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DOCTRINE OF UNDUE INFLUENCE AND THE MANNER AND

EXTENT OF ITS TREATMENT IN KENYA


Undue influence is an equitable doctrine, which applies where one party uses their influence over
the other to persuade them to make a contract1. The innocent party was not free to exercise
independent judgment while entering into the contract. Where a court finds out that a contract
was made as a result of undue influence then it may:
a) Set it aside
b) Modify its terms so as to mitigate the disadvantage
The first option is more common while the second option is also applied by the courts though
rare. This can be seen in the case of:
National Bank of Kenya limited v Pipeplastic Samkolit (k) Ltd and another (2002) EA 503
The court of appeal stated obiter thata court of law cannot rewrite a contract between
parties. The parties are bound by the terms of their contract unless coercion, fraud or undue
influence are pleaded and proved.
From that case we can see that a court of law can set aside or rewrite a contract where it finds
that undue influence has been exercised.
There are two types of undue influence and these are: a) Actual undue influence
b) Presumed undue influence
a) ACTUAL UNDUE INFLUENCE
This arises where the claimant can prove that they entered into the transaction as a result of
undue influence from the other party. In these cases, the influence tends to be of a kind which is
similar to, but falls short of duress. This type of undue influence can be seen in the case of:
Benedict Ngula Nguli v Gedion Nduva Mwendo and Priscilla Mwendo2
1Contract Law by Francis Quin and Catherine Elliot

This appeal raised two questions one being whether there was a valid contract between the
parties and two whether in fact the contract, if at all was entered into by coercion or not. In this
case Justice Isaac Lenaola accepted the evidence of the 1st appellant that she acceded those terms
of the contract to save her son who had been in detention for more than 12 hours. Such
agreement cannot have been voluntary and therefore was voidable.
b) PRESUMED UNDUE INFLUENCE
In some certain circumstances an evidentiary presumption will be applied that shifts the burden
of proof from the claimant to the defendant, so that it is up to the defendant to disprove the
existence of undue influence.
Undue influence may be presumed where there is a pre- existing relationship of confidence
between the two parties to a contract, as a result of which one places trust in the other, and the
contract between them is manifestly disadvantageous to the party who places trust in the other.
Such a relationship of trust is called a fiduciary relationship, and it may arise in two ways.
Firstly it may fall into the several categories where a relationship of trust is automatically
presumed to exist e.g. Parent and child, solicitor and client and many others. Where a fiduciary
relationship does come into one of these categories, a relationship of trust may nevertheless be
established on the facts and circumstances of the case. For one to prove undue influence one has
to establish and prove that there was a relationship of trust as shown in the case:
Agnes Wachu Wamae and 104 others v Barclays Bank of Kenya.3
In this case the claimants counsel submitted that the court will intervene and set aside a contract
which a party enters without independent advice or a contract the terms of which are very unfair
or accepts payment which is grossly inadequate where his bargaining power is grievously
impaired by reason of his own deeds or desire or ignorance coupled with undue influence or
pressure brought to bear on him. He went further and cited the case of Lloyds bank v Bundy
[1974]3 ALL ER 757. The court held that there was no undue influence and further stated the
2 EKLR Civil Appeal 28 of 2002
3 Industrial court of Kenya cause 806 of 2011

respondents counsel which stated that the claimant have failed to prove that a relationship of
confidence existed between them and the respondent which is a fundamental requirement for
asserting undue influence.

MANIFESTLY DISADVANTAGEOUS TRANSACTION


Where a party seeks to rely on the existence of presumed undue influence, the transaction must
be manifestly disadvantageous. A manifest disadvantage is where a transaction looks
suspiciously unfavourable towards one party. In the case of:
C.H. Patel v Pankaj S. Thakore 4
The respondent in this case was a schoolboy with full age and he owned land purchased for him
by his father. A loan was obtained with the property as security, but the cheque was made out in
the fathers name. The loan was not repaid and action was taken against the respondent, who in
turn pleaded undue influence. The trial court held that although the respondent was fully aware
of the nature of the transaction he was under the influence of his father. The appellant
successfully appealed. The court of appeal stated that the wording of s.16 of the Indian Contract
Act was clear. For undue influence to be effective in avoiding a contract it must be shown that
the undue influence was exercised by one party to a contact to the other party of the contract.
Here the father was not a party to the contract.. To avoid the contract it had to be shown that the
appellants were in a position to dominate the will of the respondent and that they used that
position to obtain an unfair advantage for themselves. None of these were present.
Where there is no fiduciary relationship then the claim will not succeed an example is in the
instance of employer-employee relationship. This was shown in the case: Alfred Nephat
Mwaniki v Barclays Bank of Kenya 5
The plaintiff was a senior employee for 24 years until his employment came to an end. On the
morning of 3rd August,1992 he was summoned by his two officials of the bank and he stated that
4 [1965] E.A. 629
5 Civil suit 3025 of 1994

