1) Primary remedy – refusal of the courts to enforce the agreement

against the person influenced.

2) Sometimes the person influenced takes the initiative and seeks

rescission of the contract (or gift) by the court, in which case the usual
bars to this remedy will apply.

DR JENITA KANAPATHY (SCHOOL OF LAW & GOVERNANCE) 17

 ANNOUNCEMENT
LECTURE ON 13/5/2025 (NEXT WEEK)= CANCELLED
SECTION 5 TUTORIAL ON 13/5/2025 =CANCELLED
REPLACEMENT TUTORIAL (SECTION 5) ON 14/5/2025
10 TO 11.30AM = VENUE D3.13
REPLACEMENT LECTURE 21/5/2025= 12PM TO 2PM
= VENUE TO BE CONFIRMED

DR JENITA KANAPATHY (SCHOOL OF LAW & GOVERNANCE) 18

GROUP VIDEO PRESENTATION

24 x 6 groups
3 x 7 groups
Groups formed based on
your tutor.
DR JENITA KANAPATHY (SCHOOL OF LAW & GOVERNANCE) 19