Undue influence, where established, will render a contract voidable. It occurs when there is an inequality of power between the contracting parties which results in the weaker party entering into a contract with the dominant party. Not all such transactions will result in a remedy - but where the influence that exists between the parties can be classified as 'undue' the weaker party will have the choice of rescinding the contract.
Undue influence may take two forms; express undue influence (where the dominant party acts in such a way as to effectively deprive the other of their free will - this overlaps with duress) and presumed undue influence which occurs where the dominant party holds a position of trust or confidence over the weaker party (such as solicitor and client - in such a case it will be presumed that the influence that existed between them when entering the contract was 'undue' unless the dominant party can prove otherwise)
Express (actual) undue influence
Express - or actual - undue influence arises when a gift/contract results from unfair and undue pressure by the beneficiary and not free and independent judgment. See Justice Starke, Johnson v Buttress (1936) 56 CLR 113 at 126
Presumed undue influence
Undue influence may be presumed from the relations existing between parties. There is no exhaustive list of relations giving rise to a presumption of undue influence. It includes
- parent and child
- guardian and ward
- trustee and cestui que trust
- solicitor and client
- physician and patient
- cases of religious influence.
More broadly, the presumption of undue influence arises whenever 'the relation between donor and donee is such that the latter is in a position to exercise dominion over the former by reason of the trust and confidence reposed in the latter' (Chief Justice Latham, Johnson v Buttress (1936) 56 CLR 113 at 119)
In cases where undue influence is presumed, the donee must prove that the gift was the free/voluntary exercise independent will. While it is not essential to show that the donor received independent legal advice, this is the clearest and most obvious mechanism for overcoming the presumption (Chief Justice Latham, Johnson v Buttress (1936) 56 CLR 113 at 119). It will be more difficult for the donee to overcome this presumption where the donor is 'illiterate or weak-minded' (Chief Justice Latham, Johnson v Buttress (1936) 56 CLR 113 at 119).
Leading case: Johnson v Buttress (1936) 56 CLR 113