he was subjected to harassing interrogations on false allegation resulting to the end of his
employment by him signing his resignation letter. He filed a suit stating that there was undue
influence when he signed the letter. Justice Alnashir Visram stated I have also read all the cases
cited but nothing stated therein would have affected my conclusion. In fact one of the authorities
cited to me by the plaintiff argues against the position taken by the plaintiff. The paragraph on
undue influence talks about situations when undue influence may be presumed, but
specifically excludes employer-employee relationship
CONSTRUCTIVE NOTICE
The defendant can rebut the presumption of undue influence by showing that the claimant
entered into the contract freely, and this is usually done by establishing that independent advice
was taken. This is also known as avoiding constructive notice by taking reasonable steps to
satisfy that the other partys agreement had been freely given. Failure to do this will result to the
contract being set aside due undue influence. This is shown in the case of:
Anjanaben Anil Shah V Akiba bank limited6
Two companies and the plaintiffs said husband borrowed money from the defendant and secured
the repayment thereof by inter alia charging the suit property to the defendant. The borrowers
defaulted ad the defendants sought to exercise its statutory power of sale and the charge thus
provoking thus suit and application. The plaintiffs permission was obtained by undue influence
of the husband due to her trust and faith in her husband. The court held that the plaintiff has
therefore shown a prima facie basis that the defendant cannot rely on her consent to the charge
and that the charge was not read or explained to her. In the premises the defendant did not take
reasonable steps to satisfy that the plaintiff understood the nature and effect of the charge. Hence
they did not avoid constructive notice. The court ruled in favour of the plaintiff.
UNDUE INFLUENCE AND THIRD PARTIES
The rights of a contracting party are affected by the impropriety of the third party if they knew of
it or are deemed to have such knowledge (as constructive knowledge). In these circumstances,
the innocent party is entitled to have the contract set aside. This can be seen in the case:
6 Civil case 374 of 2005 High court of Kenya

Madhupaper International ltd and another v Kenya Commercial Bank ltd and 2 others 7
In this suit the plaintiff raises a restitutionary claim, to claim a sum of money of shs 56,000,000,
from the defendants, on the well-known principle of unjust enrichment whose object is the
reversal of a defendants unjust enrichment or unjust benefit received at the undeserved expense
of a plaintiff, and in this case by means of coercive pressure and undue influence. The court
observed that it was clear that the third defendant benefited from the undue influence and
coercive pressure applied by or on behalf of the first defendant, so did the second defendant, as
did the first defendant do directly. All the defendants knew of what was going on and received
the unjust enrichment and had constructive knowledge. The plaintiffs suit succeeded against
the 3 defendants. The court entered judgement for the plaintiff to recover from the defendants
jointly and severally the unjust enrichment of shillings 56 million paid by the plaintiffs to the
defendants under coercive pressure and undue influence.
N/B: In view of the above research paper we should note that the courts are unwilling to extend
however to extend the concept of undue influence to situations where one party has taken an
unfair advantage over the other party due to the weak bargaining power of that party. Neither will
they give assistance to a person with lack of business expertise such that the other party has a
chance of exploiting him. See Gatobu Mibuutu Karothe v Christopher Muriithi Kubai 2014
EKLR where the court held that:
As was stated by Shah JA in the case of Fina Bank Ltd v Spares and
Industries Ltd (2000) 1 EA 52: It is clear beyond peradventure that save for those special
cases where equity might be prepared to relieve a party from a bad bargain, it is ordinarily no
part of equity function to allow a party to escape from a bad bargain.
CONCLUSION
It is evident from the authorities cited herein above that the doctrine of undue influence has been
interpreted by our courts in Kenya with the overarching effect that a contract based on undue

7 Civil case 1263 of 1992 High Court of Kenya

influence will be held voidable and the courts will either set it aside or modify its term to
mitigate the disadvantage.

REFERENCES
1) Law of contract in east Africa by R.W. Hodgin
2) Contract law 7th edition by Catherine Elliott and Francis Quinn
3) http://www.kenyalawresoursecenter.org/
4) http://www.kenyalaw.org/

ADMISSION NUMBER: L95S/14436/2015

COURSE NAME: LAW OF CONTRACTS 2

COURSE CODE: LCC 102

COURSE LECTURER: MR. JOHNSON ADERA

SUBMISSION DATE: 1st March 2015

SIGNATURE: