Chapter 16-18 Mistake Duress Undue Influence. MISTAKE Chapter 16.

Chapter 16-18

Mistake

Duress

Undue Influence

MISTAKE

Chapter 16

So what about mistake?

• Generally, mistake taken to void contracts…means they never came into existence…

• Debate over whether equity has some role to play by making some contracts voidable and liable to set aside on terms as the court sees just.

Types of Mistake

• We both make the same mistake – Common Mistake– We both think goods exist, they don’t

• We are at cross purposes – we both make a different mistake – Mutual Mistake– We agree I will sell you a car. I think I’m to sell you a

Fiesta, you think I’m selling you an Escort

• One makes a mistake and the other party knows or should know I am making a mistake – Unilateral mistake (if no such kn = MM)

Fact not Law

• Mistake needs be one of fact not law – seems to be rule of law (O’Loghlen v O’Callaghan – mistake about law and rent here not operative)

• Distinction gone in the UK with Kleinsworth Benson v Lincoln City Council

• But – if mistake is about some aspect of law not generally known etc – equity may offer relief

• Cooper v Phibbs (pre Great Peace)– K to sell fishery, both assume A owned it but private

act of Parl had made B tenant for life! B could rescind– Logic – mistake owed to not knowing law, but lead to

simultaneous mistake of fact re ownership

Common Mistake

• What are we talking about?

• We make the same mistake– We both think A owed the fishery– We both think the cargo actually exists– We both think Lansdowne Road is still open– We both think the car is a Mercedes

Sometimes understood by cateogories

• Res extincta – where subject matter no longer exists

• Res sua – where performance is impossible because of some legal of physical impossibility

• Common mistake as to quality (i.e. parties believed that the “thing” had a quality without which the “thing” is radically different”)

Examiner

• Examiner has shown interest in understanding common mistake in a categorical basis

• Oct 2007, Q7

– Discuss, with reference to English and Irish caselaw. The categories of common mistake at common law.

Existence of Subject Matter

• CL will void a contract where CM relates to very existence of SM of the K (sometimes called res extincta)

• Couturier v Hastie– K related to cargo of corn in transit to UK but

had already perished – HL held that parties must have contemplated a SM to the K capable of being sold – without it, no contract to be concluded

• Reasonably settled principle– Strickland v Turner – life annuity calculated by

reference to life of another sold both parties didn’t know the “life” was dead

– Galloway v Galloway – Separation agreement but in fact the marriage was a nullity – contract was therefore void – SM never existed (i.e. the marriage)

• McRae v Commonwealth Disposals Commission– D sold salvage rights to a tanker on a

particular reef– P found out no such tanker, no such reef– P sued for D – D said K void for CM– HC of Auz rejected

• Implied warranty theory – IW that the subject matter did exist

• K was not simply to sell the wreck but to guarantee the existence of the wreck

• One factor – D was clearly in better position to verify its existence or not

Res Sua• By reason of mistake of parties, contract is

physically or legally incapable of performance– Sheikh Bros Ltd v Ochsner [1957] AC 136

• K for exploitation of sisal on land belonging to A with B to cut and process it delivering 50 tons per month to A

• Land not capable of producing 50 tons per month, so contract void because this was contrary to the parties shared belief.

• Legal impossibility – cannot acquire land you already own! Cooper v Phibbs would be an example

Wider Role – Fundamental Mistake Underlying Contract?

• Bell v Lever Bros– Director agreed compensation to leave post– Both sides thought this was only way to get rid of him

– had in fact breached several duties– D claims CM voided K– HL said no…not sufficiently “fundamental” to make

K void…held that part of the $$ was to reward for previous service not just to buy him out

– Did hold that a false and fundamental assumption underlying the K without which the parties would not have entered K will make a K void

• Solle v Butcher (will return to this)– Rent agreed on CM that flat not rent restricted– Tenant wanted overpayments back– CA held CM here was not enough to make K

void (even if it was a mistake in fact)

• Leaf v International Galleries– Both thought it was a Constable – was not– Went to heart of K – but not enough to make

K void

• Associated Japanese Bank v Credit du Nord

– P & D victims of financial fraud – – P advanced $$ on foot of sale and lease back, – D guaranteed fraudster – all about certain machines

which didn’t exist – banks assumed they existed– Obiter of Steyn J seemed to accept CM operated:

• Contract will be void ab initio for common mistake if a mistake by both parties to the contract renders the subject matter of the contract essentially and radically different from that which both parties believed to exist at the time the contract was executed.

