Chapter 15 Multiple-choice questions

. A party seeking to rely upon economic duress must establish that, in addition to the fact that he/she has no realistic alternative other than to enter into the contract in question, there is coercion of will that vitiates his/her consent.

True

False

. In which one of the following factual situations between two natural persons (A and B) is economic duress most likely to be established?

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

A, a landlord, threatens to change the lock on the property and deny access to B, the tenant, if B does not agree to increase the rent paid.

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

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

. In which of the following major cases was economic duress identified on the facts? [Please select all that apply.]

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.

North Ocean Shipping Co Ltd v Hyundai Construction Co Ltd, The Atlantic Baron [1979] QB 705.

. Which of the following general statements in relation to 'illegitimate pressure or threat' are true? [Please select all that apply.]

A threat of unlawful action used to obtain a lawful demand normally amounts to illegitimate pressure or threat.

There is no established category of lawful act duress that recognises a threat of lawful action as illegitimate.

A threat of unlawful action used to obtain an unlawful demand, if made in good faith and in a commercial context, normally does not amount to illegitimate pressure or threat.

A threat of lawful action used to obtain an unlawful demand, if made in good faith and in a commercial context, normally does not amount to illegitimate pressure or threat.

. The remedy for duress will be lost unless the victim of duress ensures that it takes action to protest at the time, or shortly thereafter, and so seeks to reopen the issue.

True

False

. A presumption of undue influence arises once it is shown that the relationship between two parties falls within certain recognised relationships or, on the facts, constitutes a relationship of trust and confidence.

True

False

. 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 him/her 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 his/her 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.

. In a case of evidential undue influence, the defendant may avoid a finding that the influence is undue by showing that there is no intention to commit a wrong or bad faith on its part.

True

False

. 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.

. It is still the law that the party seeking to rely upon evidential undue influence must show manifest disadvantage on its part.

True

False

. Which of the following statements concerning undue influence and unconscionability are true? [Please select all that apply.]

Contracts affected by undue influence are void.

The principle in Fry v Lane protects certain weak parties by giving the court an equitable right to rescind the contract on the basis of unconscionability.

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 does not necessarily result in the rebuttal of the presumption of undue influence.

True

False

. The relationship of husband and wife will not automatically give rise to a presumption that one party (usually the wife) is under the influence of the other party (usually the husband).

True

False

. 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 M 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 M Bank interviews the couple in a branch of M 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 asked if the wife has received any independent advice on the application. The wife replies that she has a solicitor and will consult him 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. M 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 summarizes the legal positions of the parties?

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

M 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.

M 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.

M 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.

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