This section is from the book "The Law Of Contracts", by William Herbert Page. Also available from Amazon: Commercial Contracts: A Practical Guide to Deals, Contracts, Agreements and Promises.
In transactions between persons in confidential relations, where an advantage is taken by the person holding the dominating situation, the fact of inadequacy of consideration, even in the absence of a weakness of mind, greatly strengthens the presumption of undue influence.1 Thus a conveyance by a child to a parent;2 a contract by a ward to convey to the guardian, made soon after the relationship has expired;3 a conveyance by a niece to an uncle in whom she has great confidence,4 especially if he has been her guardian;5 a conveyance by a wife to her husband;6 a conveyance to a spiritual adviser;7 a conveyance in trust to a physician and attorney on their advice;8 or a release by a devisee to an executor,9 have all been avoided if on inadequate consideration. So a surrender by a legatee to an executor of legal rights made under a mistake as to their nature and for an inadequate consideration, will be avoided.10 Like principles apply where trust and confidence or actual influence exists, though without technical relations.11 Thus a mortgage,12 or conveyance,13 by a parent to a child, or by a stepmother to her step-son;14 a note given by an uncle to his nephew who had full management of his business;15 a sale of a legacy to a legatee's confidential adviser;16 or a conveyance to a sister who has great influence over the grantor,17 have all been set aside when upon inadequate consideration.
1 Oliphant v. Liversidge, 142 111. 160, 30 N. E. 334; Holland v. John, 60 N. J. Eq. 435, 46 Atl. 172; Moriarty v. Kelly, - N. J. - , 102 Atl. 443; Stepp v. Frampton, 179 Pa. St. 284, 36 Atl. 177; Doyle v. Welch, 100 Wis. 24, 75 N. W. 400.
2 Muzzy v. Tompkin8on, 2 Wash. 616, 27 Pac. 456, 28 Pac. 652.
3Tucke v. Buchholz, 43 la. 415.
4Tribou v. Tribou, 96 Me. 305, 52 Atl. 795.
5Earhart v. Holmes, 97 la. 649, 66 N. W. 898.
6 White v. Warren, 120 Cal. 322, 49 Pac. 129, 52 Pac. 723.
7Huguenin v. Baseley, 14 Ves. Jr. 273; White and Tudor's Lead. Cas.
(Pt. 2), 597; Corrigan v. Pironi, 48 N. J. Eq. 607, 23 Atl. 355.
8 Unruh v. Lukens, 166 Pa. St. 324, 31 Atl. 110.
9 Wheelen's Appeal, 70 Pa. St. 410, 10Cowen v. Adams, 78 Fed. 536, 24
C. C. A. 198.
11 Armstrong v Logan, 115 Mo. 465, 22 S. W. 384.
12 Bowe v. Bowe, 42 Mich. 195, 3 N. W. 843.
13Lanfair v. Thompson, 112 Ga. 487, 37 S. E. 717.
14Lamb v. Lamb (N. J. Eq.), 23 Atl. 1009.
15Darlington's Estate, 147 Pa. St. 624, 30 Am. St. Rep. 776, 23 Atl. 1046.
16McCormick v. Malin, 5 Blackf. (Ind.) 509.
The surrounding circumstances may show that the contract is fair and reasonable, even if the consideration is inadequate.18 The relation between parent and child is such that a conveyance by a parent to a child on inadequate consideration, or without any consideration,19 is not on that ground alone regarded as caused by undue influence or constructive fraud.