Economic Duress Flashcards
What is economic duress
Economic duress is the threat to damage a business or person financially
What must there be for economic duress
Lack of practical choice for the victim
The pressure must be illegitimate
The illegitimate pressure is a significant cause of making the contract
Atlas Express v Kafco
There must be a serious threat to property or business; commercial pressure is not enough
The threat must leave the victim with no practical alternative
Taking advantage of another party’s vulnerable position can invalidate contract variation
Universe Tankships Case (House of Lords case)
Originally it was said that even significant pressure might be legitimate if there’s reasonable justification. However, Lord Scarman emphasised that the presence of protest at the time of payment was strong evidence of coercion.
Added the element of has there been protest
Illegitimate pressure
Goes against the principles of fairness, justice or law
Pressure considered unethical, improper or wrongful
Commercial pressure must be distinguished from duress
Mere commercial pressure is insufficient for duress
The pressure must go on beyond normal commercial bargaining (when one side has no bargaining power)
Pao on v Lau
for there to be economic duress you must consider:
Whether there was protest at the time
Whether there was an alternative course of action
Whether the party had independent legal advice
Whether they took steps to avoid the contract after entering it
CTN Cash & Carry v Gallagher
Legitimate legal pressure
A threat to break a contract is not automatically illegitimate
The context of the commercial relationship is important
It can be illegitimate even if it is not unlawful
The courts consideration of legitimacy
Focused on whether Gallagher genuinely believed they had a right to payment
Considered whether the threat was made in good faith
Times Travel v Pakistan Airlines
Where only lawful acts have been committed economic duress will not be available as a defence unless bad faith can be proved
TT had alternatives, even if they were unattractive
Effect of finding of defence
The contract is valid but is voided by the innocent party – rescission
Damages are not available for economic duress
