What is Undue Influence?

Undue influence occurs when one party to a transaction is able to influence the decisions of another party to the transaction.

How Does Undue Influence Work?

Anybody who's ever had a pushy girlfriend or boyfriend knows what undue influence feels like. Let's say John Doe for whatever reason lands in jail for a night. He calls his girlfriend, Jane Smith, to bail him out. She does so only on the condition that John signs a contract agreeing to purchase 40% of her pizza parlor business for $100,000.

John, wanting to get out of jail and not lose Jane Smith's affections, signs the contract. He does not do so with reasonable care because he is being pressured by the other party, which happens to have the upper hand over John.

Undue influence is often claimed in estate disputes; disappointed heirs often argue that the deceased wrote a will or created a trust under undue influence from a beneficiary of the will or trust.

Why Does Undue Influence Matter?

Undue influence gives one party an advantage over another. In some cases, a party that is the victim of undue influence may be able to void a contract he or she signed while under the effects of that influence.

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Paul Tracy
Paul Tracy

Paul has been a respected figure in the financial markets for more than two decades. Prior to starting InvestingAnswers, Paul founded and managed one of the most influential investment research firms in America, with more than 3 million monthly readers.

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