Independent legal advice (Etridge)—checklist for a lender taking third-party security from an individual and checklist for a solicitor advising an individual in relation to granting third-party security


Published by a ÀÏ˾»úÎçÒ¹¸£Àû Banking & Finance expert
Checklists

Independent legal advice (Etridge)—checklist for a lender taking third-party security from an individual and checklist for a solicitor advising an individual in relation to granting third-party security


Published by a ÀÏ˾»úÎçÒ¹¸£Àû Banking & Finance expert

Checklists
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Undue influence

In a scenario where an individual provides security for the benefit of a third-party debtor there can be a presumption of undue influence in certain circumstances—for more information as to when the presumption applies, see Practice Note: Taking a guarantee or third party security from an individual—undue influence. Following the of the House of Lords in Royal Bank of Scotland v Etridge (No 2), the Law Society developed guidelines that solicitors advising security providers should follow in order to protect themselves from negligence claims. The judgment itself also clarified how a lender can protect itself against third-party security being set aside in a circumstance where there is potentially undue influence.

Checklist for a lender taking third-party security from an individual

In order to rebut the presumption of undue influence (see above) the lender needs to show that the security provider understood the transaction and made an informed decision to grant the security.

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