• However, the party seeking to rely on the mistake must have had reasonable grounds for entertaining the belief on which the mistake was based.

• Western Potato Co-Op v Durnan– Parties K on basis that seed potatoes were

sound – were not – CC held K was void were assumption was proved wrong

Different Irish Standards?

Equity’s Role

• Common law (in England) set high standards

• Equity, however, had a role

• Contract may be voidable

• Very hard to understand…very difficult to see why.

• Solle v Butcher– Tenant trying to void K for lease– Ct says no, but equity may make K voidable –

i.e. liable to be set aside by equity –– Held ct had discretion to set aside on terms –

here being that tenant pay the full rent which would have been claimed under rent control leg

• Grist v Bailey– CM that sitting tenant had particular rights and

value of house reflected this– TJ held K should be set aside but on basis

that Vr enter a new K to sell the house on a value reflecting vacant possession

Great Peace Shipping v Tsavliris Salvage

• D offered services to assist stricken vessel via tug

• Interim measures involved attempting to charter nearest ship – third party said the Great Peace was nearest; 35 miles…actually 410 miles

• D did not cancel immediately – checked to see if ships were nearer – found one, then claimed mistake with P

• CA held no operative mistake – not sufficiently fundamental – D received, so said the ct, what he contracted for

• Noted no immediate attempt to cancel• Ct noted law was confusing…from now on it said

– No jurisdiction to grant recission on basis of common mistake where K is valid and enforceable on ordinary principles of K law (i.e. no equity)

• Relevance for Ireland? Unsure…see para 7-212 for H.Delany comment

• Kyle Bay Ltd (A Nightclub) v Underwriters (etc) (2006)

• Intrum Justitia BV v Legal and Trade Financial Services Ltd (2005) – O’Sullivan J

Mutual Mistake and Unilateral Mistake

• No meeting of the minds here at all• Can be analysed in term of offer and

acceptance – i.e. no real meeting of O&A– V has two 2 Porsches – intends to sell the

1980– P believes he is getting the 1990– Bargaining at cross purposes?– Rule is that parties are held to their apparent

agreements…

Mutual Mistake

• On one level, since parties at cross-purposes, there is (subjectively speaking) never a K

• But contract law tends to view intention and mental states in a more objective sense – i.e. what a reasonable observer would infer from conduct and words used

• So, if both parties are at X purposes but a reasonable observer would suppose a K was concluded…it is binding even if parties are mistaken

• Wood v Scarth– Letting of pub at X purposes – P thought was

letting without paying £500 up front, D thought P knew he was to pay up front (as D’s clerk was supposed to tell him)

– Notwithstanding the mistake – K was binding– It was only a mistake because of

uncommunicated intention.

• Clayton Love v B&I Steampacket– Offer by D intended to convey that scampi be

loaded at certain temperature– P took it to mean would be loaded

refridgerated– SC took view that term meant what P thought

it to mean– So, if internal mistake of A of which B knows

nothing and B accepts an offer made where that mistake is operative, K has been concluded (save where knowledge comes in – unilateral mistake)

• Raffles v Wichelhaus– A agreed to buy from B cargo of cotton ex

Peerless from Bombay – two ships of that name sailed in Oct and Dec

– Parties were at X purposes as to which ship the K applied to

– Objectively, the ct said – the words used and conduct of the parties could have applied to either of the ships – and thus no objective observer could say clearly that a K had been formed

• Scriven v Hindley– Auction catalogue did not properly distinguish

between lot of hemp and lot of tow. D thought both were hemp lots and paid a price reflecting this for the tow (i.e. paid more for tow than he should have)

– (Mistake arose from the fact that both lots contained the same shipping mark, "SL", and witnesses stated that in their experience hemp and tow were never landed from the same ship under the same shipping mark. The defendants' manager had been shown bales of hemp as "samples of the 'SL' goods".)

