National Westminster v Morgan [1985] AC 686

Key point

  • The doctrine of inequality of bargaining power was rejected by the House of Lords; the doctrine of undue influence is not subsumed by it


  • D and her husband bought a house on a mortgage from a building society
  • When the mortgage payment fell into arrears, the husband asked the bank (C) to refinance the loan
  • The bank manager obtained D’s signature for a legal charge on their on the house
  • When the husband defaulted on the loan, C sought possession of the house
  • D argued undue influence in defence

Held (House of Lords)

  • The transaction was not set aside; there had been no undue influence
  • The doctrine of inequality of bargaining power was rejected

Lord Scarman

Rejection of inequality of bargaining power

  • In Lloyds Bank v Bundy, Lord Denning M.R. believed that the doctrine of undue influence could be subsumed under a general principle that English courts will grant relief where there has been “inequality of bargaining power” (p. 339)
  • The opinion of Lord Denning was not the ground of the court’s decision since the majority decided the case on the orthodox view of the principle in Allcard v Skinner
  • The principle was formulated in the language of contracts and is not appropriate to gifts
  • But even in the field of contract ‘I question whether there is any need in the modern law to erect a general principle of relief against inequality of bargaining power. Parliament has undertaken the task – and it is essentially a legislative task – of enacting such restrictions upon freedom of contract as are in its judgment necessary to relieve against the mischief’: p.708A

No finding of undue influence

  • For presumption of undue influence to arise, it is not enough that there is a relationship of trust and confidence, the transaction must be manifestly disadvantageous to the party seeking relief
  • The relationship between banker and customer is not one which ordinarily gives rise to undue influence
  • There may be circumstances where the banker ‘crossed the line’ by giving advice on the merits of the transaction as held by Sir Eric Sachs in Lloyds v Bundy at p. 347, but this is not one of those cases
  • Furthermore, the transaction was not unfair to D since she was not liable for anything more than to save the house


  • The concept of manifest disadvantage was rejected in Barclays v O’Brien as well as Etridge, however, Lord Nicholls in Etridge held that the consideration given must not be so large as to be inexplicable by the relationship of the parties for there to be presumed undue influence – thus it seems that while the terminology of manifest disadvantage was rejected, the substance of the concept is still preserved as one of two requirements for presumed undue influence