OCR A2 Law - The Law of Contract - Undue Influence (2)

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  • Created by: Majid
  • Created on: 11-05-13 22:35

Undue Influence (2)

Similarly in CASE: "Allcard v Skinner", it was said that spiritual leadership influenced the disciple and ... the contract was set aside.

Lord Denning felt that it should also apply where there is an inequality of 'bargaining power'. CASE: "Lloyds Bank v Bundy". In this case a farmer and son were customer's of the same bank. The farmer was persuaded by his son and the bank to use his farm as security for the son's company. The business failed and famer successfully pleaded UI. HELD: There was a special relationship of trust and the bank failed to rebut the presumption.

This approach was disapproved by the Lords in "Natwest v Morgan".

Class 2B: Husband/Wife - In "BCC v Aboody", the husband pressured his wife to sign a surety agreement with the bank. HELD: The bank were awre of this influence but the wife wasn't at a 'mainfest disadvatage'. However, in "CICB Mortgages v Pitt", the courts said a disadvantage wasn't a necessary ingredient for UI.

CASE: "Barclays Bank v O'Brien". In this case a husband increased his overdraft and influenced his wife into signining the overdraft agreement, misleading her of the amount. HELD: The bank couldn't enforce the agreement ... Presumed UI existed.

The court laid down important rules -  3 steps to be taken by the bank: 1. Bank must put themselves on 'enquiry'; 2. Take 'reasonable steps' to ensure the wife understands and 3. 'only have taken reasonable steps if the wife is called to a private meeting'.

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