Economic Duress

Question 1

What must a contract be to be legally binding?

Answer 1

• A contract is a voluntary agreement and when a party is forced into it, it is not valid
• If it is not voluntary, the contract is void

Question 2

What are three ways a contract may not be a voluntary agreement?

Answer 2

1. Undue Influence
2. Duress
3. Economic Duress

Question 3

What is undue influence?

Answer 3

• One party has entered the contract because of pressure from other parties
• This may mean they did not have independent judgement
• Undue influence can be presumed in circumstances such as a doctor and a patient, as seen in Allcard v Skinner

Question 4

What is duress?

Answer 4

• If a contract is signed under duress because they have been a victim of a violent threat which resulted in them signing the contract, it is not valid
• This could be black mail, violence and threats
• If they are carried out, they are crimes and therefore illegal

Question 5

What is economic duress?

Answer 5

• Economic Duress is a threat to damage a business or person financially, they will look at each case subjectively
• The threats must be improperly coercive but does not have to be unlawful
• The victim had no other choice but to agree due to the pressure that the other party placed on them
• The courts developed this idea that serious threats to property should be considered duress
• Atlas Express v Kafco showed that they had no alternative option but to sign it so therefore is economic duress
• If a business has financial difficulties, mention economic duress

Question 6

What are the three key requirements of economic duress?

Answer 6

• (Seen in Universe Tankships of Monrovia)

1. There must be pressure which means they have no other practical choice
2. There must be illegitimate pressure
3. This pressure must be the most significant cause to enter the contract

Question 7

What is the criteria of illegitimate pressure?

Answer 7

• Pressure can be illegitimate but lawful, however they often go together
• Pao on v Lau Yiu Long identified factors to decide whether the pressure was illegitimate
• Did they protest about the pressure? Must be yes
• Did they have any other available course of action? Must be no
• Were they advised before the action? Must be no
• Did they make steps to void the contract?

Question 8

What is the remedy for economic duress?

Answer 8

• The contract will become voidable and there is no award of damages
• They can restitute any property or money taken under duress
• It is an equitable remedy meaning they can restore the person to where they were in before hand