Duress Flashcards
Barton v Armstrong [1976]
FACTS: A was the chairman and held the largest share holding in Landmark Corporation Ltd, a public company. B was the managing director and also had a substantial shareholding in. There were two other directors Bovil and Cottrel. There had been a long history of ill will between the parties and a struggle over who should have controlling power with A being the most aggressive. The other directors in the company were also unhappy with A and wanted him to be removed for abusing certain privileges and they disagreed with the way he ran the company believing him to be putting the company at risk of insolvency. However, A refused to resign. The 3 managed to take control of subsidiary companies and removed all credit facilities from Landmark Corp. When A discovered the credit had been removed he made a number of death threats to B to pressure him into signing an agreement which contained various elements including the purchase by B of A’s shares in the company at a substantial over value. B agreed to this partly due to the threats but also due to the fact that it would mean that A would no longer have controlling interest and he believed he would be able to turn the company around without A’s dealings. However, the company became insolvent shortly after and B sought to have the contract set aside.
JUDGEMENT: The contract could be set aside.
PRINCIPLE: Where there is duress to the person there was no obligation to show that he would not have entered the agreement but for the threat, it simply being sufficient that the death threats were a cause.
The Evia Luck (No.2) [1992]
“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.” - Lord Goff
North Ocean Shipping v Hyundai Construction (The Atlantic Baron) [1979]
FACTS: D agreed to build a ship for C for a certain price specified in US dollars. After entering the contract the US dollar was devalued by 10%. D threatened not to complete unless C paid an additional 10% on the contractually agreed price. C 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 C brought an action to recover the additional sums paid.
JUDGEMENT: 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.
Pao On v Lau Yiu Long [1980]
FACTS: C had threatened not to complete the main contract for the purchase of shares unless subsidiary agreements were met including a guarantee and an indemnity. D was anxious to complete the main contract as there had been a public announcement of the acquisition of shares and did not want to undermine public confidence in the company and the consequent affect on share prices. D could have sued for specific performance of the agreement but this would have delayed matters and damaged the company’s reputation. D had taken legal advice on all these matters before agreeing to the guarantee and indemnity. C then sought to enforce the guarantee and D sought to have the agreement set aside for economic duress.
JUDGEMENT: Held that there was no economic duress. The Privy Council identified 4 factors to consider in assessing whether economic duress was present.
B and S Contracts and Designs Ltd v Victor Green Publications Ltd [1984]
FACTS: P were contracted to erect stands in a stadium. The contract specified that P would make every effort to complete the works, but it was subject to a force majeure clause. P brought over workers from a company of theirs that was going insolvent and was making the workers redundant. When the workers arrived, they threatened to strike unless they were paid a lump sum redundancy payment, which they were not actually entitled to. P told the defendants to pay half so that the work could continue. D paid it and on the completion of the works, they deducted the funds from P’s invoice. P brought an action. D claimed duress.
JUDGEMENT: The appeal by the plaintiff was dismissed. It was held that the payment was made by the defendant when they were under duress as their financial situation was such that if they did not pay it, the non-completion of the works would leave them financially destitute. As such, in the circumstances they had no choice but to pay it. The Plaintiffs were unable to rely on the force majeure clause because the works had been carried out and they had received payment. Therefore, they were liable for the payment demanded by the workers.
Atlas Express Ltd v Kafco (Importers & Distributors) Ltd [1989]
FACTS: K imported basket ware and entered a contract with A to sell and deliver baskets to A’s retail stores. A tried to negotiate a further term in the contract for a minimum order of £440/trailer load. Several days later, an A representative turned up to K’s premises with an empty trailer and told K that if the trailer was not returned with £440 worth of goods as the new minimum, the trailer would be driven away unloaded. K reasonably believed they would be unable to negotiate further terms of the contract and thereby sabotaging their opportunity to trade with A, so they felt compelled to sign the agreement and meet the new terms of minimum stock trade. The agreement continued until K sent them money on account and a letter stating they had signed the contract under duress. A sued for the money on account.
JUDGEMENT: Judgment was awarded in favour of Kafco.
PRINCIPLE: Kafco were found to have signed the agreement under economic duress as they felt that in the circumstances they had no alternative but to sign the varied contract. Kafco had not approved the new terms of the agreement (as they had previously rejected the proposed variation) and further, there was no consideration for the new agreement as the variation placed Kafco in a less favourable position financially. Thus, their non-payment of the money of account resulted from the duress.
DSND Subsea Ltd v Petroleum Geo-Services ASA [2000]
FACTS: DSND entered into a memorandum of understanding varying the terms of the agreement with PGS, after DSND was found to have a made a misrepresentation in their original agreement. PGS then cancelled the agreement, claiming that DSND had breached the terms of the agreement by making false representations and forcing PSG to sign under duress. DSND argued that PSG had not validly terminated the contract, as there was no duress and that there had been no misrepresentation, although DSND had agreed to a variation. PGS claimed they had validly terminated the agreement after DSND had breached the terms of their main agreement by misrepresentation.
JUDGEMENT: The appeal by PGS was dismissed. The court found that the misrepresentation had not led PGS to sign the agreement in the first instance and that there had been no evidence that any duress had occurred + there has been no conduct or breach of the agreement that warranted the notice of termination to be issued.
PRINCIPLE: (The Evia Luck) (No.2) [1992] 2 A.C. 152 was distinguished as the breach of the contract had been caused by duress which was clearly evidenced and proven. There was no evidence of duress that could be found and the agreement was signed under fair terms without misrepresentation.
Illegitimacy of pressure in DSND Subsea Ltd v Petroleum Geo Services ASA [2000]
Dyson J:
- Was there an actual or threatened breach of contract?
