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?

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
   - 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?
3. This pressure must be the most significant cause to enter the contract

Question 7

What is the remedy for economic duress?

Answer 7

• 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