Multiple choice

‘A’ applies to a banker for a loan at a time when there is stringency in the money market. The banker declines to make the loan except an an unusually high rate of interest. ‘A’ accepts the loan on these terms. In this case the contract is

  1. vitiated by undue influence

  2. valid because this is a transaction in the ordinary cause of business

  3. void because the banker took unfair advantage of stringency in the money market

  4. voidable at the option of ‘A’ who was deceived by the banker
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Undue influence requires one party to be in a dominant position over the other. Banking transactions, even at high rates during market stringency, are in the ordinary course of business. The borrower is free to accept or reject the terms - no dominance, no undue influence.

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