Duress

Question 1

Barton v Armstrong [1976] AC 104 (PC) 121 (Lord Wilberforce and Lord Simon):

Answer 1

‘in life, including the life of commerce and finance, many acts are done under pressure, sometimes overwhelming pressure, so that one can say that the actor had no choice but to act. Absence of choice in this sense does not negate consent in law: for this the pressure must be one of a kind which the law does not regard as legitimate. Thus, out of the various means by which consent may be obtained – advice, persuasion, influence, indu-cement, representation, commercial pressure – the law has come to select some which it will not accept as a reason for voluntary action: fraud, abuse of relation of confidence, undue influence, duress or coercion.’

Question 2

Duress and Consent

M Chen-Wishart, Contract Law (2nd edn OUP, Oxford 2008) 321:

Answer 2

‘If you tell me to “hand over £10,000 or be horribly maimed”, my decision to hand over the money is very real indeed. I know what I am agreeing to, I intend to agree, and I very much want to agree. The real objection is not that I did not consent, but that you induced my agreement by illegitimate pressure.’

Question 3

Types of Duress

Answer 3

• Duress to the person
• Duress to goods
• Economic duress

Question 4

Types of Duress

Answer 4

• Duress to the person
• Duress to goods
• Economic duress

Question 5

Duress to the Person

Barton v Armstrong (1976) AC 104 (PC) 119 (Lord Cross):

Answer 5

A made a number of death threats to B to pressure him to sign agreement containing elements including the purchase by B of A’s shares in the company at a substantial over value. B agreed partly bc of threats but also so A would no longer have controlling interest. However, the company became insolvent shortly after and Barton sought to have the contract set aside.
‘If Armstrong’s threats were “a” reason for Barton’s executing the deed he is entitled to relief even though he might well have entered into the contract if Armstrong had uttered no threats to induce him to do so.’

Question 6

Duress to Goods

Astley v Reynolds (1731) 2 Str 915

Answer 6

Facts: the pf pawned family silver plate to a pawn broker as a security loan of 20 pounds. The broker demanded 10 pounds interest. The pf paid the money to get the plate back and then sued the broker for the 10 pounds. Court decided in favour of pf.

Question 7

Duress to the Person

Barton v Armstrong (1976) AC 104 (PC) 119

Answer 7

A made a number of death threats to B to pressure him to sign agreement containing elements including the purchase by B of A’s shares in the company at a substantial over value. B agreed partly bc of threats but also so A would no longer have controlling interest. However, the company became insolvent shortly after and Barton sought to have the contract set aside.
(Lord Cross): ‘If Armstrong’s threats were “a” reason for Barton’s executing the deed he is entitled to relief even though he might well have entered into the contract if Armstrong had uttered no threats to induce him to do so.’

Question 8

Duress to Goods

Astley v Reynolds (1731) 2 Str 915

Answer 8

Facts: the plaintiff pawned family silver plate to a pawn broker as a security loan of 20 pounds. The broker demanded 10 pounds interest. The pf paid the money to get the plate back and then sued the broker for the 10 pounds. Court decided in favour of plaintiff.

Question 9

Economic Duress

Dimskal Shipping Co SA v ITWF (The Evia Luck) [1992] 2 AC 152 (HL) 165

Answer 9

One form of duress is illegitimate economic pressure, including the blacking or the threat of blacking of a ship.
(Lord Goff): it is ‘now accepted that economic pressure may be sufficient to amount to duress, … provided at least that the economic pressure may be characterised as illegitimate and has constituted a significant cause inducing the claimant to enter into the relevant contract.’

Question 10

Illegitimate Pressure
More than ordinary commercial pressure
Universe Tankships Inc of Monrovia v ITFW (The Universe Sentinel) [1983] 1 AC 366 (HL) 384 (Lord Diplock):

Answer 10

‘commercial pressure, in some degree, exists wherever one party to a commercial transaction is in a stronger bargaining position than the other party.’

Question 11

Illegitimate Pressure
More than ordinary commercial pressure
DSND Subsea Ltd v Petroleum Geo Services AS [2000] BLR 530 [131] (Dyson J):

Answer 11

‘In determining whether there has been illegitimate pressure, the court takes into account a range of factors. These include whether there has been an actual or threatened breach of contract; whether the person allegedly exerting the pressure has acted in good or bad faith; whether the victim had any realistic practical alternative but to submit to the pressure; whether the victim protested at the time; and whether he affirmed and sought to rely on the contract. These are all relevant factors. Illegitimate pressure must be distinguished from the rough and tumble of the pressures of normal commercial bargaining.’

