Taking Advantage – How Does Undue Influence Affect Contracts

The legal principle of undue influence provides that a contract may be set aside or at least voidable in favour of the purported ‘weaker party’, should the agreement have arisen from a relationship of influence between the parties. Not all such transactions are remediable, but where established, the ‘weaker party’ will have the option to rescind the contract. 

The doctrine is applicable to the following two categories:

Actual Undue Influence:

It arises where, in regard to a gift or contract, it is proven that the ‘dominant party’ exerted influence over the ‘weaker party’ to induce the giving of the gift or entry into the contract.

Presumed Undue Influence:

Where a relationship of influence is presumed. Whilst the list is not exhaustive, such relationships include:

  • parent and child
  • guardian and ward
  • trustee and cestui que trust
  • solicitor and client
  • physician and patient
  • cases of religious influence

For a ‘dominant party’ to refute the presumption of undue influence, he/she must establish beyond the balance of probabilities that the purported ‘weaker party’ acted independently and understood their actions, from a position of free judgement.   

Why the doctrine is important

Why do we need the doctrine of undue influence at all? This question is more so a matter of social science than it is a question of law. The doctrine was developed in response to the instinctive inclination for mankind to exploit others for their own personal gain. As such, the doctrine operates solely “to control opportunism”. 

Is it right and expedient to save persons from the consequences of their own folly? Or is it right and expedient to save them from being victimised by other people? The doctrine of undue influence was in fact founded upon the latter of these two principles. 

As such, the operation of the doctrine is one of strict liability, in response to the potential victimisation of a weaker party.  The strict implementation of the doctrine is a necessary result of the difficulty in detecting undue influence. 

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