A. Introdution

• Author: John D. McCamus
• Profession: Professor of Law. Osgoode Hall Law School, York University
• Pages: 364-367

Page 364

This chapter examines a cluster of doctrines applicable to circumstances where a stronger party has taken advantage of a weaker party in the course of inducing the weaker party’s consent to an agreement. More particularly, the common law doctrine of duress and the equity doctrines of undue influence and unconscionability will be considered. Where applicable, each doctrine renders the agreement in question un-enforceable at the option of the weaker party. These doctrines constitute, then, exceptions to or limitations on the general approach of the common law to the effect that where two parties having contractual capacity reach a consensus ad idem on an exchange of value, the resulting bargain is enforceable. These doctrines are interrelated and, in a particular fact situation, it may be appropriate to consider the application of two or even all three of the doctrines.

The organization and interrelation of the doctrines bears the burden of the historical division of private law doctrine into doctrines of common law and those of equity. The relationship between common law duress and equitable undue influence illustrates the point. Both of these doctrines consider the effect of threats of various kinds made to induce the threatened party to enter into an agreement. Thus, the common law doctrine of duress provided relief essentially in cases of agreements induced by dire threats, such as threatened physical violence.

Page 365

Equity in its traditional role of ameliorating the harsh edges of the common law, was prepared to render unenforceable agreements induced by less dire threats. This aspect of the equitable doctrine has come down to us as the doctrine of "actual" undue influence.¹

There is a second branch to the law of undue influence, however, dealing with the inducement of agreements in circumstances where the transaction results from abuse of a relationship of trust and confidence. Where such a relationship is found to exist, the existence of undue influence is presumed and this second branch of the doctrine of undue influence is therefore often referred to as "presumptive" undue influence. Under this branch the existence of a threat of some kind is not required. Under the traditional principles of duress at common law and actual undue influence in equity, a threatened breach of contract in a commercial setting would not be considered to be a threat in the requisite sense. In the late-twentieth century, however, it became...