Question 12

Illegitimate Pressure
More than ordinary commercial pressure
DSND Subsea Ltd v Petroleum Geo Services AS [2000] BLR 530 [131] (Dyson J):

Answer 12

Factors considered in determining illegitimate pressure:
“whether there has been an actual or threatened breach of contract; whether the person allegedly exerting the pressure has acted in good or bad faith; whether the victim had any realistic practical alternative but to submit to the pressure; whether the victim protested at the time; and whether he affirmed and sought to rely on the contract.”
“Illegitimate pressure must be distinguished from the rough and tumble of the pressures of normal commercial bargaining.”

Question 13

Illegitimate Pressure
More than ordinary commercial pressure
DSND Subsea Ltd v Petroleum Geo Services AS [2000] BLR 530 [131] (Dyson J):

Answer 13

Factors considered in determining illegitimate pressure:
“whether there has been an actual or threatened breach of contract; whether the person allegedly exerting the pressure has acted in good or bad faith; whether the victim had any realistic practical alternative but to submit to the pressure; whether the victim protested at the time; and whether he affirmed and sought to rely on the contract.”
“Illegitimate pressure must be distinguished from the rough and tumble of the pressures of normal commercial bargaining.”

Question 14

Good and bad faith

A Burrows, The Law of Restitution 2nd edn (2002) 233:

Answer 14

‘A threatened breach of contract should be regarded as illegitimate if concerned to exploit the claimant’s weakness rather than solving financial or other problems of the defendant. To this can be added two supplementary or clarificatory ideas … a threat should not be considered illegitimate (made in bad faith) if the threat is a reaction to circumstances that almost constitute frustration … [nor] if it merely corrects what was always clearly a bad bargain.’

Question 15

Good and bad faith

CTN Cash and Carry Ltd v Gallaher Ltd [1994] 4 All ER 714 (CA) 717 (Steyn LJ):

Answer 15

‘it might be particularly difficult to establish duress if the defendant bona fide considered that his demand was valid. In this complex and changing branch of the law I deliberately refrain from saying “never”. But as the law stands, I am satisfied that the defendants’ conduct in this case did not amount to duress.’

Question 16

Good and bad faith

Huyton SA v Peter Cremer GmbH & Co [1999] 1 Lloyd’s Rep 620, 637 (Mance J):

Answer 16

threatened not to pay for consignment of wheat unless Cremer (seller) agreed to submit to arbitration - Court held entitled to not pay in this case as he believed his demand was valid
it is ‘difficult to accept that illegitimate pressure applied by a party who believes bona fide in his case can never give grounds for relief.’

Question 17

Good and bad faith

Huyton SA v Peter Cremer GmbH & Co [1999] 1 Lloyd’s Rep 620, 637 (Mance J):

Answer 17

threatened not to pay for consignment of wheat unless Cremer (seller) agreed to submit to arbitration - Court held entitled to not pay in this case as he believed his demand was valid
it is ‘difficult to accept that illegitimate pressure applied by a party who believes bona fide in his case can never give grounds for relief.’

Question 18

Threatened acts need not be unlawful

Universe Tankships Inc of Monrovia v ITWF (The Universe Sentinel) [1983] 1 AC 366 (HL) 401 (Lord Scarman):

Answer 18

‘The origin of the doctrine of duress in threats to life or limb, or to property, suggests strongly that the law regards the threat of unlawful action as illegitimate, whatever the demand. Duress can, of course, exist even if the threat is one of lawful action: whether it does so depends upon the nature of the demand. Blackmail is often a demand supported by a threat to do what is lawful, e.g. to report criminal conduct to the police. In many cases, therefore, “What [one] has to justify is not the threat, but the demand”

Question 19

Threatened breaches of contract

B&S Contracts v Victor Green [1984] ICR 419 (CA) 428 (Kerr LJ):

Answer 19

Contractor to erect stands for an exhibition told his client. Less than a week before due to open, contractor says would cancel unless the client paid an additional sum to meet claims made against the contractor by his workforce (wanted severance pay). Company could have paid for the pay themselves but didn’t want to so instead got the client to do it. Not having the stands in time would be disastrous for the client. Held the payment was made under duress and the client was entitled to recover it back.
‘a threat to break a contract unless money is paid by the other party can, but by no means always will, constitute duress’; on the facts of the case it amounted to illegitimate pressure.

