What Is the Impact of Undue Influence on a Contract or Legal Agreement

There are two types of undue influence—express and presumed. Express undue influence occurs when the dominant party actively deprives the other person of free will and essentially forces them into a contract. This type of influence often intersects with duress.

Express or actual undue influence results from pressure. When a party receives a gift or enters into a contract without independent judgment, they can claim express undue influence from the benefactor or the dominant party. A leading case law authority on undue influence is Johnson v Buttress (1936) 56 CLR 113.

Meanwhile, presumed undue influence happens when the stronger party is in a position of dominion or dominates the weaker party. One example of this would be the relationship between a lawyer and his or her client.

Other relationships that may give rise to presumed undue influence include parent and child, physician and patient, religious leader and congregation member, and more.

If there is presumed undue influence, to defeat the claim of undue influence the donee would have to show that the gift was entered freely and voluntarily. One example of how a donee could show that the donor acted freely and voluntarily despite their positions is if the donor received independent legal advice. This would be one of the clearest ways of showing their was no exercise of undue influence despite the presumption that arises due to the relationship between the parties (Johnson v Buttress).

In the same vein, Johnson v Buttress is authority that the donee (and their commercial lawyer or civil litigation lawyer) will find it challenging to overcome a challenge to the contract based on presumption of undue influence if the donor is weak-minded or illiterate.

There are various manifestations of practical undue influence operating in an agreement or a contract. Some of these include sudden shifts in dependence toward one party, changes to authority in bank accounts, interventions in personal relationships that directly influence the course of the contract, or powers of attorney, unexpected meetings with financial planners, and other legal actions that one party undertakes without the proper information.

In making wills, for instance, vulnerable persons may experience undue influence in preparing a will when a trusted party uses the former’s will to favour them in a will. Theoretically, witnesses to wills should prevent this from happening. However, the reality is will-makers can suffer from undue influence even when witnesses are involved.

Undue influence is a real problem for many people entering into contracts and agreements, especially if they are vulnerable persons with difficulties that prevent them from understanding their legal position. Should you or your loved ones find yourselves in this situation, it would be best to contact a trusted solicitor and experienced lawyer who can help you flesh out these legal details.

Andrew Byrnes Law Group are commercial lawyers and civil litigation lawyers practising in Canberra, Queanbeyan, Goulburn, Wollongong, and surrounding areas. For deliberately different, high quality legal representation, reach out to us today.