Duress Flashcards
What is Duress?
Duress is an element which can vitiate consent and thus render a contract voidable
Types of Duress (3)
1) – Physical duress
2) – Duress of goods
3) – Economic duress
North Ocean Shipping v Hyundai Construction (The Atlantic Baron) [1979] Topic
Economic Duress
North Ocean Shipping v Hyundai Construction (The Atlantic Baron) [1979] Facts
•Contract in order to build a tanker
•Didn’t have a clause that dealt with currency fluctuations
•H found that they were going to lose a lot of money
•Demanded an extra 3 million
•N reluctantly said they would pay
•Tanker was delivered
•Later, demand for payment came
•Argued existing duty rule applied (nothing extra)
oExtra consideration came in a return letter of credit, therefore didn’t apply
oSet up in favor of the buyer
•Relied on economic duress
•Held: yes
• New contract was voidable
•Problem: 8 month delay before the claim was made for the money
oHeld: an affirmation for the contract
o Because they waited, they automatically accepted to pay it
North Ocean Shipping v Hyundai Construction (The Atlantic Baron) [1979] Princple
Economic duress
- Duress provides the remedy for rescission
- Waited too long to claim rescission
Pao On v Lau Yiu Long [1980] Facts
• P owned Shing On company
• D owned Fu Chip
• D wished to acquire building from Shing On
• Agreed that D would give shares to P for 4.2 million shares a $1 each
• P agreed to not sell of transfer 2.5 million shares to avoid a depression in the value of them
• This exposed P to the risk of any drop in value
• They agreed in a subsidiary contract that D will buy back the shares at $2.50, even if they were worth more
• P discovered this and threatened not to perform the main agreement unless the subsidiary agreement was cancelled and replaced with a guarantee only if the shares dropped below $2.50
• D agreed
• Shares dropped in price
• P sought to enforce the guarantee
• D argued:
o Party was coerced into accepting a renegotiation of a business transaction by threat of other party to break an existing contract
o There was no consideration
• Held:
o renegotiated agreement would not be set aside
o Victim did not protest and received independent advice.
o There was consideration
4 Factors:
1) L didn’t protest
2) L had other courses of action
3) L was independently advised (large company)
4) L did not take steps to avoid it
Pao On v Lau Yiu Long [1980] Principle
- Created 4 factors in considering whether duress is present
1) L didn’t protest
2) L had other courses of action
3) L was independently advised (large company)
4) L did not take steps to avoid it
Pao On factors in considering whether duress is present? (4)
1) Did the person claiming to be coerced protest?
2) Did that person have any other available course of action?
3) Were they independently advised?
4) After entering into the contract, did they take steps to avoid it?
More likely to be economic duress when? (4)
- A party is perfectly able to perform but acting in bad faith refuses to do so to exploit the vulnerability of the other party
- The non performing party is insisting on additional payment or other more favourable contractual terms
- The innocent party agrees to pay, or does pay under protest (although protest is not essential)
- The innocent party has no realistic alternative to agreeing to pay
Less Likely to be economic duress when? (5)
- A party has encountered genuine difficulties in performing
- One party does not intend to exploit the other party
- The party alleging duress is not particularly vulnerable
- The party alleging duress suggests or offers the new contractual terms or there is an element of genuine compromise
- The party alleging duress has realistic alternative courses of action
What is physical duress?
Physical threat
What is Duress of Goods?
- When you retain goods of someone else in an unacceptable way.
- Ex: garage retains your car in unacceptable way
What is Economic Duress?
Commercial Pressure
Barton v. Armstrong (1976) Facts
•Australia
•A threatened to kill B if didn’t sign the contract
•B wanted out of contract
•A argued, that he would of signed the contract anyway
•Judge said he was right
•Privy council considered who the burden of proof was on (threatener or threatenee?)
oFound the threatener must prove
oDifficult to prove that he didn’t mean it
Duress of the person
R. v. Attorney-General for England and Wales (PC 2003) Facts
o R was member of B20 team
o Patrol team, became famous
o Wrote books and films
o Ministry of defense got annoyed and made confidentiality agreements
o R was told that he had to sing it
o He wanted to get legal advise, was told no
o He left army the next year
o Wanted to write his side of the story
o Got contract with publisher
o Told he couldn’t under confidentiality agreement
o R argued economic duress
o Held: pressure was not totally legitimate
o But, there was no duress because R still had a choice.
o One of the elements is there must be an absence of a choice
R. v. Attorney-General for England and Wales (PC 2003) Principle
Economic Duress
One of the elements is there must be an absence of a choice
The Universe Sentinel (HL 1983) Facts
• Union “blacked” a ship
• Prevented the ship from leaving port
• In order to remove it, they paid a certain amount of money to the union
• Could they get their money back
• Held: they could on the grounds of economic duress
• Appeal: Union said they have immunity under an Act
o 2 elements of economic duress
• presence of choice?
• illegitimate pressure?
o Issue was about the pressure
o Pressure was found to be lawful
o Was the demand for the money illegitimate?
• Held: not illegitimate, therefore, no economic duress
• Illegitimate does not mean unlawful, but must be problematic
The Universe Sentinel (HL 1983) Principle
Action not illegitimate, therefore, no economic duress
•Illegitimate does not mean unlawful, but must be problematic
CTN Cash & Carry v. Gallaher (CA 1994) Facts
- G sent cigarettes to wrong address
- They were stolen
- Whose risk was it
- G wanted payment, C had credit facility with them, G was going to remove it
- G argued that they were coerced to pay money to maintain credit facility
- Held: credit facility was an agreement that could be opted out of any time
- D is not obliged to maintain the credit facility
CTN Cash & Carry v. Gallaher (CA 1994) Principle
Threat not to enter into a contract where D is not obliged to do so
credit facility was an agreement that could be opted out of any time
•D is not obliged to maintain the credit facility
Atlas v Kafco [1989] Facts
- Carrier to transport goods at a certain price
- Said no, until get paid extra
- Held: economic duress
- Illigitamate pressure, no choice
• K’s commercial survival depended on the contract
o Could not find an alternative carrier
• K agreed to K’s demand but then refused to pay
• Court held that the new terms were agreed under economic duress
o There was a direct threat to retract the contract
Atlas v Kafco [1989] Principle
Illegitimate pressure
Created no choice
3 Steps to answering a Duress question
Explain Duress
Explain the 4 factors (Pao On)
Apply the test
B & S Contracts and Design Ltd v Victor Green Publications Ltd Facts
• Party threatened to allow its workers to strike unless other party agreed to make a payment in addition to the contract price
• Court held: it was a veiled threat
o Constitutes as duress because the other party had no other choice but to pay.
o Indirect threat
o Contractors did not make reasonable efforts to avoid the strike before demanding additional payment from the party
B & S Contracts and Design Ltd v Victor Green Publications Ltd Principle
o Constitutes as duress because the other party had no other choice but to pay.
o Indirect threat
o Contractors did not make reasonable efforts to avoid the strike before demanding additional payment from the party
