National Westminster Bank Plc v Morgan [1985]

National Westminster Bank Plc v Morgan [1985] UKHL 2 is a significant House of Lords decision in English contract law, particularly concerning the doctrine of undue influence. The case gained prominence due to Lord Scarman's remarks on the supposed necessity of manifest disadvantage to set aside a contract for undue influence.

A bank manager from National Westminster Bank visited Mrs Morgan's house to have her sign a charge, providing security for refinancing the family home. Mrs Morgan received no independent advice. Following her husband's death, the bank sought to enforce the charge, leading Mrs Morgan to resist enforcement, claiming that she had been unduly influenced by the bank when entering into the agreement.

The Court of Appeal, under Dunn LJ, found that manifest disadvantage was not an essential requirement for presumed undue influence. However, they acknowledged the absence of cases where there was no manifest disadvantage, asserting that Mrs Morgan did not fully consent to the charge. The House of Lords, in their judgment, held that evidence of the transaction being wrongful, constituting an advantage taken of the person under influence, was necessary. Importantly, it was emphasised that no confidential relationship existed between the wife and the bank manager beyond the typical business interaction.

Lord Scarman's substantive judgment challenged the notion of erecting a general principle of relief against inequality of bargaining power in contract law. He questioned the need for such principles when legislation, like consumer protection laws, addressed concerns about freedom of contract. While the case was often cited for requiring manifest disadvantage, Lord Scarman did not expressly state this, leading to subsequent clarifications in later cases.

In later jurisprudence, CIBC Mortgages Plc v Pitt [1994], Lord Browne-Wilkinson clarified that Lord Scarman did not intend to establish a general principle requiring manifest disadvantage. Browne-Wilkinson affirmed that manifest disadvantage was not a requirement for cases of actual undue influence, differentiating it from presumed undue influence.

The case of National Westminster Bank Plc v Morgan, therefore, stands as a notable legal precedent that prompted discussions and clarifications regarding the necessity of manifest disadvantage in claims of undue influence in contract law.
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