BLAW10001 Chapter Notes - Chapter 9: Undue Influence, Clean Hands, Australian Consumer Law
15 May 2018
School
Department
Course
Professor
Principles of Business Law
• Tutorial 9
• Week 8
• Circumstances that may invalidate a legal transaction
• The effect of making a transaction invalid
• When a legal transaction is made void, it is as thought that transaction had never
been entered into at all
o Wiped out as from its very beginning (ab initio)
o All legal obligations that were created by that transaction are discharged, and
any money or property given back
▪ Neither party retains benefit
o Circumstances that make a legal transaction void are known as itiatig
irustaes eause the are ialidate or itiate the affeted
transaction
• Matters affecting the right to invalidate a transaction
• Party who wishes to invalidate a legal transaction must seek relief within a
reasonable time of having the opportunity to do so
o If they delay for too long, the court will treat their delay as a decision to ratify
the transaction and will not assist them
• Right to avoid a transaction will also be lost if, after discovering facts which might
give rise to such a right, party seeking relief does anything that is inconsistent with
an intention to have the transaction set aside
o Relief granted to a party if they have themselves engaged in conduct which
the law regards as improper
▪ These rules of equity require that a party seeking relief must have
ehaed appropriatel ad ask for relief ith lea hads
• Duress
• Obtaining consent by means of compulsion
• Legal transactions such as contracts are considered to be legally binding because
they are an exercise of the free will of the parties
o If a person consents to be bound by a transaction because they are forced
(compelled) to do so, rather than freely, the law says the agreement can be
set aside as from its beginning (ab initio) and the parties restored to their
pre-contractual position (restitution in integrum)
• Duress
o Obtaining consent by unlawful compulsion
• Threats of physical harm
• Law will not tolerate threats of physical violence (or the actual infliction of physical
har) as a eas of gettig aothers oset to enter a contract
o Threats made either directly against contracting party, or against person who
is related or close to them
• Threats of economic harm
• Critical question is whether the threat was in some way unlawful
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o The threat to wrongfully terminate the lease on a pretext is clearly unlawful
and amounts to duress
▪ Sometimes even a threat to do something that is unlawful might
constitute duress if, in the circumstances, making the threat amounts
to unconscionable conduct, because unconscionable conduct is
unlawful
• Threats to goods
• Courts now recognise threats to detain, damage or otherwise unlawfully deal with
aother persos goods ould ostitute duress
• Undue influence
• Obtaining consent by means of a controlling influence
• If a person with a controlling influence over another advises them to enter into a
legal transaction, the person receiving the advice might be unable to independently
judge what is in their own best interest
o If dominant party has used their controlling influence improperly, then the
situatio is desried as udue ifluee ad the affeted trasatio a
be set aside as void ab initio
• Situations involving a presumption of a general controlling influence
• Relationships where a dominant person has a general controlling influence over the
other
o Parent and child
o Guardian and ward
o Doctor and patient
o Religious advisor and believer
o Solicitor and client
o Trustee and beneficiary
• When this relationship exists, there is a presumption that a transaction entered into
on the advice of the dominant party is the result of undue influence
o Up to dominant party to rebut this presumption→ if not, then it can be set
aside as void
• Situations requiring proof of a general controlling influence
• In some relationships, a general controlling influence by one person over the other is
not presumed
o A weaker party may be able to prove that such a general controlling influence
actually exists, in which, it is then presumed that a transaction entered into
on the advice of the stronger party is the result of undue influence
▪ Dominant party must then prove that the transaction was not the
result of undue influence, which if failed, would set the contract aside
as void
o Husband and wife
o Principal and agent
o Accountant and client
o Banker and customer
o Dentist and patient
o Employer and employee
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