Undue influence
Undue influence

The following Property guidance note provides comprehensive and up to date legal information covering:

  • Undue influence
  • Presumed undue influence
  • Lenders and third party security
  • Guarantees—constructive knowledge of beneficiary
  • Overlap with misrepresentation
  • Subsequent ratification of a fraudulent transaction

Undue influence arises where the transaction is to the manifest disadvantage of the person subjected to the dominating influence. It is the abuse of a relationship of trust and confidence or the exploitation of a vulnerable person.

A contract is voidable where a person is induced to enter into a transaction by undue influence. The doctrine of undue influence affords an important mechanism for providing a remedy in equity when common law will not. Common law is only applicable where duress involves an element of violence, which is not always the case where undue influence is concerned.

Presumed undue influence

In certain narrowly defined relationships undue influence is presumed. There are certain relationships where undue influence is presumed to arise because of the relationship between the parties, in that one party has ceded such a degree of trust and confidence as to require the other party to show that it has not been betrayed or abused. These relationships include those of:

  1. trustee and beneficiary

  2. principal and agent

  3. solicitor and client, or

  4. parent and child

When does it arise?

In other cases, the burden lies on the claimant to establish it by demonstrating that there is a relationship of trust and confidence and a transaction calling for an explanation. If the defendant cannot counter the prima facie case, there is a rebuttable presumption