What Is Undue Influence?
Let me explain undue influence directly: it's when one person uses their power or position over another to push decisions that might not serve the other's best interests. You see this often in relationships where one side has an edge, like higher status, more education, or strong emotional bonds. The stronger party leverages this to coerce the weaker one into choices that could harm them long-term.
As an equitable doctrine, undue influence means someone takes advantage of their power, making the other party's consent invalid because they can't freely decide. This power imbalance lets the influencer exploit the situation. In contract law, if you're claiming undue influence, you might get the agreement voided.
Understanding Undue Influence
You need to grasp that undue influence is about using an advantage to force someone else's choices, usually hurting the weaker party while benefiting the stronger one. Think of relationships like a doctor and patient or parent and child—these are flagged legally as risky for undue influence. Here, the influential person must prove they weren't exploiting their position.
In other cases, based on past dealings, one party might be accused of abusing trust for their gain. It can range from small favors to huge deals worth billions, and if enough influence is proven with other factors, some agreements can be legally thrown out.
Example of Undue Influence
Take this scenario: Bert is Ernie's therapist and also tied up in some real estate developments. Ernie mentions hearing about units for sale in Bert's project, but he's not interested and doesn't think it's the right time for him to buy. Still, he feels pressured seeing his friends investing.
Bert, using his influential role, convinces Ernie that investing is a smart life move. This hurts Ernie financially but boosts Bert's investment value. That's undue influence in action—Bert exploited his power.
Undue Influence in Financial Markets
You should know there's a widespread issue of undue influence in global financial markets. It can be straightforward, like using insider info to push a sale or purchase, or complex, such as pressuring board members to vote a certain way. To cut down on this, bring in third-party counsel or a mediator during big deals or trades—it helps prevent exploitation.
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