Undue influence is an equitable concept that supplements the common law vitiating factor of duress. It operates largely through the application of presumptions. The following aspects are discussed in this chapter:

360The underlying principles. When does influence become ‘undue’? Imbalance of power between the parties is an important element in identifying undue influence.

Actual undue influence. If there is direct evidence that a party agreed to a contract under the influence of improper pressure at that time, this will constitute actual undue influence. Such evidence is, however, rare.

Presumed undue influence. A relationship of influence will be established where:

the parties are in one of a number of recognised relationships (for example, solicitor – client); the presumption of influence is in these circumstances irrebuttable;

the relationship between the parties has developed in a way that one party can be shown to have a sufficient degree of influence over the other party (sometimes referred to as one party dominating the other); this type of presumption of influence may be rebutted by evidence to the contrary.

Presumed undue influence and disadvantageous transactions. Where a contract between parties in a relationship of influence clearly operates to the disadvantage of the weaker party, then undue influence will be presumed. It will be up to the alleged influencer to rebut this presumption of undue influence (for example by demonstrating that the other party entered into the contract with a full appreciation of what was involved (for example, after receiving independent legal advice)).

Effects. A contract entered into on the basis of actual or presumed influence is voidable. The usual bars to rescission apply (for example, lapse of time, third party rights). Damages are generally not available.

Third parties. Where, for example, a debtor has persuaded a person to act as surety or guarantor, the creditor will be put on notice whenever the relationship between debtor and surety is non-commercial (for example, husband persuading wife to use the family home as security for business debts). In that situation:

the creditor will be affected by any undue influence used by the debtor; the transaction may be voidable on that basis;

the creditor can protect itself by insisting that the surety receives legal advice before entering into the transaction.

Unconscionability. English law recognises no general concept of unconscionability.