LAW2102 · Contract B
Common-Law Vitiating Factors & Rescission
Where a vitiating factor is made out, the contract is voidable and the innocent party may elect to rescind. This chapter covers the three common-law/equity branches: duress (illegitimate pressure that induces the contract and leaves no practical alternative — Universe Tankships; Crescendo), undue influence (actual or presumed from a relationship of trust — Johnson v Buttress), and unconscionable dealing (a stronger party unconscientiously exploits a known special disadvantage — Amadio; Blomley v Ryan; Thorne v Kennedy). It then covers rescission — setting the contract aside ab initio with substantial restoration (Alati v Kruger) and its bars (Henjo). It is examined where one party has been pressured, dominated or exploited into the contract.
What this chapter covers
- 011. Vitiating factor made out → contract VOIDABLE → innocent party may elect to rescind
- 022. Duress — illegitimate pressure + induced the contract + no practical alternative
- 033. Economic duress — esp. a threatened breach as illegitimate pressure (Universe Tankships; Crescendo)
- 044. Undue influence — actual (proved) vs presumed (from a relationship of trust/confidence)
- 055. Presumed undue influence shifts the onus; rebuttal by independent advice (Johnson v Buttress)
- 066. Unconscionable dealing — special disadvantage + known + unconscientious advantage taken (Amadio; Blomley v Ryan; Thorne v Kennedy)
- 077. Rescission — sets the contract aside ab initio; aims at restitutio in integrum; substantial restoration (Alati v Kruger)
- 088. Bars to rescission — affirmation, delay, third-party rights, inability to restore (Henjo)
Undue influence / unconscionable dealing + rescission (Topics 14–15)
- 2 marksIssue. Is there undue influence and/or unconscionable dealing, and is rescission available?
- 4 marksRule. Presumed undue influence arises from a relationship of trust/confidence, shifting the onus to the stronger party to show the transaction was a free, independent act (e.g. independent advice) (Johnson v Buttress). Unconscionable dealing: (1) special disadvantage; (2) the stronger party knew or ought to have known; (3) unconscientious advantage taken (Amadio; Blomley v Ryan; Thorne v Kennedy). If made out, the contract is voidable → rescission restores the parties ab initio; equity allows substantial restoration (Alati v Kruger); bars include delay, affirmation, third-party rights and inability to restore (Henjo).
- 5 marksApplication. Hale's dependence on Quill is a relationship of trust → presumed undue influence; Quill (the beneficiary) must rebut, but Hale got no independent advice, making rebuttal hard. Separately, Hale's bereavement and dependence are a special disadvantage that Quill knew of, and selling his own failing shop at an inflated price is taking unconscientious advantage (an Amadio-type case). For rescission, a few months' delay may still permit substantial restoration of the shop and money (Alati); watch for Henjo bars (delay, change in the shop's character, decline in goodwill).
- 3 marksConclusion. There are strong undue-influence and unconscionable-dealing claims, so the contract is voidable; Hale should elect to rescind promptly to preserve restitutio in integrum before a bar arises.
Key terms
- Voidable
- The status of a contract affected by a vitiating factor: it is valid until the innocent party elects to set it aside. The innocent party may rescind (and obtain restitutio in integrum) or affirm. Contrast 'void', which means no contract ever existed.
- Duress
- Illegitimate pressure that induces a contract (or variation) and leaves the victim no practical or reasonable alternative. Elements: (1) illegitimate pressure (e.g. a threatened unlawful act, such as a threatened breach of contract); (2) which induced the contract (consent overborne, not absent); (3) no practical alternative (Universe Tankships; Crescendo). The contract is voidable.
- Economic duress
- Duress applied through economic/commercial pressure, classically a threatened breach of an existing contract used to extract a variation. Genuine renegotiation in response to changed circumstances is not illegitimate pressure; a threatened breach to coerce agreement is.
- Undue influence
- Where one party's will is so influenced by another that the transaction is not their free, independent act. It may be actual (proved on the facts) or presumed (arising from a relationship of trust/confidence, shifting the onus to the stronger party to show free, independent will — e.g. independent advice) (Johnson v Buttress).
- Unconscionable dealing
- Where a stronger party unconscientiously exploits a special disadvantage of a weaker party. Elements: (1) a special disability/disadvantage seriously affecting the weaker party's ability to protect its own interests; (2) which the stronger party knew or ought to have known; and (3) the stronger party took unconscientious advantage (Amadio; Blomley v Ryan; Thorne v Kennedy).
- Rescission
- The remedy when a vitiating factor is made out: it sets the contract aside ab initio (as if it never existed), aiming to restore the parties to their pre-contract position (restitutio in integrum). Equitable rescission is discretionary and allows substantial (practical) restoration (Alati v Kruger); bars include affirmation, delay, third-party rights and inability to restore (Henjo).
Common-Law Vitiating Factors & Rescission FAQ
What is the difference between duress, undue influence and unconscionable dealing?
All three are vitiating factors making a contract voidable, but the focus differs. Duress is about illegitimate pressure that overbears the victim's will, leaving no practical alternative (Universe Tankships). Undue influence is about a relationship of trust in which one party's will is dominated, so the transaction is not a free, independent act (Johnson v Buttress). Unconscionable dealing is about a stronger party exploiting a known special disadvantage of a weaker party (Amadio). They overlap on the facts, so run whichever the facts support — often more than one.
What is the difference between actual and presumed undue influence?
Actual undue influence is proved directly on the facts. Presumed undue influence arises from a relationship of trust or confidence (some relationships, like solicitor–client, are presumed; others must be proved). The presumption shifts the onus to the stronger party to show the transaction was the weaker party's free, independent act — typically by showing independent advice was obtained (Johnson v Buttress).
What are the elements of unconscionable dealing?
Three: (1) the weaker party was under a special disability or disadvantage (e.g. poverty, illness, lack of education, emotional dependence) seriously affecting their ability to protect their own interests; (2) the stronger party knew or ought to have known of it; and (3) the stronger party took unconscientious advantage of it (Amadio; Blomley v Ryan; Thorne v Kennedy). All three must be made out.
What does rescission do, and what can bar it?
Rescission sets the contract aside ab initio, aiming to restore the parties to their pre-contract position (restitutio in integrum). Equitable rescission is discretionary and allows substantial restoration even where precise restoration is impossible (Alati v Kruger). It can be barred by affirmation, lapse of time/delay, intervening third-party rights, or inability to make substantial restoration — Henjo refused rescission for delay plus a substantial change in the business and decline in goodwill.
How is this topic examined?
Through facts showing one party pressured, dominated or exploited into the contract. Identify which vitiating factor(s) the facts support (often duress plus undue influence, or undue influence plus unconscionable dealing), apply the elements with the leading cases, then turn to rescission — the contract is voidable, the remedy aims at restitutio in integrum (Alati), and you must test the bars (Henjo). Note Yerkey/Garcia (special wives' equity) is not examinable.
Exam move
Treat the three branches as a menu you scan in order: duress (illegitimate pressure → induced → no practical alternative, Universe Tankships/Crescendo), undue influence (actual or presumed-from-relationship → rebut by independent advice, Johnson v Buttress), unconscionable dealing (special disadvantage → known → advantage taken, Amadio/Thorne v Kennedy). Because they overlap, argue every branch the facts support. Then always converge on rescission: voidable, restitutio in integrum, substantial restoration (Alati), and the bars (Henjo) — delay, affirmation, third-party rights, inability to restore. Memorise the elements as keyword-plus-case so you can drop them in fast, and keep the vitiating-factors menu diagram in your kit. Skip Yerkey/Garcia, which is not examinable.