Question 20

Threatened breaches of contract

Cf DSND Subsea Ltd v Petroleum Geo-Services ASA [2000] BLR 530 [134] (Dyson J):

Answer 20

PGS contracted with DSND to provide subsea work. Agreement formalized in a number of documents. Subsequently, the parties entered into a further document. PGS alleged that this was entered under economic duress. DSND refused to continue work until PGS had agreed to provide (i) assurances as to its insurance cover and an indemnity, and (ii) a reimbursable basis of payment. PGS was under severe financial pressure from its employer and was at risk of substantial damages for delay. PGS agreed to these terms. It claimed later that it had done so under duress.
On the facts of the case the threat was ‘reasonable behaviour by a contractor acting bona fide in a very difficult situation’ and so was not illegitimate pressure.

Question 21

Contractual variations and the ‘past consideration’ rule

Stilk v Myrick (1809)

Answer 21

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Question 22

Threatened breaches of contract

Cf DSND Subsea Ltd v Petroleum Geo-Services ASA [2000] BLR 530 [134] (Dyson J):

Answer 22

DSND refused to continue work until PGS had agreed to provide (i) assurances as to its insurance cover and an indemnity, and (ii) a reimbursable basis of payment. PGS was under severe financial pressure from its employer and was at risk of substantial damages for delay. PGS agreed to these terms. It claimed later that it had done so under duress.
On the facts of the case the threat was ‘reasonable behaviour by a contractor acting bona fide in a very difficult situation’ and so was not illegitimate pressure.

Question 23

Contractual variations and the ‘past consideration’ rule

Stilk v Myrick (1809)

Answer 23

Seamen on a ship. Several quit. Remaining are told that if they take on the extra work then wages of quit seamen will be shared out among them. Does not share it out. No claim bc there was no consideration, performed anly a pre-existing contractual duty doing their work as seamen on the ship

Question 24

Wliiams v Rofferey brother

Answer 24

subcontractor teels contractor not gonna pay unless you giv more money. Say they’ll give more money. Do the work. Doesn’t give money. Say the consideration was past. Court says there was a practical benefit that it was built on time and thus the head-contractor did not have to go find another sub-contractor

Question 25

Contractual variations and the ‘past consideration’ rule

Stilk v Myrick (1809)

Answer 25

Seamen on a ship. Several quit. Remaining are told that if they take on the extra work then wages of quit seamen will be shared out among them. Does not share it out. No claim bc there was no consideration, performed anly a pre-existing contractual duty doing their work as seamen on the ship. Since there was no contract did not have to go to economic duress.

Question 26

Wliiams v Rofferey brother

Answer 26

Subcontractor tells contractor not gonna pay unless you give more money. Say they’ll give more money. Do the work. Doesn’t give money. Say the consideration was past. Court says there was a practical benefit (that it was built on time and the head-contractor did not have to go find another sub-contractor) which supported the promise.
Backup plan of economic duress, were pressured into paying the extra money. Economic duress not found bc they benefitted

Question 27

Wliiams v Rofferey brother

Answer 27

Subcontractor tells contractor not gonna pay unless you give more money. Say they’ll give more money. Do the work. Doesn’t give money. Say the consideration was past. Court says there was a practical benefit (that it was built on time and the head-contractor did not have to go find another sub-contractor) which supported the promise.
Backup plan of economic duress, were pressured into paying the extra money. Economic duress not found bc they benefitted

Question 28

Causation test

Dimskal Shipping Co SA v ITWF (The Evia Luck) (No 2) [1992] 2 AC 152 (HL) 165 (Lord Goff):

Answer 28

a ‘significant cause’.

Question 29

Causation test

Huyton SA v Peter Cremer GmbH & Co [1999] 1 Lloyd’s Rep 620, 636 (Mance J):

Answer 29

‘the illegitimate pressure must have been such as actually caused the making of the agreement, in the sense that it would not otherwise have been made either at all or, at least, in the terms in which it was made.’

Question 30

Causation test

Kolmar Group AG v Taxpo Enterprises Pty Ltd [2012] EWHC 113 (Comm) [92] (Christopher Clarke J):

Answer 30

‘Economic pressure can amount to duress, provided it may be characterised as illegitimate and has constituted a “but for” cause inducing the claimant to enter into the relevant contract.’

Question 31

Reasonable alternatives

Kolmar Group AG v Taxpo Enterprises Pty Ltd [2012] EWHC 113 (Comm) [92] (Christopher Clarke J):

Answer 31

‘it is relevant to consider whether the claimant had a “real choice” or “realistic alternative” and could, if it had wished, equally well have resisted the pressure and, for example, pursued practical and effective legal redress. If there was no reasonable alternative, that may be very strong evidence in support of a conclusion that the victim of the duress was in fact influenced by the threat.’

