(a)Wendy told her very elderly brother Johnnie, who was seriously ill for some time that she
would care for him until he recovers. Wendy then asked Johnnie to transfer all his property
to her. He did what his sister asked him to do. When Johnnie’s wife, Susie found out about
the whole matter, she was very unhappy and she thinks this is a voidable contract.
(5 marks)
INTRODUCTION
A contract is not enforceable if its object is considered to be illegal or against public
policy. In many jurisdictions contracts predicated upon lotteries, dog races, horse races,
or other forms of gambling would be considered illegal contracts. When entering into
agreement, the parties must be free consent to contract. The free consent as provided in
Section 10(1) “All agreements are contracts if they are made by the free consent of
parties competent to contract for a lawful consideration and with a lawful object, and are
not hereby expressly declared to be void”. Under Section 14, consent must be free and
not caused by coercion, undue influence, fraud, misrepresentation and mistake.
ISSUE
Based on the question it would regard to the issue of undue influence and we are required
to advise Susie whether the contract made by her husband, Johnnie, is enforceable or not.
Undue influence is an essential idea that one party, Wendy, has taken advantage of a
relationship of trust and confidence to the substantial detriment of the party, Johnnie, who
has reposed the trust and confidence in her. Such treats would now constitute duress, but
the equitable concept of ‘pressure’ is still wider than that of duress at common law, for
undue influence cannot be exercised with making illegitimate threats or indeed any treats
at all. A doctrine can be applied in two potential pathways through actual and presumed
undue influence. According to Section 20 Contract Act 1950, when consent to an
agreement is caused by undue influence, the agreement is a contract voidable at the
option of the party whose consent was so caused.
CASES
The presumption of undue influence is illustrated in Allcard v Skinner. The claimant was
introduced by her spiritual director and became a professed member of the sisterhood.
She made gifts of money and stocks amounting to the value of £7154 to Miss Skinner
without independent advice as to the nature and effect of the transaction. The plaintiff
attempted to recover the assets six years after she left the sisterhood and she claimed the
return of the remaining property on the grounds had been procured from her by undue
influence of Miss Skinner. The court has held that the plaintiff’s gifts were voidable
because it is not reasonably accounted. In other words, undue influence could be present.
Allcard knew her rights and the property was made over to Miss Skinner as a gift that
was the independent and well-understood act of a man in a position to exercise a free
judgment based on information as full as that of the done. However, on the fact, the
rescission of her gifts is unsuccessful because of a lapse of time.
In the case of O’Connor v Hart, Vendor, at the age of 83, sold a trust property to Hart
when he is of unsound mind but Hart did not know and was fair in his negotiations with
Vendor’s solicitors. Hart occupied and improved the land. When O’Connor, one of the
Vendor’s brothers, took over as a trustee of the estate he sought to set aside the contract.
The board held that Vendor is lacking contractual capacity and accepted the principles
that a contract made by a person of unsound mind but appears to be of sound mind with
another person is valid. There is no unfairness or equitable fraud that can be imputed to
the party that has no knowledge of the other’s unsoundness. Unfairness amounts to
equitable fraud which would have enabled the complaining party to avoid the contract
even if he had been sane.
In Schomberg v Taylor case, Mrs. Taylor created a will in 2008 which she left the
majority of her property to her nephews and only small gifts to her 2 stepsons. But the 2
stepsons counterclaimed asking the court to pronounce against it and in favor of the first
will. It is evidence to show that the nephew’s father repeated to called Mrs. Taylor ask
her to change her will that would in favor of his sons. The court held that there is an
undue influence to change her will due to the circumstances that Mrs. Taylor face in –
vulnerability when her husband passed away and she wish the constant telephone calls to
be ceased. The nephew’s father had the motive for doing such matter as he was in the
trouble of financial problems and tends to grip benefits from his children inheritance.
Lastly, the court has declared that Mrs. Taylor had bowed to pressure to make the new
will and the 2005 will is truly reflects her wishes.
SITUATION
It is evidence for undue influence in a contract, Johnnie has no any advice received from
a third party, her wife, before entering into the impugned transaction. It is one of the
matters a court takes into account when weighing all the evidence. Advice from a
solicitor or outside adviser can bring an emancipating effect to a complainant a proper
understanding of what he or she is decide to do. The appellant did not contend that he did
not understand the nature of the transaction which he had entered. The presumption of
undue influenced can be found in cases of [Allcard v Skinner]. The court will take the
consideration the gifts in terms of nature and size. If the transaction is out of all
proportion to the kindness in question, the presumption of undue influence will arise.
On facts it seems that Wendy obtained the property consisted the elements of fraud as it
called Johnnie to transfer his property when he is having serious illness this would
amount as an unsound mind. Sound mind is defined in Section 12(1), “A person is said to
be of sound mind when he is capable of understanding and forming a rational judgment.
It must be clearly proved that the person is presumed to be sane as not to know the nature
and quality of the act he was doing or he did not notice that he was doing something
wrongly. And this was demonstrated by the cases of [O’Connor v Hart].
Under Section 16(2) Contract Act 1950, in particular and without prejudice to the
generality of the foregoing principle, a person is deemed to be in a position to dominate
the will of another where he makes a contract with a person whose mental capacity is
temporarily or permanently affected by reason of age, illness or mental or bodily distress.
Susie has claimed that Wendy abused the influence she acquired in a relationship of trust
and confidence the plaintiff has succeeded by recourse to the rebuttable evidential
presumption. There is an existence of the motive of affection which conferring substantial
financial benefits on her brother. It has the similar situation as [Schomberg v Taylor]. As
Johnnie is relying Wendy to take care of him, Wendy may use her power over Johnnie
and their heavy involvement in his daily life to exert undue influence. He may be terrified
of her if he refuses his wishes as Wendy may isolate him from other people in various
methods. Therefore, he transfers the property to the name of Wendy which is not
reflecting his wishes.
CONCLUSION
The contract is voidable and the property could be returned to Susie if Wendy has made a
contract with Johnnie who is undergoing the unsound mind condition. This is because
Johnnie does not fulfill the capacity or not competent to contract according to law to
which he is of unsound mind. On the other hand, the contract is counted as valid if
Wendy makes the contract with Johnnie when he is of sound mind. This is because
Johnnie has the full capacity of forming a rational judgment upon his interest and has
fulfilled the condition which is sound mind.