– Auctioneer unaware of the mistake at time– Ct said circumstances were like that in

Raffles, an observer could not conclude firmly from the objective facts that a contract had been entered into for a particular subject matter.

– No contract entered into

Mespil v Capaldi

• “Full and final settlement of all disputes between the parties”

• A intended it to refer to all outstanding disputes, include ones not yet issued

• B believed it referred to all those in court

• SC held K void – held they circumstances were such that no one objective meaning existed to which both parties could be held

Unilateral Mistake

• Knowledge is key here

• Webster v Cecil– D refused to sell land to P for 2000– D offered to sell then for 1250 – meant 2250– D immediately told P of mistake – P purported

to accept– No room for objective approach where one

party knows that other is mistaken

Hartog v Colin & Shields

• D contracted to sell to the plaintiff 30,000 hare skins, • But offered the goods at certain prices per pound instead

of at those prices per piece. The value of a pound was approximately one-third that of a piece.

• In verbal and written negotiations which took place prior to the sale, reference had always been made to the price per piece and never to the price per pound, and expert evidence was given that hare skins were generally sold at prices per piece.

• Held that buyer either knew or ought to have known of mistake

• Crucial rule – if ought to know that other party made a mistake, cannot insist on K

Nolan v Graves (1946)

• Vendor and Purchaser disagreed over what agreed price was

• Price was included in contract as £4,550

• Written documents suggested it was intended to be £5,550

• Ct accepted that a mistake was made – i.e. P knew Vr was making a mistake with £4,550.

• Must also show that mistake relates to terms of the K not just motive (para 16-08)

– K to sell Land - Vr thinks gold is on it, Pr knows it isn’t and knows of Vr’s belief

– If the gold is not a term of the K – then there is no problem as it just an element of the motive of Pr

– Smith v Hughes– Reen v BOI (pages 239-240)

Mistaken Identity Cases• A pretends to be B and gets goods from C and

sells them to D etc. C does not get paid, D gets goods…

• Who should bear the loss?• All depends on whether K between A & C is

void or voidable – if void, A never got title to goods to pass to D

• If voidable – D can say should not be set aside if a bona fide purchaser for full value

• So, C wants to say K is void in such cases…(no title would have passed to D)

How to achieve this?

• Claim mistake in CL – i.e mistake had effect of rendering C’s deal with A (pretending to be B) void

• Won’t it always be unilateral mistake?

• But can it work? Contradicting case-law

Cundy v Lindsay

• Fraudster ordered goods in name of Blenkarn & Co from 123 Wood Street…firm of Blenkiron & Co operated on the same street

• Vr believed dealing with the real one, dispatched goods

• K void for UM – Vr intended to deal with real company, was making mistake, the other party to the K knew all about it.

Contract with fraudster who defrauds on identity

• Cundy v Lindsay: K = void (no 3rd party defence)

Phillips v Brooks

• F pretends to be Sir George Bullough

• And induces jeweller to part with goods- wanted to take a ring to his wife – cheque bounced

• Ct held here K was not void (i.e. no mistake in CL) but only voidable (the catch-all equity)

• Ct held jeweller meant to contract with the person in the shop and although mistaken as to who he was, did not matter for CL mistake


• Cundy v Lindsay: K = void (no 3rd party defence) – (i.e. you intend to contract with the identity presented to you)

• Phillips v Brooks: K = voidable (3rd party defence) - (i.e. you intend to contract with the person presented to you)

Ingram v Little

• Seller of car only accepted cheque when F pretended to be a particular person

• Majority view – offer to sell was directed to that person, not the Fraudster

• Devlin LJ in dissent echoed Phillips

• Case of little old ladies and a rogue…




• Ingram v Little as per Cundy

Lewis v Avery

• Fraudster got car by pretending to be well known actor – Richard Green – had fake ID

• Lord Denning in CA – voidable not void

• Presumption where you deal with person face to face that you intend to deal with that person, irrespective of mistake as to ID




• Ingram v Little as per Cundy!

