Case name & citation: Williams v Bayley (1866) LR 1 HL 200
Year of the case: 1866
Jurisdiction: The House of Lords, UK
Area of law: Undue influence
What is the case about?
Williams v Bayley is an English contract law case that illustrates that an agreement may be cancelled on account of undue influence.
Facts of the case (Williams v Bayley)
Bayley’s son went to a bank with promissory notes that he had forged in his father’s name and without his father’s knowledge. The notes were forgeries. The son had done this several times before and gotten away with it each time. On one occasion, the bank brought the promissory note into doubt because it had been dishonoured. The son redeemed it, but Bayley was unaware of the reason why the note had been dishonoured, so the son continued.
On the discovery of the truth, the bank managers threatened prosecution of the son, and the father to avoid this threat was proposed to give an equitable mortgage to the bank on his property. Therefore, in order to pay them back, Bayley did as was asked, but later filed a lawsuit against the bank challenging the legality of the agreement with the bank.
Issues that were raised
Whether the agreement between the bank and the father was lawful?
Given that the agreement was created as an alternative to prosecuting the son for his fraud, could it be set aside on account of undue influence?
Judgement of the Court in “Williams v Bayley”
The mortgage agreement was held to be null and void. Because the agreement was solely made to keep his son from facing criminal charges, it could not be enforced in equity. Bayley was in a tough situation and was at no fault. As a result, he made an illegitimate agreement in order for his son to evade prosecution for his criminal act of fraud.
It was held that the bank took unfair advantage of the situation of the other and used undue influence to force an agreement from the father. The Court observed that the fears of the father were stimulated and operated on to an extent to deprive him of free agency.
Further, the bank had accepted a position that was contrary to ethics, justice, and morality. Hence, this was deemed to be a significant deviation from what an agreement should be in the absence of pressure.
The legal point emerging from the case
In situations where a stronger party places improper pressure on the weaker party to wrongly influence them to enter into an agreement against their free will, the doctrine of undue influence can be applied to attain equity. In such situations, the contract is invalidated as was done in the instant case of Williams v Bayley.
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