Doctrine Of Undue Influence And Recession

In situation where it can be proved that a party to the contract had been influenced or induced to enter into the transaction or contract through the use of undue influence of another party the contract which is formed may be set aside on the option of the weaker party. Thus in case the management of undue influence is found the contract is voidable on the option of the weaker party and can be set aside to the remedy of recession.

One of the landmark cases in relation to undue influence in Australia is the case of Johnson v Buttress[1]. In this case an approach in relation to presumed and actual undue influence was addressed. Actual undue influence takes place when it is shown that the defendant had used influence over the plaintiff to make them enter into a contract. On the other hand presumed undue influence takes place when there is a deemed relationship of influence which means that a relationship which as a matter of law raises the issue that influence has been used by the defendant. Under this type of undue influence, the relationship of influence has to be in fact, where it can be made out that the plaintiff had confidence and trust on the defendant and in addition presumption of influence has to be present.

Application

In the given situation it has been provided that Jacy is elderly woman who is approximately 70 years of age. She has great trust and confidence on her neighbour Linda who has been friendly with her over the years. Jacy relies on Linda for most of our financial matters as she has a disability in relation to arithmetic. Jacy wants to sell her house yes she is old and wants to purchase a Nursing Home unit. The current market value of the house is 1.5 million dollars however Linda has told Jacy that she is willing to buy the house for $1 million. It is clear that Linda in this situation has a position over lazy through which she can easily influenced her as lacy relies on her for most of her financial matters and places great confidence and trust on her. Jacy is sure that Linda is going to provide her with a reasonable price. Therefore in this situation it is clear that the doctrine of undue influence would come into the contacts as the defendant has position of power over the plaintiff to make her enter into a contract. In addition the defendant has taken advantage of such position and power to provide the plaintiff with the lesser price then the market price because of the trust and confidence placed by the plaintiff on her.

Therefore in the given situation as there is an element of undue influence in this case Jacy has the right to set aside the contract based on the doctrine of undue influence and recession the right to set aside the contract which has been formed with Sajen and Co for the sale of our investments based on the provisions of unconscionable conduct.

The doctrine of unconscionable conduct is used for the purpose of providing justice to the party who has being forced to enter into a contract by another party without being properly able to understand the terms of the contract and where the other party actually took advantage of the lack of understanding which the weaker party possesses in relation to the contract.

One of the primary cases in relation unconscionable conduct in Australia as the case of Commercial Bank of Australia v Amadio[2]. In this case the plaintiffs had been convinced by their son to act as the guarantor for a bank loan taken by him. There was a failure on the part of the bank to marketing the plaintiffs understand the position they were in while getting into a contract and acting as a guarantor. Subsequently the business of the son failed and the bank approached the guarantors to recover the loan by selling their house which was mortgaged. In this case it was held by the court that the conduct on the part of the bank with respect to this contract was an unconscionable conduct conduct as the bank manager did not adequately explain the consequences of the contract to the plaintiff who did not have the capacity to understand it otherwise due to lack of understanding English

Another case in relation to unconscionable conduct is the case of James v Morgan[3]. In this case it was held by the court that unconscionable conduct is a position where a party to the contract entraps a deal on terms which are grossly unfair such as purchasing property from a person at a lesser price than the market price by taking advantage of the lack of understanding by the other party. Where there is an element of unconscionable conduct present in a contract the court has the right to nullify on modified the terms of the contract to the advantage of the weaker party.

In the given situation has been provided that Jacy wants to sell her investment for the purpose of purchasing Nursing Home unit. She has been invited to a party by Linda where she has met her son who is the owner of Sajen & Co. The Son coming to know that Jacy is willing to sell her Investments approaches her to buy the investment from her. He notified Jacy that he would be willing to purchase the investment over 12 instalments and at an interest of 1.5% per annum with the price of $500,000. It has been provided by the scenario that Jacy has a disadvantage in relation to understanding arithmetic. The actual price of the investment owned by Lucy has a market value of$900,000. In the given situation Lucy has also informed us that she is unable to understand the calculation which was attempted by Dickson to explain Jacy about the price she would gain by selling the investment. Knowing about such lack of understanding Dickson took advantage of the situation and got into a contract with Jacy. Thus it is clear that there was an unconscionable conduct on the part of Dickson by taking advantage of the lack of understanding of Jacy and making her enter into a contract which was detrimental to the position of Jacy as she was offered a much lesser price.

Conclusion

As the elements of an unconscionable conduct has been found in this contract Jacy has the right to set aside this contract based on the doctrine of unconscionable conduct.

Whether the promise which has been made by using to Kane is binding

In the case of Ward v Byham[4] it has been ruled by the court that a contract can be only found between the parties where there is consideration provided by both the parties in relation to the contract. A contract cannot come into existence without the presence of a consideration.

In the case of Collins v Godefroy[5] the defendant had promised the plaintiff to pay him if the plaintiff attends Court. Defendant did not pay the plaintiff so the plaintiff sued the defendant for the breach of contract. In this case it was stated by the court that there was no contract formed between the parties as the plaintiff had an existing duty under law to attend the court and therefore there was no consideration.

Under the principles of promissory estoppel a promise has to be performed even if there was no consideration present against the promise. However it is to be noted that the performance is only to be made when the person to whom the promise was made has actually suffered any detriment by the relying on such promise.

In the case of Glasbrook Bros v Glamorgan County Council[6] the defendant had promised to pay the police if they provided him with extra protection. Protection was provided the plaintiff refuse to pay the police. It was held by the court that there was no contract between them as police was already under the obligation of performing their duties.

It has been provided through the scenario that Jacy has promised to provide Kane with her property because of all the gardening work which has been done by him in the past. From the above principles it can be stated that where there was no consideration which has been paid in return by Kane there was no contract between the parties. In addition Kane was already under the obligation of doing the gardening work as he was a gardener and was paid for his services. The doctrine of promissory estoppel would also not intervene in this situation as Kane has not relied on the promise and had face detriment because of it.

Therefore the promise which has been made by Jacy is not binding.

References

Collins v Godefroy (1831) 1 B & Ad 950; 109 ER 1040. 

Commercial Bank of Australia v Amadio. (1983) 151 CLR 447; accounting HCA 14 

Glasbrook Bros v Glamorgan County Council [1925] AC 270

James v Morgan (1663) 83 Eng Rep 323

Johnson v Buttress. High Court of Australia (1936) 56 CLR 113

Ward v Byham [1956] 1 WLR 496