• Lewis v Avery as per Phillips!

Shogun Finance v Hudson (2004)

• F got D. licence and forged signature to obtain car from dealer – offer to sell was made to holder of licence (Patel)

• F sold on the car to BF purchaser for value

• Remember the principles – nemo dat quod non habet

Lord Hobhouse

• Focussed on written agreement

• K named Patel, therefore offer was made to Patel

Lord Philips and Walker

• In face to face dealings you intend to deal with the person physically present

• Lord Walker said phone could count

• Ingram v Little seems wrongly decided in light of this…

• But presumption did not apply to written contracts – turned purely on terms (like Hobhouse said)

Lord Nicholls and Millet (Dissent)

• General proposition – person is presumed to intend to contract with the person with whom he is actually dealing

Conclusion?

• Distinction between face to face and otherwise – if they do, Phillips and Lewis are good law (only a presumption)

• If they don’t Cundy seems good law

• If contract is written – argument may simply be one of offer and acceptance

NON EST FACTUM

Non est factum

• It is not my act – usually where you sign something believing it to be another so that mind does not accompany act of signing

• Bank of Ireland v McManamy– Told docs were order forms, really guarantees– Plea could be made out

• Saunders v Anglia Building Soc– Mistake as to precise nature of transaction not

enough– Elderly widow raising $$ for nephew – agreed to

assign lease to him but he could not effect it – got another to stand in – told aunt that it would transfer to nephew – actually transferred to him personally

– HL said no plea here – you knew you were assigning your interest, identity of to whom was not a sufficiently radical departure

– Need show you took all reasonable precautions – also mistake as to legal effect is not enough – has to be about nature of document

Chapter 17DURESS

• This is all about K’s entered under coercion

• Void or Voidable? – Difference? Void never existed, voidable can have legal effects until set aside

• View really is equity says duress will make a contract voidable not void (7.97)

What constitutes duress?

• Barton v Armstrong– Privy Council– Common law – need show only reason you entered K

was duress– Equity – if duress was a reason if not the dominant or

only reason…can still operate– Suggested that threats needed be of assault or

physical injury….– A (the former chairman of a company) threatened B

(the managing director) with death if he did not agree to purchase A's shares in the company.

• Lessee of Blackwood v Gregg (1831)– Elderly man abducted and signed a K –

captivity = coercion

• Griffith v Griffith– 19yo met 16yo girl – threatened by family

when she fell pregnant with prosecution and married her under threat

– Haugh J held marriage vitiated by duress• May be a Q of degree from a gentle form of

pressure to physical violence accompanied by threats of death

• Consent to marry here obtained under real and grave fear

• Kaufman v Gerson– D was wife of man who had committed fraud

on P– She agreed to repay if P promised that H

would not be prosecuted– Court held unenforceable for duress –

coerced the wife into agreeing with threat of dishonour by the prosecution

– This is all fine…what about where threat is less obvious?

Smelter Corporation of Ireland v O’Driscoll

• D agreed sell land to P in belief that if he did not LA would CPO it and give it to P

• No threat was made…but ct allowed D to resist SP (defence of SP = equity)

• See P had basically told D this was the case – misrep there

• SC held That, by reason of the plaintiffs' misrepresentation, the defendant had been under a fundamental misapprehension about the true facts, and that it would be unjust to grant a decree of specific performance in the circumstances.

Focus on Economic Duress

•Always been the argument that duress can’t be allowed where one is “pushed” in a non overt sense

•Allied to law’s caution for pure economic loss / nervous shock etc

•There was even an argument that English law restricted duress to “duress of goods” or duress by physical threats

•Duress of Goods: one party refuses to release the goods belonging to the other party until the other party enters into a contract with them. For example, in Hawker Pacific Pty Ltd v Helicopter Charter Pty Ltd (1991) 22 NSWLR 298, the contract was set aside after Hawker Pacific's threats to withhold the helicopter from the plaintiff unless further payments were made for repairing a botched paint job.

•Wider question – should the focus be just on an overborne will?

