Self-test questions: Duress, Undue Influence, and Unconscionable Bargains

. In which one of the following factual situations is economic duress most likely to be established?

Arnie, a hooligan, threatens to physically assault Karl if Karl does not agree to sell his football match ticket to Arnie.

Liz, a landlady, threatens to change the lock on the house and deny access to Darren, the tenant of Liz's house, if Darren does not agree to increase the rent paid.

Lorraine, a business tycoon, threatens to destroy Nadia's business if Nadia does not agree to transfer her business to Lorraine.

Marco, a shipowner, threatens to seize Fay's goods on board Marco's ship if Fay does not agree to increase the freight.

Saz offers to pay Monster Build an extra £500 to complete the installation of a swimming pool in her garden on time because she has learned Monster is struggling to source materials and might not be able to complete on time.

. Lottie engages Construct It to complete building work on her house. Construct It knows that Lottie needs the work completing by the agreed date because she is due to host a large garden party on which she has spent a significant amount of money. Construct It tells Lottie that it will not complete the work on time unless she agrees to pay an additional £2,000 on top of the contractual price. Lottie agrees to pay the additional £2,000 because otherwise she will lose money when she has to cancel the garden party, but when the work is completed she claims she only did so through the fear of the work not being completed on time. Which one of the following most accurately summarises the parties' legal position?

It is likely that Lottie will be able to establish evidential undue influence based on the influence Construct It has exerted.

It is likely that Lottie will be able to rescind the transaction under the general doctrine of bad faith.

It is likely that Lottie will be able to establish economic duress based on the threat to not complete the work on time.

It is likely that Lottie will be able to establish actual undue influence based on the influence Construct It has exerted.

Lottie is unlikely to have any cause for redress because she agreed to pay the additional money.

. In which one of the following major cases was economic duress identified on the facts?

Williams v Roffey Bros & Nicholls (Contractors) Ltd [1991] 1 QB 1.

B & S Contracts & Design Ltd v Victor Green Publications Ltd [1984] ICR 419.

Pao On v Lau Yiu Long [1980] AC 614.

Rock Advertising Ltd v MWB Business Exchange Centres Ltd [2018] UKSC 24, [2019] AC 119.

CTN Cash and Carry Ltd v Gallagher Ltd [1994] 4 All ER 714.

. Ole knows that Soft Seat, the company from which he has purchased a new sofa, is facing financial difficulties, so Ole tells Soft Seat he will only pay half the £2,500 he was due to pay for the sofa, and if Soft Seat does not accept this, Ole will pay nothing and will leave negative reviews about Soft Seat's customer service online. In relation to the parties' legal position, which one of the following is true?

Soft Seat will not be able to claim the full amount of money as it obtained a practical benefit of avoiding the negative reviews by accepting half the money.

If Soft Seat accepts the payment of half the money, it can probably still claim the full amount on the basis that it did so due to economic duress.

Ole will not be required to pay the full amount if he received a signed written agreement to that effect from Soft Seat.

Soft Seat can probably set any agreement to accept half the money aside on the basis it is an unconscionable bargain.

Soft Seat can claim the full amount on the basis of actual undue influence, provided it acts quickly and has not affirmed the transaction.

. Which one of the following statements in relation to 'actual undue influence' is true?

The party seeking to rely upon actual undue influence must show that there is a relationship of trust and confidence between itself and the other party.

The party seeking to rely upon actual undue influence must show that there is a manifest disadvantage resulting from the contract.

The party seeking to rely upon actual undue influence must show that its free will to enter or to decline the contract has been overcome by the influence of the other party.

An action for actual undue influence will fail if it is shown that the party seeking to rely upon actual undue influence would have entered the contract anyway.

The party seeking to rely upon actual undue influence need only show that there was a 'protected relationship' between itself and the wrongdoer.

. In which one of the following relationships is it not possible to disapprove the existence of trust and confidence between the parties by contrary evidence?

The relationship between an unmarried couple.

The relationship between solicitor and client.

The relationship between army and soldier.

The relationship between bank and customer.

The relationship between a mother and her adult daughter.

