Contracts and Sales Multistate Bar Practice Exam

What must be proven to establish undue influence in a contract formation?

1. Presence of written contracts between parties

2. Peoples' prior relationships and the balance of power

3. Demand for evidence of fair market value

4. Both parties must have been affected equally

The correct answer is: Peoples' prior relationships and the balance of power

To establish undue influence in the context of contract formation, it is essential to demonstrate the prior relationships between the parties involved and the balance of power between them. Undue influence arises when one party is in a position of strength or dominance over another, which may lead the latter to enter into a contract that they wouldn't have agreed to if they were acting independently and free from that influence. The presence of a close relationship—such as between a caregiver and a dependent person—can create a susceptibility to persuasion and manipulation. Additionally, if one party holds a position that allows them to exert pressure or control, the dynamics of influence come into play. The court will examine these factors to assess whether the influence exercised over the weaker party was improper or coercive. By focusing on relationships and power dynamics, this analysis balances the competing interests of personal autonomy and protection against exploitation. The other options, such as the requirement of written contracts, demand for evidence of fair market value, and the notion that both parties must be equally affected, do not directly relate to the concept of undue influence and do not properly assess the dynamics that lead to a finding of such influence.