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What is Undue Influence?

March 9, 2023   Domenic MansuetoPhilip Evangelou

Forced, pressured, or coerced into entering a contract or agreement? At law, a court of equity will render a contract void if it has been procured by undue influence. Equity intervenes to prevent victimisation of the innocent party, and to ensure parties to a contract have the same bargaining power.

There are two types of undue influence.

Actual Undue Influence

Actual undue influence protects an individual that has been victimised by a dominant party exerting ascendancy to procure their consent to the transaction. In essence it is a species of equitable fraud.

This pressure must subjugate the weaker party’s free will by essentially overbearing their autonomy to act independently and voluntarily. This doctrine therefore focuses on the quality of the weaker party’s consent, to ensure that they assented as free agents without their independent capacity for judgment being impaired.

To sufficiently characterise the victim as lacking free will, the court must evaluate the extent that the victim’s autonomy has become subservient to the dominant party’s influence. The court will ultimately deem the victim’s free will to have been subordinated by the dominant party if their autonomy was impaired to a significant degree. 

Hence, the plaintiff bears the burden of proof in establishing that their consent was infected with undue influence exerted on them by the defendant.

Presumed Undue Influence 

In the eyes of equity, a finding of presumed undue influence will only be found if the party’s relationship is deemed an association that is a special relationship where dominance is presumed for the dependent party’s protection. 

Examples of special relationships consist of:

  • Parent over child
  • Solicitor over client
  • Trustee over beneficiary
  • Doctor over patient
  • Religious leader over adherent to the faith

However, presumed undue influence can still be found regardless if the parties are not captured by one of the unique relationships. If the relationship between the parties is one where one party exerts dominance over the other, and the agreement is one that the weaker party’s consent has benefited the stronger party, then the law will presume that the consent was secured by the undue influence. 

Regardless of how the presumed undue influence has manifested itself, the burden of proof is on the stronger party to disprove this presumption.

Remedies for Undue Influence

If the Court determines that a contract has been infected with undue influence, remedies available to the victim include:

  • Rescinding (voiding) the contract
  • Financial compensation

If you would like further information or advice on undue influence, please reach out to us through the contact form or by calling us on 1300 337 997. 

About Domenic Mansueto

Domenic ManuestoDomenic is a legal intern at OpenLegal, undertaking this internship whilst also working as an in-house paralegal at British American Tobacco Australia. He is studying a Bachelor of Laws at UTS. His interests lie in the legal, compliance, governance and risk-management spheres of corporate industries.

About Philip Evangelou

phillipPhil is a director at OpenLegal. He has over 16 years experience working in private practice and in-house counsel in Sydney and London, giving him expertise in employment law, IP, finance, leases, dispute resolution, insurance and contracts.