Question 32

Contractual variations and the ‘past consideration’ rule

Stilk v Myrick (1809)

Answer 32

Seamen on a ship. Several quit. Remaining are told that if they take on the extra work then wages of quit seamen will be shared out among them. Does not share it out. No claim bc there was no consideration, performed anly a pre-existing contractual duty doing their work as seamen on the ship. Since there was no contract did not have to go to economic duress.

Question 33

Contractual variations and the ‘past consideration’ rule

Wliiams v Rofferey brothers

Answer 33

Subcontractor tells contractor not gonna pay unless you give more money. Say they’ll give more money. Do the work. Doesn’t give money. Say the consideration was past. Court says there was a practical benefit (that it was built on time and the head-contractor did not have to go find another sub-contractor) which supported the promise.
Backup plan of economic duress, were pressured into paying the extra money. Economic duress not found bc they benefitted

Question 34

Causation test

Huyton SA v Peter Cremer GmbH & Co [1999] 1 Lloyd’s Rep 620, 636 (Mance J):

Answer 34

‘the illegitimate pressure must have been such as actually caused the making of the agreement, in the sense that it would not otherwise have been made either at all or, at least, in the terms in which it was made.’

Question 35

Causation
Reasonable alternatives
Kolmar Group AG v Taxpo Enterprises Pty Ltd [2012] EWHC 113 (Comm) [92] (Christopher Clarke J):

Answer 35

‘it is relevant to consider whether the claimant had a “real choice” or “realistic alternative” and could, if it had wished, equally well have resisted the pressure and, for example, pursued practical and effective legal redress. If there was no reasonable alternative, that may be very strong evidence in support of a conclusion that the victim of the duress was in fact influenced by the threat.’

Question 36

Atlas Express v Kafco

Answer 36

Atlas Express realised they couldn’t afford to make the deliveries in their trade agreement and would have to renegotiate. Told Kafco this. Kafco refused to renegotiate. AE said they wouldn’t deliver if they didn’t renegotiate. Kafco renegotiated but later succeeded in their claim on economic duress.
Directly contradicts DSND. Despite acting bona fide in a very difficult situation the pressure was considered illegitimate

Question 37

Occidental Worldwide Investment v Skibs (The Sibeon & The Sibotre) [1976] 1 Lloyds Rep 293

Answer 37

The defendants chartered two vessels from the claimant. The defendants told the claimants that they would go bankrupt if they did not lower the cost of charter. This was completely untrue. The claimants feared that they would lose valuable customers and they were also were owed substantial amounts of money by the defendant which they feared they would lose if the defendants did become insolvent. The claimants therefore agreed to renegotiate the contract to lower the cost of charter. They later sought to have the renegotiated contract set aside.

Held: Whilst recognising that it would be possible to render a contract voidable for economic duress, it was not established in this case. To amount to economic duress there had to be a coercion of the will so as to vitiate consent. Commercial pressure was not sufficient.

Note: This was the first case where economic duress was recognised as giving rise to a cause of action. More recent cases look to absence of choice rather than coercion of the will vitiating consent. See: The Universe Sentinel

Question 38

Occidental Worldwide Investment v Skibs (The Sibeon & The Sibotre) [1976] 1 Lloyds Rep 293

Answer 38

Defendants chartered two vessels from the claimant. D said would go bankrupt if charter cost not lowered. Completely untrue. C would lose customers and were owed money by D which they would lose if D became insolvent. C agreed to renegotiate the contract to lower the cost of charter. They later sought to have the renegotiated contract set aside.

Held: Whilst recognising that it would be possible to render a contract voidable for economic duress, it was not established in this case. To amount to economic duress there had to be a coercion of the will so as to vitiate consent. Commercial pressure was not sufficient.

Note: This was the first case where economic duress was recognised as giving rise to a cause of action. More recent cases look to absence of choice rather than coercion of the will vitiating consent. See: The Universe Sentinel

Question 39

North Ocean Shipping v Hyundai Construction (The Atlantic Baron) [1979] QB 705

Answer 39

The defendants agreed to build a ship for the claimants for a certain price specified in US dollars. After entering the contract the US dollar was devalued by 10%. The defendants threatened not to complete unless the claimants paid an additional 10% on the contractually agreed price. The claimants had a valuable charter lined up so agreed to pay the additional sums and did pay them without protest. 8 months after delivery of the ship the claimants brought an action to recover the additional sums paid.

Held: The contract was voidable for duress, however, since the claimants had left it so long in bringing their claim they had affirmed the contract and lost their right to rescind.