FLK1 · Multiple-choice practice

FLK1 Contract Law — Question 40

Question

Mary is an elderly woman who recently inherited a significant amount of money. Her nephew, John, who has been helping her manage her finances, persuades her to transfer a large portion of her inheritance to him, claiming he will invest it wisely on her behalf. Mary, trusting John completely and feeling pressured by his insistence, agrees and transfers the money. Later, Mary learns that John has used the money for his personal expenses and not for investments as promised. Mary feels that she was tricked by John and wants to take legal action to recover her money. Which of the following elements must Mary prove to successfully reclaim the funds in this scenario?

That John made a fraudulent misrepresentation about the investments
That Mary lacked mental capacity to make the financial decision
That there was a relationship of trust and confidence between Mary and John, and that John exploited this relationship to Mary’s detriment
That Mary was physically coerced by John to transfer the money
That Mary received no consideration for the money transferred to John

Answer and explanation

Correct answer: C. That there was a relationship of trust and confidence between Mary and John, and that John exploited this relationship to Mary’s detriment

In cases of undue influence, it must be shown that there was a relationship of trust and confidence between the parties, and that one party exploited this relationship to the detriment of the other. In this scenario, Mary trusted John to manage her finances, creating a fiduciary relationship. John exploited this trust to persuade Mary to transfer her inheritance, which he then used for his personal expenses. This exploitation of the trust and confidence Mary placed in John constitutes undue influence. The other options are not directly relevant to a claim of undue influence: fraudulent misrepresentation involves false statements to induce someone into a contract, lacking mental capacity involves the inability to understand the nature of the transaction, physical coercion involves the use of force or threats, and lack of consideration refers to the absence of mutual exchange in a contract. Therefore, the key element Mary needs to prove is the relationship of trust and confidence and John’s exploitation of it.

Original newsletter explanation ↗

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