Undue influence: Overview, definition and example
What is undue influence?
Undue influence happens when someone uses their position of power or trust to pressure or manipulate another person into making a decision or signing a contract. The influenced party might feel they have no real choice because of the relationship or circumstances, making the agreement unfair.
For example, if a business partner pressures another to sign an unfavorable contract by exploiting their trust or reliance, that could be considered undue influence.
Why is undue influence important?
Undue influence is important because it protects people and businesses from being unfairly pressured into agreements that don’t truly reflect their free will. Contracts made under undue influence can be challenged in court and may be voided or revised to restore fairness.
For businesses, understanding undue influence helps ensure that agreements are made in good faith and without coercion, safeguarding relationships and preventing disputes.
Understanding undue influence through an example
Imagine a senior manager pressures a subordinate into signing a personal loan guarantee for the company, hinting that their job could be at risk if they refuse. The subordinate, feeling they have no choice, signs the agreement. If challenged, the court might find the contract invalid due to undue influence because of the power imbalance.
In another case, a family member pressures an elderly relative into transferring property by leveraging their close relationship and the relative’s reliance on their care. The court could determine that the transfer was made under undue influence and overturn the agreement.
An example of an undue influence clause
While undue influence is typically a concept that invalidates contracts, some agreements include clauses to affirm free will. For example:
“The Parties agree that they have entered into this Agreement voluntarily and without undue influence, coercion, or pressure from any other Party.”
Conclusion
Undue influence occurs when someone abuses a position of power or trust to pressure another into an unfair agreement. It protects parties from being manipulated into contracts that don’t reflect their genuine consent.
By understanding undue influence, businesses and individuals can ensure their agreements are fair, freely made, and enforceable. It’s a reminder that fairness and trust are essential to any valid contract.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.