D is corrent. Undue influence occurs when one party entering into a contract is so greatly influenced by his/her relationship with the second party of the contract that the first party does not exercise free will in entering into the contract. In this case, Smith was unduly influenced by Jones because of their close personal relationship. Even though Smith, as an executive, is only an agent of Apex, it is as if the undue influence were exerted over Apex, the principal. Thus, Apex will be able to avoid the contract.
A is incorrect because there is no indication that a lack of consideration is present. Even though the contract is grossly unfair to Apex, the court is not primarily concerned with the adequacy of consideration. However, the fact that the contract was grossly unfair to Apex will help prove undue influence is present.
B is incorrect because even if express authority to enter into the contract had not been given to Smith, as an executive he would have either implied or apparent authority to do so, and accordingly, Apex would be bound to the contract.
C is incorrect because duress does not apply to the situation in which one party influences another by using the relationship existing between the two parties. Duress involves the use of a threat to overcome a party’s free will and force the individual into a contract.
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