Exam 11: Undue Influence

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The question of whether it is correct fo...

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Scott LJ (Lord Justice of Appeal Sir Richard Scott) expressed doubts about the adequacy of agency as a basis for setting aside agreements made as a result of undue influence in the context of English contract law. His concerns were articulated in the case of "Royal Bank of Scotland v. Etridge (No. 2)" [2001] UKHL 44, which is a leading case on undue influence in the context of financial transactions, particularly those involving mortgages and sureties. The concept of agency in this context refers to the idea that one person (the agent) can affect the legal relations of another person (the principal) with third parties. In cases of undue influence, the question arises as to whether the undue influencer can be seen as an agent of the victim, such that their actions can bind or affect the victim's legal relationships. Scott LJ's skepticism about using agency as a basis for setting aside agreements due to undue influence can be understood for several reasons: 1. **Nature of Undue Influence**: Undue influence involves a misuse of power or trust in a relationship, where one party exerts overbearing pressure on another to enter into a transaction that is not in the latter's best interest. This is fundamentally different from the concept of agency, where an agent is authorized to act on behalf of the principal. 2. **Lack of Authority**: In cases of undue influence, the influencer does not have actual authority to act on behalf of the victim. The transactions are not entered into because the victim has consented to the influencer acting as their agent; rather, they are entered into because the victim has been coerced or manipulated. 3. **Consent and Autonomy**: Agency is based on the principal's consent to the agent's actions. In undue influence, the victim's consent to the transaction is compromised, which is the very reason why the agreement may be set aside. The victim's autonomy and ability to make independent decisions are undermined, which is inconsistent with the notion of agency that presupposes voluntary and informed consent. 4. **Protection of Third Parties**: The law of agency provides protections for third parties who deal with agents in good faith. If undue influence were to be treated as a form of agency, it could potentially leave third parties, such as banks, in a vulnerable position where they could not rely on the apparent authority of the agent. 5. **Remedies and Consequences**: The remedies for undue influence, such as setting aside a contract, are different from those in agency law. In agency, the focus is on the agent's authority and the principal's liability for the agent's actions. In undue influence, the focus is on the fairness of the transaction and the victim's right to be released from it. In summary, Scott LJ doubted that agency provided a convincing basis for setting aside agreements made as a result of undue influence because the concepts are fundamentally different. Agency is based on authority and consent, whereas undue influence involves coercion and a lack of genuine consent. The legal consequences and remedies are also distinct, making agency an unsuitable framework for addressing the issues that arise in cases of undue influence.

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A) CIBC Mortgages plc. v Pitt (1994)
B) B. Barclay's Bank v O'Brien (1994)
C) Royal Bank of Scotland v Etridge (No2) (2001)
D) Dunbar Bank plc. v Nadeem (1998)

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B

A) A transaction is not on the face of it to the wife's financial advantage
B) The transaction has been conducted substantially or entirely without the wife's knowledge
C) The transactions relates to matters in which the wife would not normally be involved
D) There is a substantial risk that the husband has committed a legal or equitable wrong

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A) Contradicts the principle of duress
B) Is not in connection with the principle of duress
C) Supplements the principle of duress
D) Violates the principle of duress

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In the case of Royal Bank of Scotland v ...

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A) The fact the bank employee was the son of the claimant.
B) The fact that the bank had refused to allow the customer to seek independent financial advice
C) Relationships between banks and customers fall into the category of 'presumed influence'
D) The course of dealings between the bank and claimants was of such a duration that such a relationship had come to exist.

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The concept of a transaction being "mani...

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In cases of 'presumed undue influence' t...

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The point at which influence becomes 'un...

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A) That undue influence was exerted in a particular transaction
B) That a relationship exists where undue influence is possible
C) That a threat was used
D) That a reasonable person would be influenced

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A

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The law determines which relationships a...

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A) the bank
B) a person who guarantees the debts of another
C) a solicitor who advises a creditor
D) a solicitor who advises a debtor on the risks of a transaction

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Privity of contract can be problematic i...

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