•Economic duress cases were flash point for this

Universe Tankships of Monrovia v ITWF

• Int federation of trade unions threatened to black a ship if owners did not sign collective agreement – involved lump sum payment to ITWF

• Was conceded in HL that duress operated here – Lord Diplock did note– Financial consequences were so catastrophic as to amount to

coercion…which vitiated their consent– Rationale – consent was needed – was not there

• Dissent from Lord Scarman but pointed out some points to look for– Could steps have been taken to avoid the problem?– Was independent legal advice taken– Did the victim protest?

Atlas Express v Kafco

• P was to deliver D’s basketware goods – price agreed on basis of certain load (400 cartons)

• In fact load was much smaller (200)• P threatened not to carry any more unless got

paid more – D had no alternative and agreed – claimed entered this new rate under duress and K was voidable

• Ct agreed - One party being forced to re-negotiate where had no real alternative – economic duress

• Walmsley v Christchurch CC– P produced and printed a programme for D– Was of poor quality and D rejected it – demanded P

redo it – did so– P claimed new agreement was obtained under duress– Note that P was in breach of K by sub-standard work!– Noted that P had obtained indep legal advice before

entering new K– No duress

Distinguish from Commercial Pressure?

Move in the cases?

Has the will been overborne -v- was the pressure exercised legitimate?

DSND Subsea Ltd v Petroleum Geo-Services ASA (manual addition)

Dyson J there must be pressure

(a)Whose practical effect is that there is compulsion on or a lack of practical choice for the victim

(b)Which is illegitimate

(c)Which is a significant cause in including the claimant to enter the contract

• Carrilion Construction v Felix UK Ltd (2001)– Distinguish pressure from “the rough and

tumble of the pressure of normal commercial bargaining”

Key point

• Bank threatens to appoint receiver (Westpac Banking v Cockeril) (Australia (not in manual))

• Party performing badly, and then being pressured into paying for costs of remedy (Walmsley)

• None of these are really “operative”

Third Party Coercion

• Alec Lobbs (Garages) v Total Oil• Solus agreement – P under pressure from bank

and creditors – claimed duress in entering it…rejected it

• Had to show– Entered into transaction unwillinginy– No realistic alternative– Apparent consent exacted by improper pressure– That they repudiated transaction as soon as pressure

was removed• Focused in part on how pressure came from

third parties – no duress….

Factors

• In essence, so, you look for

• The source of the pressure (and comment on Lobbs)

• The nature of the pressure (and comment on the overborne will v illegitimate pressure cases)

• The existence of causation (consider Scarman’s points)

Chapter 18 Undue Influence

• Equitable intervention which founds itself on the principle that those who are in a position where they might be exploited should be protected against such exploitation.

Forms

• There are two forms; actual or factual undue influence or presumed undue influence.

• The latter arises because the law deems that certain relationships automatically raise a presumption that transactions are tainted by undue influence. This is only a presumption, and can be rebutted.

Actual

• Nearly taken over by duress

• Royal Bank of Scotland v Etridge– Actual overbearing of will

• Contrators Bonding v Snee (1992)– Exercise of undue influence which caused

entry into transaction of manifest disadv

• Show it was actually exerted – pressure etc…you allege it, you prove it.

• O’Flanagan v Ray-Ger Ltd– A&B owned Co – A terminally ill– B dominant in business and persuades A to

accept X money for the rest of his life for transfer of property

– A’s executors sought to set aside and won– Practically a gift here….

Presumed UI

• Occurs in two way– 1. By reason of relationship which exists

between parties – law raises presumption that any dealing between them is tainted by UI

– 2. By reason of the existence of facts which allow one to infer an analogous relationship

• And, in both cases, if the transaction is “suspicious”

Latter Point

• It must be a transaction which is such to call for explanation arising in the context of such a relationship.

• CIBC Mortgages v Pitt (1994) – The transaction must be one of “manifest disadvantage”

• Royal Bank of Scotland v Etridge (2001) – Must be a “transaction that calls for an explanation”.

• So, selling a book to your father would not really raise the presumption, but selling a house might. Ask yourself always, does the transaction arise suspicion?

What relationships?

