What does undue influence mean in contract relationships?

Undue influence in contract relationships refers to a situation where one party exerts excessive pressure or dominance over another party, leading to an unfair advantage in the formation of the contract. This occurs often in relationships where there is a power imbalance, such as between a guardian and a ward, or a lawyer and a client. The party in the weaker position may not be able to make decisions freely or may feel compelled to agree to terms they would not have otherwise accepted if the relationship had been more balanced.

This is distinct from the other options provided:

• False statements that induce someone to enter a contract pertain to misrepresentation, which involves deception rather than a power imbalance.

• Threats or acts used to induce agreement represent coercion, which is different from undue influence, as the latter does not require an overt threat or force.

• Errors affecting the agreement's validity relate to mistakes made by one or both parties about essential terms of the contract, which is unrelated to the notion of undue advantage or manipulation inherent in undue influence.

Understanding undue influence helps to safeguard individuals in contractual matters, ensuring that agreements are made freely and fairly, and that parties are protected from exploitation.