Economic duress

Question 1

Definition

Answer 1

Duress is divided into two areas:
Personal duress: Threats to a person (e.g., death threats or blackmail).
Economic duress: Pressure on a party that affects their economic position and forces them to agree to a contract.

Question 2

Developments

Answer 2

In Pao On v Lau Yiu Long (1980), Lord Scarman identified four factors to establish economic duress:
Did the person protest?
Did they have any other available course of action?
Were they independently advised?
Did they take steps to avoid the contract once entered?

Question 3

The basic rules

Answer 3

Pao On v Lau Yiu Long (1980), Lord Scarman stated economic duress required coercion of will.
In Universe Tankships (1983), Lord Diplock said pressure must be “illegitimate” and force the victim into a contract.
It is not just a “bad commercial bargaining position” (CTN Cash and Carry v Gallaher (1994)).

Question 4

The ‘classic’ situation

Answer 4

A “classic” case involves one party forcing another into a contract with no realistic alternative:
Atlas Express v Kafco (1989): Kafco, a small company, had a delivery contract with Woolworths. Atlas Express demanded higher fees at the last minute. Kafco, fearing financial loss, had no choice but to agree. The court held this was economic duress.

Question 4

Illegitimate factors

Answer 4

In Pao On, factors included:
Did the victim have a realistic alternative?
Was the pressure lawful or unlawful?

Question 5

Trade unions

Answer 5

Trade unions may pressure businesses through industrial action. Courts distinguish between:
Lawful pressure (strikes, negotiations).
Unlawful pressure (threats beyond legal rights).
Universe Tankships v ITWF (1983): Shipowners paid money due to union threats. Held: economic duress.

Question 6

Ship builders

Answer 6

In North Ocean Shipping v Hyundai (1979), builders demanded a 10% price increase after the contract was agreed.
The buyer protested but later paid, fearing delays.
Held: Economic duress, but no remedy as the buyer waited too long to act.

Question 7

Must be illegal

Answer 7

Economic duress must go beyond tough commercial pressure.
CTN Cash and Carry v Gallaher (1994): A supplier refused credit over a lost delivery.
Held: Not economic duress, as it was a lawful act in commercial dealings.

Question 8

Legitimate pressure

Answer 8

In Times Travel v Pakistan International Airlines (2021), an airline used its dominant position to force travel agents into lower commission contracts.
Held: No economic duress, as the pressure was lawful and legitimate commercial pressure.

Question 9

Remedies

Answer 9

If economic duress is established:
The contract may be voided.
Possible restitution of money or benefits received