Deck 9: Unifairnes: Ubdue Influence, Non-Commerical Guarntees, Unconscionable Bargains

Question 1

There are traditionally said to be two categories of undue influence: actual undue influence and presumed undue influence. In Royal Bank of Scotland plc v. Etridge (No 2) (2001), the House of Lords stressed that too much emphasis should not be put on this distinction. Rather, there is only one category of undue influence, although it can be proved in different ways: either by positive proof (undue influence by overt pressure) or by inference from other evidence raising an evidential presumption of undue influence (undue influence by omission). To succeed in a claim in the former case (undue influence by persuasion), what must the claimant be able to show?

A) That the defendant failed to protect the complainant's interests by overtly exploiting her influence over her.
B) The existence of a relationship of influence between the parties.
C) That the resulting transaction was manifestly disadvantageous for the complainant.
D) All of the options given are correct.

Answer 1

A

Question 2

Which of the following may not amount to the exertion of undue influence?

A) Bruce tells his wife that, if she does not guarantee his business debts, she will be a 'total waste of time' and he can't see why he should stick around.
B) The Army tells Fred that, unless he agrees to keep his activities as a member of the Elite Force secret, he will be dismissed and returned to the ordinary forces.
C) Janet befriends Max and takes increasing control of Max's finances and activities. She has decided that Max's brothers and sisters and his old friends are bad for him and has forbidden him from seeing them.
D) Tom visits his shy uncle to ask for money. When his uncle shows reluctance, Tom continues to press him, alternately shouting and crying and refusing to leave for seven hours.

Answer 2

B

Question 3

The law adopts a protective attitude towards certain types of relationship in which one party acquires influence over another who is vulnerable and dependent, and where substantial gifts by the influenced or vulnerable person are not normally to be expected. In these cases, the law presumes, irrefutably, that one party had influence over the other (old presumed undue influence). The complainant need not prove he actually reposed trust and confidence in the other party. It is sufficient for him to prove the existence of the type of relationship. In which of the following relationships will there not be an automatic presumption of undue influence?

A) Doctor and patient.
B) Parent and child.
C) Trustee and beneficiary.
D) Husband and wife.

Answer 3

D

Question 4

In Royal Bank of Scotland plc v. Etridge (No 2) (2001), Lord Nicholls said that the question is whether the transaction is 'not readily explicable by the parties' relationship'. Which of the following statements is true?

A) It is unnecessary to show that a transaction calls for an explanation when asking the court to infer (presumed) undue influence.
B) The complainant must show that the transaction calls for an explanation if he wants the court to find overt (actual) undue influence.
C) A transaction calls for an explanation only if the values exchanged deviate from the market price.
D) Whether a transaction calls for an explanation depends on the nature of the parties' relationship, the nature of the transaction, the impact of the transaction on the complainant, and on the latter's ability to provide for others in a close relationship to him.

Question 5

Which of the following statements are false?

A) For undue influence to be found, the complainant must always show that the defendant has exerted overt pressure.
B) The court can infer undue influence from the complainant's proof of a relationship of influence between him and the other party, and that the transaction calls for an explanation.
C) Once an inference of undue influence arises, it is up to the defendant to rebut or counter that inference by showing that the complainant entered the contract with full, free, and informed consent; usually by showing that the complainant had independent advice.
D) None of the options given is correct.

Question 6

Which of the following statements is true?

A) A defendant who has received a benefit pursuant to a contract rescinded for undue influence will be required to return only what is left so long as he has not acted with bad faith.
B) In cases of actual undue influence, the complainant must show that there was undue influence; whereas in cases of presumed undue influence, it is the defendant that must show that there was no undue influence.
C) A contract procured through undue influence cannot be affirmed by the complainant.

Question 7

In which of the following cases is a complainant barred from rescinding a contract for undue influence?

A) Only where a third party has acquired an interest in the subject matter of the contract from the defendant in good faith and for value.
B) Only where the complainant has full knowledge of the facts and full knowledge of the right to rescind, by lapse of time after the cessation of the influence.
C) Only where precise mutual restoration of the benefits conferred under the contract is impossible.
D) All of the options given are correct.

Question 8

In a number of cases, problems have arisen where a wife guarantees the debts of her husband or his company to a bank but, on his default and the bank's request to enforce the guarantee, the wife alleges she was induced to guarantee by the husband's undue influence, misrepresentation, or pressure. To avoid rescission of the guarantee in the usual case, what are the minimum reasonable steps a bank must take to ensure the wife entered the transaction freely and knowledgeably?

A) The bank must inform the wife itself of the nature of the transaction and the consequences of the guarantee, and obtain from her a confirmation that she entered into it of her own free will.
B) The bank must order its solicitors to inform the wife of the nature and financial consequences of the transaction and obtain confirmation from her that she entered the guarantee of her own free will.
C) The bank must communicate directly with the wife about the identity of her solicitor, disclose the necessary financial information to the solicitor and obtain a confirmation from the solicitor that the wife understands the nature and consequences of the transaction.
D) The bank must demand from the husband that he duly informs his wife about the nature and financial consequences of the transaction and obtain from him a confirmation that she has been advised about the nature and consequences of the transaction.

Question 9

Where a wife guarantees the debts of her husband's company, the lender must take reasonable steps to ensure the guarantor obtains legal advice from a solicitor. Which of the following is true?

A) The solicitor advising the wife may be the same solicitor as her husband's.
B) Where the wife is a shareholder or director of her husband's company, the bank is relieved from taking these reasonable steps.
C) A court can award partial rescission of an improvident guarantee to the sum that the wife freely and knowledgeably believed she was guaranteeing in exchange for loans to her husband.

Question 10

Which of the following statements are false? For a transaction to be set aside as an unconscionable bargain:

A) the complainant must show that he suffered some special disability which impaired his bargaining power.
B) the complainant must show that the defendant used immoral methods to induce him to agree.
C) the complainant must show that the transaction was manifestly improvident to the complainant.
D) the complainant must show that he lacked adequate independent advice.

Question 11

Which of the following statements are false?
I)The dominant view is that the doctrine of undue influence is based on unconscientious or reprehensible conduct by the stronger party.
II)The dominant view is that the doctrine of undue influence is based on the defective consent of the weaker party to the transaction.
III)The dominant view is that the doctrine of undue influence is based on a failure by the stronger party to protect the weaker party as the parties' relationship requires.

A) All of the above.
B) II and III.
C) I and III.
D) I and II