Contract - 1.5 - Duress Flashcards
Contracts are about two or more parties assuming obligation to each other by….
Contracts are about two or more parties assuming obligation to each other by consent
Duress
Duress involves one party coercing another party into a contract…
Meaning consent is not present or given freely
Three types of duress
- Duress to the person
- Duress to property
- Economic Duress
Duress to the person
Actual of threatened violence
Baron v Armstrong 1976
Baron v Armstrong 1976
Est that physical threats contributed to the decision to enter into contract duress will be found.
Burden of proof was on the party exerting pressure to show threats contributed nothing to victims decision to contract.
Duress need only influence the wronged party’s behaviour
Duress to goods
Threat to seize or owners property
Occidental Worldwide Investment v Skibs A/S Avanti
Must be shown that it is unlikely that agreement would not have been entered into if there had not been duress.
Economic Duress
More recent doctrine = less well settled/
- lack of practical choice
- illegitimate pressure
- But for duress the agreement would not have been entered into
DSND Subsea v Petroleum Geo Services 2000
DSND Subsea v Petroleum Geo Services
“Pressure whose practical effect is that there is compulsion or lack of practical choice for the victim, which is illegitimate and which is a significant cause inducing the claimant to enter the contract
Legal effect of duress
Contract will be “voidable”
Remedy = Recission
Voidable
A contract which is capable of being voided (annulled) but which remains in force unless some action is taken to void it.
Rescission
A remedy which involves returning the parties to their pre-contractual position
Affirmation
Affirmation operates as a bar to recission.
Court might conclude that a contract is affirmed if after duress has ceased innocent party fails to challenge contract in a timely manner; or acts in compliance with terms
Economic duress:
Lack of practical choice
Pressure must result in a lack of practical choice for the victim
Carillion Construction Ltd v Felix (UK) 2001
Carillion Construction Ltd v Felix (UK)
Carillon = contractor; Felix = subcontractor for cladding
Felix were in a strong position - trades were dependent, and no other supplier to meet time frame.
Asked for substantially more money to deliver cladding on time.
Carillion wrote a letter protesting.
Under duress
Atlas Express v Kafco 1989
Claimant: road hauliers, deliver cartons of basket ware to store.
Fixed at £1.10 per basket based on 400/600 cartons.
First load was only 200 cartons. Refused to take any more without renegotiating for a minimum of £440.
Defendant was reliant, so agreed reluctantly to pay. They then later refused and sued. Held that the party had no alternatives but to accept revised terms.
B&S Contracts and Design Ltd v Victor Green Publications Ltd
1984
Erect stands at Olympia for defendant.
Week before workers went on strike refusing to work unless a pay demand met (+£4500)
Later deducted from contract price paid.
As had no practical choice = economic duress
Kolmar Group AG v Traxpo Enterprises PVT Ltd
Sell methanol for a fixed price within set timeframe.
Claimants needed methanol for an important client in urgent time.
Take it or leave it proposal for an increased price.
No alternative, complied with demands due to threats
Illegitimate Pressure
Whether there has been:
- an actual or threatened breach of contract
- acted in bad faith;
- whether victim protested at the time;
- whether affirmed and sought to rely on the contract.
Illegitimate pressure:
Threatened breach of contract
Threat to breach contract is unlawful
eg failure to comply -> right to cllaim damages
Carilliion and Atlas.
Illegitimate Pressure:
Good or bad faith
Breach of contract for illegitimate ends = BAD FAITH (eg Carillion and Atlas)
DSND pressure was found to exerted in GOOD FAITH
- suspension of work undtil insurance and indemnities clarified.
DSND v PGS
Faith
Dyson J held that the pressure exerted by DSND was “reasonable behavior by a contractor bona fide in a very difficult situation”
The dividing line between …. exerted in good faith and …. amounting to duress may be a fine one
The dividing line between legitimate commercial pressure
exerted in good faith and unconscionable illegitimate pressure amounting to duress may be a fine one
Illegitimate Pressure
Did the victim protest
Demonstrate evidence of protest at the time the alleged duress was exerted
Carillion - wrote a letter protesting
North Ocean Shipping Co Ltd v Hyundai Construction Co Ltd
North Ocean Shipping Co Ltd v Hyundai Construction Co Ltd
Hyundai agreed to build a tanker for North Ocean but refused to deliver without 10% more payment than contract price.
Breach in contract was illegitimate
NOS failed to show they protested as was not until 8 months later that they requested the return
Difficulty of the party in the
North Ocean Shipping Co Ltd v Hyundai Construction Co Ltd
Unable to take relief for the alleged duress as delayed taking action to set aside the contract.
Was not until some eight months later that the owners claimed the return of the 10%
Held that they had affirmed the contract
Contracts and Design Ltd v Victor Green
Acted sufficiently promptly by deducting the extra £4500 under duress from B&S contracts invoice - avoiding a new agreement and satisfying the criterion.
Significant cause
Must succeed int showing the agreement would not have been entered into if there had not been the duress
Mance J: “basic test of subjective causation in economic duress is the “but for” test”
Carillion Construction Ltd v Felix (2001)
Lack of Practical Choice
Carillion needed this work to be completed to allow other work on the property to proceed.
If all work was not completed on time, Carillion would incur heavy fees.
Carillion couldn’t find an alternative action or pursue legal action in time.
Carillion Construction Ltd v Felix (2001)
Caused by pressure
Felix refused to complete the work on time unless Carillion agreed to the new terms
Carillion Construction Ltd v Felix (2001)
Pressure illegitimate - threat?
The refusal to complete on time amounted to a threatened breach of contract ie was unlawful
Carillion Construction Ltd v Felix (2001)
Pressure illegitimate - good or bad faith?
Bad faith - to extort money
Carillion Construction Ltd v Felix (2001)
Pressure illegitimate - protest?
Letter protesting
Carillion Construction Ltd v Felix (2001)
Pressure illegitimate - affirmation?
Carillion did nothing that would amount to affirming the contract
Carillion Construction Ltd v Felix (2001)
Pressure illegitimate - “but for”?
Carillion would not have entered into the new terms had there been no durress.
Economic Duress and Consideration
Court is increasingly likely to find “consideration” by way of practical benefit to support a variation.
More variations would appear to be binding, and the doctrine of economic duress is therefore increasingly important to seek relieg
