Consent

Gordon v. Roebuck (1992)

It was suggested that a contract between lawyers be set aside on the grounds of economic duress. The court assessed the facts based on the four tests first put forward in the Pao On v. Lau Yiu case (also summarized in From The Case Books, page 3 of the Canadian Contract Law Centre). Did the party claiming economic duress protest? Was there an alternative course open to him? Was he independently advised? After entering the contract, did he take steps to avoid it? The judge concluded that there was economic duress but then went on to say that "the appellant, in claiming unjustifiable economic duress, had the onus of proving that (the defendant) was not entitled to the amounts required under the impugned agreement." This was a matter of evidence and the onus having not been satisfied, "the agreement was not one which could be set aside as one executed under unjustifiable economic duress."

Geffen v. Goodman Estate (1991)

The Supreme Court of Canada reviewed a case from Alberta where a trust was set up by a "manic depressive and immature" woman. She went to see a lawyer recommended by her brothers to set up a trust. After her death, her son was not happy with the trust and tried to have it set it aside arguing that his mother was unduly influenced by either the brothers or the lawyer. The Supreme Court refused to buy the argument and allowed the trust to stand. The Court was unable to agree on some fundamental principles but the following is what Justice Wilson came up with: a presumption of undue influence can arise in certain relationships; each relationship must be looked at individually; the existence of confidentiality between the parties is not a absolute requirement; a presumption of undue influence arises between parent/child and solicitor/client; in commercial transactions, undue disadvantage or benefit must also be shown; that once the presumption exists, it must be rebutted with evidence that the transaction was entered into "as a result of his own full, free and informed thought." Justice La Forest refused to endorse Wilson's "commercial transaction" dicta, saying that this case did not even involve a commercial transaction. La Forest noted that the deceased had a "deep-rooted poor relationship" with her brothers which tended to negate the suggestion of undue influence.

Morrison v. Coast Finance Ltd. (1965)

A 79-year old widow was induced into mortgaging her home to allow two men to buy cars. "Undue influence attacks the sufficiency of consent ... that a bargain is unconscionable invokes relief against an unfair advantage gained by an unconscientious use of power by a stronger party against the weaker. On such a claim, the material ingredients are proof of inequality in the position of the parties arising out of the ignorance, need or distress of the weaker which left him in the power of the stronger, and proof of substantial unfairness of the bargain obtained by the stronger. On proof of these circumstances, it creates a presumption of fraud which the stronger must repel by proving that the bargain was fair, just and reasonable." The court held the finance company responsible because they "undertook the preparation of the documents" and took "advantage of her obvious ignorance and inexperience to further their respective business" raising a presumption of fraud. The mortgage was set aside.

Marshall v. Canadian Permanent Trust Company (1968)

According to doctors, John Walsh was "definitely not capable of transacting business" having just suffered a stroke. This did not stop Marshall from seeking and obtaining his signature on an offer to purchase Walsh's land. Two months later, Walsh's affairs were formally turned over to the administration of Canadian Permanent Trust, appointed under provincial mentally incapacitated persons legislation. The trust company refused to close the deal arguing that it was unconscionable. The court said there were two criteria to be met: "(1) that Walsh was incapable of protecting his interests; (2) that it was an improvident transaction for Walsh. With respect to (1), it is not material whether Marshall was aware of Walsh's incapacity. With respect to (2), the onus rests with the plaintiff (Marshall) to show that the price given for the land corresponded to its fair value." The plaintiff succeeded on both accounts and the contract was rescinded.

Lloyds Bank v. Bundy (1975)

In this British case, an old farmer mortgaged his farm to the hilt to help out his son and soon enough, the bank moved in to foreclose. The court acknowledged that "in the vast majority of cases a customer who signs a bank guarantee or a charge cannot get out of it. There are many hard cases which are caught by this rule.... Yet there are exceptions.... where the parties have not met on equal terms." The court went on to mention that cases of duress of goods are voidable; when a party is taken advantage of because of a desperate need of the goods. And then there was the "unconscionable transaction ... when a man comes into property - and then being in urgent need - another gives him ready cash for it, greatly below its true value.... Even though there is no evidence of fraud or misrepresentation, nevertheless the transaction will be set aside." The third category is undue influence where a relationship gives some advantage. Then there are the cases of undue pressure and the salvage agreements (the latter when a vessel is in danger of sinking .. and the rescuer takes advantage of his position). The court suggested that all these instances "run on a single thread: inequality of bargaining power" and that "undue" does not mean wrongdoing nor "that every transaction will be saved by independent advice but the absence of it may be fatal." The court then concluded that the bank had a relationship of confidence with the farmer, a conflict of interest and by failing to suggest that he seek independent advice, the court disallowed the foreclosure action.

Harry v. Kreutziger (1978)

A fishing boat was sold in a high pressured bid by the defendant. When "a claim is made that a bargain is unconscionable, it must be shown for success that there was inequality in the position of the parties due to ignorance, need or distress of the weaker, which would leave him in the power of the stronger, coupled with proof of substantial unfairness in the bargain. When this has been shown, a presumption of fraud is raised, and the stronger must show, in order to preserve his bargain, that it was fair and reasonable." The court then proceeded to rescind the contract because the "appellant was so dominated and overborne by the respondent that he was ... within the power of the respondent in these dealings." Another judge hearing the case agreed but for slightly different reasons, invoking "community standards of commercial morality." Both principles prosper in Canadian case law.