A.5.III. Vitiating Factors - Duress & Undue Influence Flashcards
Duress - 5 conditions
- Pressure was exerted on the contracting party. 2. The pressure was illegitimate. 3. The pressure induced the claimant to enter the contract. 4. The claimant had no real choice but to enter the contract. 5. The claimant protested at the time or shortly after the contract was made.
Barton v Armstrong
Pressure. Duress to person. The traditional common law approach was for contracts to be voidable for duress by means of physical violence or threats of it, or unlawful constraint. Here, he was threatened to death if he didn’t buy the shares at a given price. It was a good deal, in any case, but the threat still made the contract voidable. Pressure induced to enter the Contract. It’s not enough that there was illegitimate pressure, that pressure must have induced the party to enter the contract. If A threatens B to buy his car but he wanted to buy the car anyway, there is no duress. It needn’t be the only reason, “but for” the illegitimate pressure, the claimant would not have entered the contract, modified the contract or made the payment.
The Atlantic Baron
Pressure. Now economic duress applies. To constitute duress, the economic pressure must go further than the ordinary pressure of the market system - a financial reason why they felt FORCED to enter the contract. Here, the had agreed to terms to build a ship. During construction, the builder asked for more money given fx rates. The buyer was already negotiating contracts for the ship, and felt they needed to accept, and paid it. After the ship was done, they claimed duress. The court agreed there was duress, but the lapse of time had been too long. DURESS ARISES WHEN THERE IS A COMPULSION OF THE WILL FROM ECONOMIC OR PHYSICAL PRESSURE. The party wanting to set aside the contract must make it clear that they are reluctant to agree either at the time of doing so, or quite shortly afterwards.
Pao On v Lau Yiu Long
Pressure. Economic pressure can amount to duress, but it has to be considerably more than the normal pressures of the commercial world. Here they had to write a guarantee to cover the fluctuation of the share prices. They felt they had to because of the reputational harm if the trip didn’t go forward. Here, the court didn’t consider the pressure sufficient to constitute duress, they just wanted to avoid bad publicity. A threat to break a contract is not sufficient for duress. It must be shown that the payment made or the contract entered into was not a voluntary act.
Williams v Roffey Bros
New consideration for a new promise. Where there is no duress or fraud, a promise to fulfil an existing obligation can be consideration if it provides a benefit or prevents a disadvantage or the other party.
The Sibeone and the Sibotre
Mixed picture Economic Duress on goods. Some cases point to this being duress, others not. In this case, threats to goods are considered to constitute duress. The true question is ultimately hether or not the agreement in question is to be regarded as having been concluded voluntarily.
Atlas v Kafco
Illegitimate Pressure. A threat to do an unlawful act (such as breaking a contract) will always be illegitimate, but a threat to do a lawful act will only be illegitimate if the threat is unreasonable. Made a deal to distribute their basketware. When the holidays came along, their sole distributor asked for more money, knowing this was a key time. In different times, they might have found another distributor, but here it was completely impractical. Duress.
Cash and Carry v Gallaher
Illegitimate Pressure. Here it was a cigarette distributor with a monopoly, delivered the smokes at the wrong place. They asked for the shipment to be delivered at the right place. It finally was, but had been stolen in the meantime. The supplier told them they could only have it if they paid for both or the credit facilities would be removed, which was agreed. Then they sued for duress. The court said no, the threat was not to cancel the contract, but only alter the terms, which was not unlawful - court said a lawful act could constitute duress, but was unlikely to do so in a commercial setting.
Kolmar v Traxpo
Illegitimate Pressure. Here they had an agreement to supply methanol. Turned out they didn’t have enough for it, and they already had a contract for a buyer; meanwhile the price of methanol had increased. They agreed to the new terms, but later sued for duress. The modified terms were only agreed to as a result of the coercive and illegitimate threats, which amount to duress.
B&S v Victor
Illegitimate Pressure. Contracted for stands. At the last minute, the stand company was going to back out unless there was more money. Not getting the stands would be disastrous for them. They agreed, but didn’t pay the extra money, were sued. Held to be duress.
The Universe Sentinel
No real choice but to enter the contract. Here the union was holding a strike that affected the ship - only agreed to lift the strike in exchange for a payment, which was paid. Afterwards, they claimed it was under duress, this was upheld. The court explained that it’s not about not having any choices (There are always two choices, even between unpleasant options), but whether there is a practical alternative.
Undue influence.
This is an equitable doctrine, which applies where one party uses their influence over the other to persurade them to make a contract. IT is equitable, so the courts have discretion - they may set the contract aside, or modify its terms so as to mitigate the disadvantage. There are two types: actual and presumed.
Bank of Credit v Aboody
Actual undue influence. This arises when the claimant can prove that they entered the transaction as a result of undue influence. This is unlike duress, because it isn’t pressure, it’s more like influence. What the courts will look at is the relationship between the parties. Here, she signed a mortgage security for her husband to borrow. She routinely signed whatever he asked her to, and when she was getting financial advice, he burst in and insisted she sign. The courts easily found undue influence, and even explained that the contract need not be necessarily disadvantageous to the innocent party.
Presumed undue influence.
The majority of undue influence cases concern presumed undue influence. This arises where there is no direct evidence that someone has exerted undue influence, but the nature of the relationship is such that it can be presumed. Here, the alleged influencer will have to prove no undue influence happened. Parent and child Religious adviser and disciple Guardian and ward Solicitor and client trustee and beneficiary doctor and patient.
This is when a fiduciary relationship arises, but there are no limits to when this could arise given the cases.
Lloyds v Bundy
Presumed undue influence. Here he and his son both banked with Lloyds for a long time. The son had difficulties, the bank asked the father to guarantee their sums with his farm, which he did. The son went bankrupt, they went after the farm. He claimed undue influence by the bank, which didn’t advise him it was against his interests. He succeeded, the bank couldn’t rebut the presumption.
