Capacity, Duress and Undue Influence Flashcards
What is the general rule relating to capacity?
Generally, persons over 18 who are of sound mind and not suffering from a factor ruling out capacity (such as inebriation) have full contractual capacity.
Can persons under the age of 18 be bound by contracts? Any exceptions?
No, unless for contracts to supply necessaries and contracts of employment, apprenticeship or education.
What does s.3(3) of the Sales of Goods Act 1979 provide?
That ‘necessaries’ are defined as goods suitable to the condition in life of the minor or other person concerned and to their actual requirements at the time of the sale and delivery.
11 waistcoats were supplied to a Cambridge undergraduate, costing more than the average weekly wage. The undergrad refused to pay for the waistcoats, claiming he no longer wanted them and already had other suitable clothing. Could the waistcoats be deemed ‘necessaries’ to make the contact enforceable?
No, because the waistcoats are not suitable according to the minor’s station in life and he already has sufficient clothing.
When is a minor bound by a contract of employment, apprenticeship or education?
Only if it is for their benefit.
A young footballer’s contract with his club restricted his freedom to pursue a football career. It provided for no extra training or experience, the terms were onerous and the payment of wages depended on the will of his employer. Could this contract against this minor be enforced?
No, because it is not beneficial to the minor despite being a contract for employment.
Is it true that a person without capacity still remains liable to pay a reasonable price for ‘necessaries’?
Yes, as per s.7 of the Mental Capacity Act 2005.
If someone is intoxicated can they bound by contracts?
If they are so intoxicated that they do not understand what they are doing will have to pay for necessaries. However, they will not be bound by any other contract.
If a person is mentally incapacitated and did not contract for necessaries, will they be bound by the contract?
Yes, unless it can be established that they did not understand what they were doing and the other party knew that to be the case. The contract will be voidable if these can be established.
What is duress?
It involves coercing another into contact (i.e. where consent is not present or not freely given).
What is the effect of a contract entered into under duress?
It becomes voidable - the wronged party may be able to set the contract aside.
What are the three types of duress?
(i) Duress to the person;
(ii) Duress to property; and
(iii) Economic duress.
When will duress to the person be established and what is the legal consequence of it being established? Where does the onus lie?
Actual or threatened violence can amount to duress to the person which can vitiate a contract.
The onus lies on the party who exerted the pressure to show that their threats contributed nothing to the victim’s decision to contract.
When will duress to property be established and where does the onus lie?
A threat to seize the owner’s property or to damage it can amount to duress to property.
The onus is on the wronged party to show that the agreement would not have been entered into if there had been no duress.
What is the common fact pattern associated with economic duress?
One party makes improper financial threats in order to get the counterparty to enter into a contract.
What are the three elements to establish economic duress?
(i) pressure whose practical effect leads to a lack or practical choice;
(ii) which is illegitimate; and
(iii) which is a significant cause inducing the victim to enter into the contract.
What is significant cause in the context of economic duress?
It must be shown that the agreement would not have been entered into if there had not been the duress.
If a party falls foul of duress, but fails to challenge the contract in a timely manner and/or acts in compliance with its terms, will the contract still be voidable?
No, the remedy of recession may be lost where the contract is affirmed.
What does the first element of duress (i.e. lack of practical choice) mean?
Where the pressure placed on the victim is so that they have no practical choice but to acquiesce to the demand.
B&S Contracts and Design (“B&S”) were contracted to erect stands at Mr Olympia 2024 for V&G Publications (“V&G”). A week before the exhibition, B&S’s workmen went on a strike and subsequently demanded an additional £10,000 to continue with the contract, which V&G paid because if the stands were not erected it could cause serious damage to the exhibition. Would this contract be enforceable?
No, because V&G had no practical choice to pay the sum - the cancellation of the contract would have caused serious damage to V&G’s interests.
Kolmar Group (D) had an agreement to sell methanol to Traxpo Enterprises (C) at a fixed price within a set timeframe. Knowing that C needed the methanol to satisfy an order for an important client who needed it urgently, D gave C a ‘take it or leave’ proposals for the delivery of less methanol at an increased price. Would this contract be enforceable?
No, because it was a result of economic duress - more specifically, it is an example where one party had no alternative but to accept the revised proposal. Otherwise, they would have lost a major client.
What are some factors that indicate the existence of the second element of economic duress (i.e. illegitimate pressure)?
Includes: actual or threatened breach of contract, acting in bad faith, whether the victim protested at the time, and whether the victim affirmed and sought to rely on the contract.
Hyundai agreed to build a tanker for North Ocean, known as the Atlantic Baron. Hyundai refused to deliver the ship unless North Ocean agreed to pay 10% more than the contract price. North Ocean did not protest and only brought a claim 8 months later. Would this contract be enforceable and why?
Yes - the fact that North Ocean did not protest would prove fatal to a claim under economic duress. In addition, the fact they took so long to bring a claim indicates they affirmed the contract (i.e. did not take immediate action). These two factors would prove fatal to economic duress claim.
Sophie agrees to supply a computer package to Anita. The original price for the package is agreed at £1,000. Sophie then tries to reshape the deal, persuading Anita to pay £1,250. Is the contract enforceable?
No, because Sophie has done no more than supply the computer package to the original specification.
