What is undue influence?
Question:
Discuss about the Text Cases And Material of the Contract Law.
The issue which has been determined by reviewing the facts of the case study is that whether Sam has the right to set aside the contract which he has got into with Patrick for the sale of his business.
There are various situations which have been provided by contract law through which the party has the right to set aside an existing contract. The term “set aside” a contract means the bringing of a contract to an end. The ways in which a contract can be set aside include the situation of a contractual mistake, duress and under influence.
According to McKendrick (2014) the situation of undue influence takes place when a dominate parry influences the mind of a weaker party to a degree that the weaker party is not able to indulge in the process of making a decision in an independent manner. Thus a party who has entered into a contract which has the element of undue influence to it has the right to make the contract voidable at his or her option. The victim has the right to set aside the contract only in a situation where he acts in a prompt manner where he has realized that he was subjected to undue influence. In situation where the party is found to have delayed or accepted the situation then the court may refuse to set aside the contract.
The issue of undue influence comes to light only in situation where the parties to the contract are in a special relationship. One of the parties to the contract who is the dominant party possesses a special knowledge, position or skill which makes the weaker party to place his trust and confidence on the dominant party. Few examples of such relationship is that of doctor and patient or lawyer and client
The party who has made a claim in relation to undue influence has to make it clear before the court that in the given situation there was scope for domination by the other party. Undue influence is easy to provide in situation where a special relationship exists between the parties. It is presumed by the law that in contract which is favorable with respect to the dominant party undue influence has taken place. Where there is no special relationship undue influence can also be provided if the weaker party is able to show some desperate situation he was in when the contract was formed such as desperate need to keep friendship.
In situation where it has been shown by the party the element of undue influence may be present than it is the duty of the dominant party to show that no pressure had been exerted.
In the case of Barclays Bank plc v. O’Brien , [1993] 4 All E.R. 417 it was held by the court that the bank is not able to claim the house which was provided a guarantee for loan in situation where the property was jointly owned by the spouse of the creditor and she signed the mortgage document without explanation or legal advice.
Elements of undue influence
On the other hand in the case of Bank of Montreal v. Duguid (2000), 185 D.L.R. (4th) 458 where there was no history of confidence and trust placed by the wife on the husband while decision making element of undue influence was not satisfied.
In the given situation it has been provided that there was a string trust and confidence which Sam had on Patrick in form of both a manager and a friend. However the relationship cannot be treated as a special relationship. However a claim from undue influence can be made where there is no special relationship present between the parties.
This happens where the weaker party had been subjected to a desperate situation. According to the fact of the case Sam was in a desperate situation as he wanted to ensure the his friendship with Patrick is not hampered and his business would not be able to run without Patrick who threatened to resign if the contract was not formed. In addition the contract which has been formed is in favor of Patrick who is the dominant party and thus the element of undue influence may exist. Through the application of the above discussed cases it is clear that an undue influence claim can be brought where the weaker party actually had placed trust and confidence on the dominant party. In this situation there was clear history of Sam placing trust and confidence on Patrick.
Conclusion
Thus the contract may be sent aside upon making a claim for undue influence.
The issue in this case is that whether Katharine can make a successful claim for misrepresentation against Northeby (seller) and what are the remedies she may have in relation to the claim
The concept of misrepresentation takes place where one of the party to the contract relied upon the untruthful or misleading representation made by the other party to get into a contract. The concept of misrepresentation is dealt under both tort and contract law. When an untrue statement has been made in a negligent and intentional manner they can be processed under torts and where the element of innocence is present the law of contract is applied.
The party is provided the right to rescind the contract where material misrepresentation in relation to the terms whether the misrepresentation is negligent, innocent or fraudulent in nature as provided through the case of Museprime Properties v Adhill Properties [1990] 36 EG 114.
In the case of Bisset v. Wilkinson (1927) AC 177 it had been ruled that a claim of misrepresentation can only be sustained where the party had actually put its reliance on the material representation made by the other party to get into the contract.
In the case of Nottingham Brick & Tile Co. v Butler (1889) 16 QBD 778 it had been ruled by the court that the a party to the contract is not allowed to only reveal partial truth in relation to a material fact. Therefore a statement in which the party has failed to reveal the entire truth to the other party is considered as a misrepresentation.
Undue influence in special relationships
In case of Derry v Peek (1889) 14 App Cas 337 the court had provided a judgment where it was signified that where the party has committed misrepresentation in an intentional and fraudulent manner the other party has the right to set aside the contract as well as claim damages for any loss which has been incurred by them due to getting into the contract.
In the case of L’Estrange V Graucob [1934] 2 KB 394 it had been held by the court that where a term of the contract has been incorporated through signature the term is actually binding on the parties irrespective of their awareness in relation to the term.
On the other hand it has been stated in the case of Thornton v shoe lane parking ltd (1971) 2 QB 163 that where a party has attempted to incorporate a term which is unusual such as a limitation of liability term it has the duty to ensure that the other party must have been made aware about such terms unless the term is incorporated by few other exception to this rule such as industrial customs. Where the party has failed made the other party aware of the term the exclusion clause is held not be incorporated into the contract in a legal manner.
As per the case of Addis v Gramaphone Company (1909) damages are provided to the parties to the contract to restore the position of the party which it was in before the contract was created.
In the given situation it has been provided that Katharine has purchased 2 painting which had been labeled as original “Renoir” at a price of $400000. It was provided that the paintings are worth $600000 prior to the auction by the seller. However upon inspection it had been found that the paintings were worth $200000 as they had not been entirely made by Renoir. In this case it is clear that the seller has made a material misrepresentation. Katharine had relied on the representation to get into the contract. Further as per the case of Nottingham Brick & Tile Co. v Butler as entire truth had not been revealed the seller is still liable for misrepresentation. As the misrepresentation was not fraudulent Katherine only has the right to set aside the contract.
There was an exclusion clause in the contract which provided that the seller according to which the buyer is not entitled to make any other claims other then returning the items within 15 days for a refund. In addition they do not guarantee the authenticity of the paintings. The clause was present behind the ticket which Katherine had brought to take part in the auction. Applying the principles of the Thornton v shoe lane parking ltd case it can be stated that as the clause was not brought to the attention of Katherine it has not been incorporated in a proper manner. Thus the clause is invalid and not effective.
Conclusion
Katherine has the right to rescind the contract and return the paintings at the purchase price to Northeby due to their misrepresentation. The exclusion clause is not validly incorporated.
References
Addis v Gramaphone Company (1909)
Bank of Montreal v. Duguid (2000), 185 D.L.R. (4th) 458
Barclays Bank plc v. O’Brien , [1993] 4 All E.R. 417
Bisset v. Wilkinson (1927) AC 177
Derry v Peek (1889) 14 App Cas 337
L’Estrange V Graucob [1934] 2 KB 394
McKendrick, Ewan (2014). Contract law: text, cases, and materials. Oxford University Press (UK),.
Museprime Properties v Adhill Properties [1990] 36 EG 114
Nottingham Brick & Tile Co. v Butler (1889) 16 QBD 778
Thornton v shoe lane parking ltd (1971) 2 QB 163
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