Undue Influence And Unconscionability - Contract

UNDUE INFLUENCE AND UNCONSCIONABILITY * * * * In almost all cases, the objective appearance of consent is sufficient to give rise to contractual obligations. In exceptional cases, the fact that one parties' consent was not real (i.e. is vitiated by some factor) is taken into account. In classic contract law, the parties are regarded as robust and self-- interested and capable of pursuing and protecting their own interests. The law distinguishes between driving a hard bargain (for which there is no relief), and the abuse of a position of relative weakness (which may lead to the contract being rescinded). Undue Influence: * This arises when a party in a position of influence over another person exercised that influence to effect the weaker party's decision to enter into the contract. The weaker party's consent was not freely given, and so the contract will be set aside. * The doctrine reflects 'the general policy of the law directed to preventing the possible abuse of relationships of trust and confidence' o Johnson v Buttress (1936) 56 CLR 113, 123 per Latham CJ. Types of Undue Influence: 1. Actual undue influence: one party alleges the other actually exerted undue influence which affected the judgment of the innocent party in entering into the contract. * The weaker party must prove that the stronger party actually exercised a controlling influence over the weaker party. 2. Presumed undue influence: a relationship of presumed influence (a relationship of trust and confidence) existed between the parties prior to the contract. * If a relationship of influence existed, the contract is presumed to have been concluded as the result of this influence. The stronger party must prove the contract was not the result of this influence. Establishing Undue Influence: * Relationships in which influence is presumed o The law deems certain relationships to be relationships of influence: eg parent--child, solicitor--client, doctor--patient. o There is no presumption in relationships between husbands & wives, accountants & clients, or financial advisors & clients.