economic duress Flashcards
what are two types of vitiating factors?
- misrepresentation
- economic duress
what is a vitiating factor?
- makes a contract void or voidable
- a contract is void if it has no legal standing
what is economic duress?
where someone is forced into signing a contract through economic/financial threats
this could be as a result of undue influence, duress or economic duress
undue influence
- occurs where one party entered the contract as a result of pressure
- this is presumed where the relationship is one of trust and one party will benefit at the expense of the other.
Allcard v Skinner (1882)
Allcard v Skinner (1882)
A novice nun gave nearly all her money to the mother superior. In that case it was said: “the court interferes, not on the ground that any wrongful act has in fact been committed by the donee, but on the ground of public policy, and to prevent the relations which existed between the parties and the influence arising therefrom being abused”
duress in contract law
- in contract law, where one of the parties alleges that they have been forced to enter into a contract as a result of threats made by another person
- Barton v Armstrong (1976) - death threats were made
economic duress
the threat to damage a business or person financially – is a common form of
duress and the court will consider each case involving economic duress
according to its individual circumstances.
economic duress in context
- In the case of Skeate v Beale (1840) – the court had decided that a threat towards property did not constitute duress.
- However, in the case of The Siboen and The Sibotre (1976) – the court said that serious threats should be considered as duress
- This was developed in Atlas Express v Kafco (1989)
Atlas Express v Kafco (1989)
- Atlas agreed to transport Kafco’s goods for many months. A rate was agreed, but Atlas later insisted on minimum quantities to be delivered.
- Kafco argued that its agreement to the new term has been obtained by economic duress
- Kafco would have been forced out of business if Atlas refused to carry its goods as the goods were to be transported to its major customer.
- Economic duress was established as the agreement was induced by illegitimate pressure
requirements for economic duress
The key requirements for economic duress are that there must be pressure.
This involves:
* a practical effect that there is compulsion on, or a lack of practical choice for the claimant
* the pressure must be illegitimate
* the illegitimate pressure is a significant cause of making the contract
Universe Tankships v International Transport Workers Federation (1983)
- ITWF blocked a ship, The Universe Sentinel, to prevent it from leaving port.
- They made several demands in relation to pay and conditions and also demanded the ship owners pay a large sum of money to the Seafarers International Welfare Fund.
- The ship owners agreed so the ship could leave port.
- The court decided that the money had been extracted as a result of economic duress and had to be repaid.
-Gave them little practical choice
-Pressure was illegitimate
-Pressure caused them to sign the contract
What does ‘illegitimate’ mean?
Factors to consider what pressure is ‘illegitimate’ were set out in Pao on v Lau Yiu Long (1979)
The court then identified factors to help decide whether economic duress was present:
* Did the person claiming to be coerced protest about the pressure?
* Did that person have any other available course of action that was reasonable?
* Was he independently advised before taking the action?
* After entering into the contract, did he take steps to make the contract void?
Pao on v Lau Yiu Long (1979)
- Defendant had threatened not to complete a large contract for the purchase of shares unless subsidiary agreements including a guarantee were signed. The court said that there must be some factor ‘which could in law be regarded as a coercion of his will so as to vitiate his consent’.
- The court then identified factors to help decide whether economic duress was present
