LAW 251 ASSIGNMENT

Name:Onalenna Letlakana
ID:202105651
Due date: 11 October 2023
DISCUSS UNDUE INFLUENCE

Contracts law is a fundamental aspect of legal systems around the world,providing the foundation for
business transactions,agreements and obligations.However,there are instances where contracts may be
considered invalid due to the existence of undue influence.Undue influence is an equitable doctrine in
contract law that refers to circumstances in which an individual with more power places improper
pressure on the weaker party to induce them into entering a contract against their will.A finding of undue
influence requires that there is a relationship where one party is dependent on the other. The person who
is depended on must occupy a position of ‘trust and confidence'. For undue influence to happen, this
position will be abused, resulting in the dependent party being pressured to enter a legally binding
contract and subsequently put at a disadvantage. If undue influence is established successfully, it
renders the contract voidable at the instance of the party influenced1. Where there is a special
relationship between the parties, there is a presumption that the transaction results from undue influence,
and the burden of proof is on the person receiving the benefit to rebut the presumption. An important way
to rebut undue influence presumes to show that independent advice was taken by the other party out of
their own free will.
There is no fixed list of relationships where undue influence might occur. A finding of undue influence can
occur in any relationship, so long as the key legal requirements are present.

The following key elements are typically considered in determining the presence of undue influence in a
contract:

1. An Unfair Transaction: There must be evidence of a transaction that is unjust, disadvantageous, or

oppressive to the party allegedly influenced. This implies that the weaker party received unfavourable.
terms in the contract.

2. Unfair or improper persuasion: Undue influence involves persuasion techniques that go beyond mere
advice or advocacy. The influence must be improper and exerted through coercion, manipulation, or
abuse of trust.

3. Vulnerability of the influenced party: The individual subjected to undue influence is often in a position
of weakness, such as due to age, mental capacity, financial dependency, or a fiduciary relationship. This
power imbalance increases the likelihood of exploitation.

4. Substantial influence: The influencing party must possess a level of influence or authority over the
other party that enables them to dominate and control the decision-making process, effectively
eliminating the influenced party's free will.

Lord Browne-Wilkinson identified two distinct classes of undue influence in Barclays Bank Plc v O'Brien 2
being actual undue influence and presumed undue influence.

1. Actual Undue Influence: In cases of actual undue influence, there is direct evidence of coercion,
duress, or manipulation. This can occur through physical threats, blackmail, or emotional
manipulation. Actual undue influence is easier to establish when there is clear proof of abusive
behaviour.For example in the case of Lloyds Bank v Bundy3,an elderly lady was influenced by her
son to guarantee his business debt. The court found that the son had exerted undue influence and
the guarantee was set aside.

2. Presumed Undue Influence: Presumed undue influence arises from relationships where one party is
deemed to possess significant influence over the other. These relationships include:

a. Fiduciary Relationships: A fiduciary relationship is one based on trust and confidence, such as
between a lawyer and client, guardian and ward, or trustee and beneficiary. In such relationships, the law
presumes that the dominant party may exert undue influence over the weaker party. One significant case

1
Preller v Jordaan 1956 (1) SA 483
2
Barclays Bank Plc v O’Brien (1994) 1 AC 180
3
Lloyds Bank v Bundy 1975 qb 326
that addresses undue influence in attorney-client relations is Johnson v. Zerbst (1938)4. In this case, the
Supreme Court held that an attorney's conduct could be considered undue influence if it overpowers the
will and judgment of the client, leading to an unfair agreement. The court emphasized that attorneys have
a duty to act in their clients' best interests and must not exploit their position for personal gain.

b. Family Relationships: Undue influence can arise in familial relationships, especially when one family
member has considerable influence, control, or authority over another. This includes relationships
between parents and children, spouses, and other close relatives.
A notable case is Barclays Bank Plc v O'Brien (1994)5. In this case, Mrs. O'Brien's husband persuaded
her to sign a mortgage guarantee for his business debts without fully explaining the implications and risks
involved. The court found that there was undue influence exerted by Mr. O'Brien due to their marital
relationship and Mrs. O'Brien's lack of independent advice.

c. Doctor-Patient Relationships: Medical practitioners, owing to their specialized knowledge, can

potentially exploit vulnerable patients, exerting undue influence while obtaining consent for medical
procedures or financial transactions. A relevant example would be the case of Preller & others v
Jordaan6, where Jordaan an elderly farmer donated and transferred 4 farms to Preller, his doctor, to be
administered by Preller for the benefit of Jordaan’s wife and farm labourers. Preller subsequently
transferred one farm to his son and 2 to his daughter. Jordaan sought to recover the farms arguing that
he had been sick, spiritually weak, and mentally/physically exhausted and had fallen totally under the
influence of his doctor. He argued that Preller had used his influence improperly otherwise, he would
never have agreed to the transfer. Subsequently the farmer seeked for restitution in integrum.Restitution
was granted for one farm retained by Preller but not for the other three which had been transferred to
Preller’s children. It was explained that a contract obtained by undue influence is not void and is thus
valid ab initio. It is merely voidable and so transfer had passed irretrievably.

d. Religious or Spiritual Advisors: Individuals in positions of authority within religious or spiritual

organizations may misuse their influence over followers, leading to undue influence in contractual
matters.For example in the case of Allcard v Skinner7, Miss Allcard was influenced by her spiritual
advisor, Mrs. Skinner, to donate her entire fortune to the church. The court held that the donation was
voidable due to undue influence exerted by Mrs. Skinner.

Legal Principles and Consequences

The principles governing undue influence in contract law serve to protect the weaker party from entering
into contracts that they did not genuinely agree to. When a contract is tainted by undue influence, several
legal consequences can follow:

1. Rescission of the Contract: The court may order the contract to be rescinded, effectively nullifying it
and returning the parties to their pre-contractual positions. This is a remedy aimed at restoring fairness.

2. Restitution: In cases where a party benefited from undue influence, they may be required to make
restitution, returning any gains or benefits obtained from the contract.

3. Damages: In some instances, the court may award damages to the party subjected to undue influence
to compensate for any losses suffered because of the contract.

4. Setting Aside Transactions: In cases where property transactions are involved, such as the transfer of
property or the creation of security interests, the court may set aside such transactions due to undue
influence.

Undue influence is a vital concept in contract law that aims to protect parties from unfair agreements.It is
evident that courts are willing to intervene and set aside contracts tainted by undue influence. By
recognizing the presence of an imbalanced relationship and excessive pressure, the legal system seeks
to restore fairness and protect the interests of vulnerable individuals. Through the

4
Johnson v Zerbst 304 U.S. 458 (1938)
5
Barclays Bank Plc v O’Brien (1994) 1 AC 180
6
Preller and others v Jordaaan 1956 CD SA 483
7
Allacard v Skinner (1887) 36 Ch D 145
application of the doctrine of undue influence, the courts contribute to maintaining the integrity of contract
law and ensuring justice for all parties involved.
BIBLOGRAPHY

1. Preller v Jordaan 1956 (1) SA 483

2. Barclays Bank Plc v O’Brien (1994) 1 AC 180
3. Lloyds Bank v Bundy 1975 qb 326
4. Johnson v Zerbst 304 U.S. 458 (1938)
5. Barclays Bank Plc v O’Brien (1994) 1 AC 180
6. Preller and others v Jordaaan 1956 CD SA 483
7. Allacard v Skinner (1887) 36 Ch D 145