. Which one of the following statements concerning undue influence and unconscionability is true?

Contracts affected by undue influence are void.

The principle in Fry v Lane (1888) 40 Ch D 312 protects certain weak parties by giving the court an equitable right to rescind the contract where the court considers the contract to be unreasonable or unfair in its outcome.

Undue influence may not be relied upon if the innocent party takes no action within a reasonable time after the undue influence has ceased.

The concept of unconscionability is concerned with whether the will of the innocent party is not independent and voluntary because it is overborne.

In the case of evidential undue influence, a finding that the person influenced has received independent advice about the true nature of the transaction will necessarily result in the rebuttal of the presumption of undue influence.

. A married couple live in a house owned by the wife and jointly own a family business. The husband persuades the wife to use the house as a security to obtain loans from Spark Bank. In the loan application form, it is stated that the loan will be used for the purpose of the family business. A manager of Spark Bank interviews the couple in a branch of Spark Bank and is informed of their relationship and of the fact the husband is responsible for the operation of the family business and that the wife has no active role. The manager then asks if the wife has received any independent advice on the application. The wife replies that she has a solicitor and will consult her about it. The wife forgets to consult her solicitor. The next week, the application is approved and the wife and the manager sign a contract using the house as security of the loan. Five months later, the family business fails due to poor management and the couple is unable to repay the loan. Spark Bank then claims the wife's house. It has been established that the husband has unduly influenced the wife's decision to enter the security contract. Which one of the following statements most accurately summarises the parties' legal position?

Spark Bank is entitled to claim the house because Spark Bank has not unduly influenced the wife's decision to enter into the security contract.

Spark Bank is entitled to claim the house because it has not been put on inquiry because the application form stated that the loan was to be used for the family business partly owned by the wife. The security contract was thus to the advantage of the wife.

Spark Bank is not entitled to claim the house because it has not taken reasonable steps to ensure that the wife entered the security contract freely and with the knowledge of the implications of the transaction.

Spark Bank is not entitled to claim the house because it has been put on inquiry because the couple informed the manager during the interview that the wife had no active role in the family business.

Spark Bank is entitled to claim the house because the wife promised to speak to her solicitor.

. Maxi Finance plc advised Dayna, a businesswoman, in relation to certain financial investments made by Dayna. Due to a market downturn, these investments turned out to be bad ones for Dayna and she lost a significant sum of money. In relation to Dayna's rights against Maxi Finance, which one of the following is most likely to be true?

A court is likely to hold that this amounts to an unconscionable bargain, unless it can be proved that Dayna sought independent advice before making the investments.

A court is unlikely to hold there is an unconscionable bargain or a case of undue influence.

Due to the apparent difference in the nature and size of the parties, there is a presumption that there is an unconscionable bargain, which it will be for Maxi Finance to rebut.

If a court concludes that the investments were commercially unreasonable ones, it is likely to conclude that the bargain is an unconscionable one and Dayna is entitled to pursue Maxi Finance to recover her losses.

There is a presumption of undue influence.

. Issy has inherited a large sum of money. Her husband, Jeremy, wishes to persuade Issy to invest the money in his new business venture. Jeremy produces a detailed business plan and tells Issy that it will be more convenient for him to use her money than to go to the bank for a loan. Issy transfers the money to Jeremy, but Jeremy's business venture is not a successful one and results in significant financial losses. Issy claims her decision to transfer the money was procured by Jeremy's undue influence. In relation to such a claim, which one of the following is not true?

Jeremy's attempt to persuade Issy to transfer the money based on his business plan amounts to actual undue influence; otherwise the relationship is one of presumed undue influence based on trust and confidence, which will be substantiated on the facts.

With actual undue influence, there is no need for the party claiming undue influence to prove it had a special relationship with the defendant.

With undue influence, what matters is whether the end result involves a taking advantage of the relationship.

Whether a transaction has been brought about by undue influence is a question of fact.

The relationship of husband and wife will not automatically give rise to a presumption that one party is under the influence of the other party and so is not one of the recognised 'protected relationships'.

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