• Where relationship is one of trust and confidence

–Parent and Child (i.e. Parent over child, not vice versa)

–Patient/doctor

–Trustee/beneficiary

–Solicitor/client

Other Relationships• Facts may disclose the situation is one where a

presumption should be raised – consider the last quote…make analogies

• Hammond v Osbourn (2002)– Elderly man cared for by neighbour

• Gregg v Kidd– Para 18-12

How do we tell which ones raise the presumption?

• Look for imbalance in the parties. • Look at the ages, the mental competencies even the

physical powers or anything else that suggests imbalance.

• Look for reliance by one party on the other in the past. • Anything which you think rationally shows that one party

relied on the other or was, in some sense, imbalanced vis-à-vis the other is important – i.e. the imbalance may show why one party put faith and trust and confidence in the other.

Special Case of Husband and Wife

• Does not raise the presumption

• But raises very interesting issues viz third parties

Key Issue

• In these cases the issue is usually between the wife and the bank with whom a security contract was entered over debt of husband.

• The bank comes (upon the predictable default) to enforce the security. The wife then claims the contract was tainted by the undue influence of either (a) the bank or (b) the husband and seeks to avoid the contract.

English Cases

Barclays Bank v O’Brien

• H secured co’s debt on house – wife signed docs without advise as to effect or any Indep advise at all

• HL held three classes of UI exist– Actual UI – where claimant needs show it actually

occurred – need to show manifest disadvantage in transaction

– Presumed UI – where relationship gives rise– Presumed UI where rel is shown to give rise to a

holding of trust and confidence in the wrongdoer and where transaction is manifestly disadv

• House of Lords held this case fell within 3 – i.e. here on the facts the wife did “de facto” leave decisions on financial affairs to her husband – important to note H lied about amount of guarantee here

• Effect on 3rd parties? BANK?• Lord BW – 3P obliged to take reasonable steps

to ensure that spouse entered transaction freely and in knowledge of the true facts and such steps would depend on the circumstances

Steps?

• Normally, BW said, the 3P would do enough if (in guarantee cases) it met with guarantor in absence of beneficiary, explained the risks and advised them to take ILA

Royal Bank of Scotland v Etridge

• Harsher principles in UK• Bank is put on notice whenever a spouse stands surety

for another – Lord Nicholls held bank on notice whenever relationship is non-commercial

– “Whenever a wife offered to stand surety for the indebtedness of her husband or his business, or a company in which they both had some shareholding, the lender was put on inquiry”

• Not always obliged to meet guarantor if it could assume that advice had been obtained – i.e. if bank told proper advice given, can take that at face value

• The steps reasonably to be expected of a lender in relation to past transactions were– to bring home to the wife the risk she was

running by standing surety, either at a private meeting with her or by requiring her to take independent advice from a solicitor on whose confirmation the lender might rely that she had understood the nature and effect of the transaction

Irish Cases

Bank of Ireland v Smyth• S.3 1976 consent – wife not aware of nature of

transaction – therefore could not give an informed consent

• Bank said it didn’t know and should be allowed take her consent at face value

• SC said no – special issue in 1976 Act• More generally – bank had CONSTRUCTIVE

NOTICE – i.e. under a duty to make enquiries to ensure she understood

• ILA? SC held bank owed no duty to advise on it – but would have been in it interest to do so – indicated unlikely to ever win a UI claim if you had ILA

Bank of Nova Scotia v Hogan• Wife secured H’s debts over her property (not a Fhome)

– was advised by sol that she was not obliged to do this and if she did, could be sold if H defaulted

• Claimed UI – claimed sol also acted for bank in other unrelated matters!

• SC noted Smyth concerned 1976 Act – special concerns for FH – here is different

• Ct looked at Barclays v O’Brien – sceptial of perceived ease which relationship of H&W could shift burden onto other party to discharge p of UI

• Defnitely critical of any “pres” in favour of married women

• Here – could not alleged UI against H, therefore could not make it out against Bank – but also, on the merits, held bank had acted properly…ILA etc.