- Did the person exerting the pressure act in good or bad faith?
- Did the victim have a realistic practical alternative to submitting to the pressure?
- Did the victim protest at the time?
- Did the victim affirm or seek to rely on the contract?
Carillion Construction Ltd v Felix (UK) Ltd [2001]
C was a main contractor on a building site and subcontracted F to undertake work. The work was due for completion in January 2000 but F breached this obligation and estimated delivery by April 2000. F told C that the completion of the work was dependent on payment of their account, which was several hundred thousand over what had been agreed. F threatened not to complete the works without payment of their account, although C had disputed the amount and stated that such terms amounted to duress although made the payment. After all the works were completed, C brought action claiming duress.
JUDGEMENT: The appeal by C was allowed. The court held that for an agreement to rescind on grounds of duress, it must be proven that illegitimate pressure had been applied compelling C to make the payment.
PRINCIPLE: Was distinguished from DSND as there was no conduct/breach of the agreement that warranted DSND to issue a notice of termination, whereas in the present case, F told C that the work would cease if their account was not settled before the completion of the works. This was a threat to breach the contract. They had already breached the contract by failing to meet the deadline for the completion of the works. The account was over what was agreed and was only paid by C for fear that the works would not be completed before the final deadline in June 2000. The pressure applied was illegitimate and amounted to duress.
Progress Bulk Carriers Ltd v Tube City IMS L.L.C. [2012]
FACTS: The dispute arose out of the sale of a load of shredded scrap that the charterers (hirers of a cargo ship) had to ship to China from Mississippi. The owners of the ship agreed to hire out the ship to the charterers for this voyage. Despite the agreement, the owners then hired the ship out to a third party, rendering the performance of the original contract impossible. However, in order to make up for their repudiatory breach, the owners offered to compensate the charterers’ losses and promised to find another ship to perform the agreement. The charterers relied on this and agreed to a later date of delivery with their buyers. In the meantime, the cargo’s value dropped and the buyers claimed a discount for late delivery. The charterers notified the owners of their intention to claim these losses as well as damages for breach of contract.
JUDGEMENT: The High Court held that despite the fact that the owners’ refusal to provide a substitute ship was not a crime, a tort, or even a breach of contract, it still amounted to economic duress.
PRINCIPLE: The owners’ unethical behaviour of offering help and withdrawing it in the very last moment was already preceded by a repudiatory breach + the owners’ actions left the charterers without an alternative. Putting the charterers into a situation of false sense of security was in fact a manoeuvre to corner them – and thus it amounted to illegitimate pressure.
CTN Cash & Carry v Gallagher [1994]
lawful act duress
FACTS: D sent a consignment of cigarettes to the wrong address. The cigarettes were then stolen. D mistakenly believed that the cigarettes were at the C’s risk and sent them an invoice. D threatened to withdraw the C’s credit facility unless the invoice was paid. C needed the credit facilities and so paid the invoice and then sought to reclaim the money on the grounds of economic duress.
JUDGEMENT: The Court found against CTN.
PRINCIPLE: The threat to withdraw credit facility was lawful since under the terms of the credit agreement credit could be withdrawn at anytime. Therefore the threat was legitimate and consequently, economic duress could not be established.
3 factors the court based their decision on in CTN v Gallagher
- The agreement/dealings in question took place between two commercial entities, two companies, and not between a supplier and a consumer
- Gallagher had the right to refrain from future dealings with CTN for any reason it chose. Thus, because a decision to discontinue dealings with CTN was lawful, it was also lawful for Gallagher to threaten CTN with credit withdrawal in the absence of payment of an invoice that was already due.
- Gallagher acted in good faith when it demanded payment from CTN – it genuinely felt entitled to the payment. In the absence of malice or any other form of bad faith, economic duress could not be established.
Adam Opel GmbH v Mitras Automotive (UK) Ltd [2007]
FACTS: M was in the business of manufacturing automotive parts and was the sole supplier of a particular part. A decided to source the part from a new supplier, as they began manufacturing a new model and advised M they would be terminating the supply contract. M made several demands for payments on the basis that the amortisation of the development costs had been based on the supply. A offered costs substantially lower than what M were claiming. M provided A with an option to either accept the price or source the goods elsewhere. A paid their demands for fear of not being supplied with the goods for the remainder of the year. They claimed duress. M argued that A had the realistic option of pursuing other alternatives and that there was no duress.
JUDGEMENT: Judgment was awarded in favour of A and duress was found to have compelled A to pay the money to M.
PRINCIPLE: Causes required for a finding of duress were applied from the case of DSND, in that there needs to be a lack of practical choice for the victim which is illegitimate and a major clause in inducing the victim to enter into the contract.
Skeate v Beale [1840]
duress to goods
FACTS: A landlord was owed money by a tenant. He seized goods owned by the tenant and threatened to sell them immediately unless the tenant entered an agreement for repayment of the sums owned. The tenant agreed to the repayment terms but then sought to have the agreement set aside for duress.
JUDGEMENT/PRINCIPLE: Duress to goods will not suffice to render a contract voidable.
Maskell v Horner [1915]
duress to goods
FACTS: D demanded money from C by way of a ‘toll fee’ for his market stall. D had no legal basis for demanding this money. D threatened to seize C’s stock and sell it if he did not pay up. C paid the toll fee for a considerable period of time and then brought an action for money had and received to recover the money paid under duress.
JUDGEMENT: C was entitled to recover the sums paid in the law of restitution.
PRINCIPLE: This decision is out of line with the law on duress of goods in contract law and is considered by some as demonstrating that the position taken in contract law should be revised.
