The conventional case associated with undue influence, although not necessarily so labeled, is categorized within the typical rubric associated with unconscionability. The idea entails situations in which one particular individual brings to bear mental pressure with substantial force as well as taking length of time contrary to the will belonging to another individual that, while with complete lawful capacity, could possibly be irresolute, weak or perhaps vulnerable. Virtually any contract involving the party that exerts the particular influence and also the party that gives in to it all is unlikely to give good results in the pursuits associated with either party; it really is greatly predisposed to generally be the doing belonging to the more powerful party even though it is the actual formalized expression associated with both. Even though the weakness associated with the particular party beneath the influence will not be straightforward for any stranger to identify, it's without doubt identified by the particular party that benefits from it1. The same is defined in Contractors Bonding Ltd v Snee2.
The particular idea how the grounds for the fair doctrines associated with unconscionability as well as undue influence lie within the inequality associated with bargaining strength acquired its most strong manifestation within the ruling associated with Lord Denning, M. R. for Loyds Bank Ltd. v. Bundy3, at this point particularly disapproved with one voice by the House of Lords during National Westminster Bank v. Morgan4. Based on the doctrine associated with undue influence, Lord Denning's thinking debatably over-accentuated the inequality associated with the bargaining strength at the cost of the importance of the conduct of the particularly more powerful party in benefiting from the inequality.
It should be acknowledged that a preliminary inequality in bargaining strength will likely not automatically deny free agreement in the crafting of the agreement
The Obligation to Disclose Extraordinary Conditions in the Guarantee Contract
Soon after Goodwin v. National Bank of Australasia5, the primary lender in using a guarantee is actually within the obligation to reveal any kind of attributes of its transactions with the borrower that hold the impact that the situation belonging to the borrower differs from whatever the surety may normally anticipate, especially if it has effects on the character or even level of the particular surety's obligation. Gibbs, C. J., in Commercial Bank of Australia Ltd. v. Amadio6 highlighted the inability of the financial institution to adhere to their responsibilities in this regard. Particularly, Gibbs, C. J. ruled that the financial institution was in infringement regarding its inability to reveal to Amadios the particular conditions associated with its having designed itself as an accomplice in the particularly discriminatory checks dishonoring with an effort to keep up the act of success that this enterprise, even though financially troubled, had put up, and additional held that this bank's inability to reveal these kinds of conditions was tantamount to some sort of intended deception that they didn't really exist.
The outcome in cases MacKenzie v. Royal Bank of Canada7 demonstrate how the kind of wrong doing which may prevent the particular shift of situation defense will not need to involve planned or even deceptive activity by the accused. Consequently, the particular schema developed by Barclays Bank plc v. O’Brien8 and Royal Bank of Scotland plc v. Etridge (No. 2) 9 definitely doesn't demand that the accused possess genuine information about this undue influence or even misapprehension within that the plaintiff is actually laboring. The particular inability to undertake any actions necessary to control the likelihood associated with undue influence is enough.
In Shotter v Westpac Banking Corporation10, Wylie J ruled that the obligation associated with clarification, caution or even suggestion for independent guidance comes up whenever a financial institution ought to fairly believe that a guarantor might not completely understand the meaning in the guarantee and also the magnitude of the legal responsibility taken on in that way.
The House of Lords case of Royal Bank of Scotland Plc v Etridge (No 2)11 is one of the most relevant cases as far as undue influence in Hong Kong, as a whole, is concerned. It lays down the guidelines that a third party should follow so as to avoid liability. This includes fully advising the party that is possibly under influence on the transactions implications on them. Also, the bank should be put on inquiry to verify if there is a possibility that either undue influence or misrepresentation was used. Another case on undue influence, and where a third party was involved, is that of Li Sau Ying v Bank of China (HK) Ltd12.
