Undue influence is normally used in situations where

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Undue influence is normally used in situations where gifts or contracts are tainted by pressure (normally pressure operating on the servient party’s mind) which falls short of duress. The influence required to substantiate such a plea can arise through: a relationship of trust or confidence (in which case the existence of the required influence is presumed); or either actual coercion or general domination of the servient party’s will (ie express influence). Therefore, if a parent obtains an undue benefit when dealing with his or her child, a solicitor when dealing with his or her client, a doctor when dealing with his or her patient, a trustee when dealing with a beneficiary of the trust or a religious adviser when dealing with one of his or her adherents, the dealing can be overturned and the court can order that any unfairly obtained benefits be returned. Unconscionability The common law position At common law harsh and unconscionable contracts were both valid and enforceable. The law generally took the view that parties who entered into contracts knowing what they involved but hoping that their harsher aspects would not be activated, would not be assisted if the worst happened and the harsher aspects of the agreement had to be performed. This view has now been somewhat softened with the result that contracts resulting from one party’s unconscionable conduct can often be set aside. A plea of unconscionability will usually succeed if one party has deliberately and unconscionably exploited the other’s weakness in order to obtain some contractual benefit. For instance, in CBA v Amadio (1983) 151 CLR 447, the Commercial Bank of Australia induced an elderly migrant couple with poor business and English language skills to sign a mortgage and guarantee in its favour to secure their son’s company’s overdraft. The Amadios believed that this was a mere formality, that the company was secure and that their liability was limited. The bank knew that that was not the case. When the company went into liquidation the bank tried to exercise the guarantee and the Amadios applied to have it set aside. They succeeded. The High Court held that the bank had obtained the guarantee through unconscionable conduct. The Amadios had been under a special disability vis-à-vis the bank in both their actual knowledge and their ability to understand what they were doing. The bank had also been aware of that special disability and its actions in procuring the Amadios’ signatures, in the circumstances in which they were procured, were clearly unfair and unconscionable. It should have ensured that the Amadios
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© Stephen Graw 2012 obtained independent advice or at least that they had had the opportunity to obtain it. The court did not regard as material the fact that there was no dishonesty on the bank’s part.
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