Ulster Bank v Fitzgerald

• P got J against 1ND – guaranteed by 2ND

• Ct accepted wife entered into it on pressure by H – otherwise would have compounded marital probs

• Were signed in presence of Bank – bank advised of risk and advised her to take ILA

• Signed “on the spot”• Ct held nothing really should have alerted the

bank here• No automatic presumption of UI

Bank Customer Relations

• Noted above – need to be a fiduciary relationship – i.e. one of trust and confidence and transaction be manifestly disadv

• Not always the case with the banks

Lloyds Bank v Bundy

• Generally banks only in creditor / debtor rel with customer – may be circs where relationship requires more

• Here elderly farmer mortgaged only asset to his son

• Held he trusted bank implicitly – bank failed to give proper advise, so set aside

Nat Westminster Bank v Morgan• H&W in debt on mortgage – H in debt on

company• W executed 2nd Mortgage• What is NB here is that UI was claimed against

BANK itself• HL held it was a normal commercial deal – no

element of disadv to the wife – since it didn’t go beyond normal bus relationship – bank did not assume role raising presumption that there was a presumption of undue influence

Really special case• the principle that justified the setting aside of a

transaction on the ground of undue influence was the victimisation of one party by the other, and before a transaction could be set aside for undue influence, whether in reliance on evidence or on the presumption of the exercise of undue influence, it had to be shown that the transaction had been wrongful in that it had constituted a manifest and unfair disadvantage to the person seeking to avoid it; that evidence of the mere relationship of the parties was not sufficient to raise the presumption of undue influence without also evidence that the transaction itself had been wrongful in that it had constituted an advantage taken of the person subjected to the influence which, failing proof to the contrary, was explicable only on the basis that undue influence had been exercised to procure it.

Rebutting the Pres

• Its only a presumption – need rebut by showing the party entered the transaction freely, voluntarily and with full knowledge

• ILA is key – McMackin v Hibernian Bank – i.e. would have been enforceable had it been obtained

• Provincial Bank v McKeever – cannot disprove with certainty – need show reasonable probability of the exercise of independ will – surrounding circs can be relevant here.

Rebutting – Indep Legal Advice – Carroll v Carroll (1999) (not in

manual)• Thomas Carroll Sr transferred a pub and

associated premises to his son, Thomas Carroll who, sadly, was killed in a motor accident.

• Other members of the family only then found out what had gone on between father and son and those members sought to set the contract aside.

• The presumption was raised and the question was whether Thomas Carroll Sr had received independent legal advice. Things get interesting here.

• It was alleged that Mr. Joyce, the solicitor, gave no proper advice and spent very little time with Sr. Not only that, but he acted for both parties!

• The Supreme Court held that the advice was not adequate because he, basically, did not know enough about the relevant circumstances and didn’t actually give any advice but simply carried out instructions given to him.

• Barron J noted:-

[A] solicitor or other professional person does not fulfil his obligation to his client or patient by simply doing what he is asked or instructed to do. He owes such person a duty to exercise his professional skill and judgment and he does not fulfil that duty by blithely following instructions without stopping to consider whether to do so is appropriate. Having done so, he must then give advice as to whether or not what is required of him is proper. Here his duty was to advise the donor to obtain independent advice.

Unconscionable Bargain

• If can’t make out D or UI, maybe UB – where one party has taken unfair adv of another

• Slator v Nolan (1876) – principle – whether or not confid relationship exists, one take unfair adv of the other, not allow transaction to stand

• Set aside sale of inheritance – he needed money and sold at gross undervalue

Rae v Joyce

• Young pregnant woman with no commercial experience and short on $ mortgage property at a 60% rate.

• Set aside – unless other side could show it was fair, was to be set aside

Grealish v Murphy

• Wealthy, elderly farmer but perhaps mentally “off” and no business acumen

• Became friends with younger man – agreed to sell him property on the cheap – solicitor drew up docs and explained it all but sol not aware of the surrounding circs nor clear if farmer understood it

• Still set aside – Gavan Duffy J – no UI but grossly improvident transaction – parties did not meet on equal terms….

Chapter 16-18 Mistake Duress Undue Influence. MISTAKE Chapter 16.

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Transcript of Chapter 16-18 Mistake Duress Undue Influence. MISTAKE Chapter 16.