Economic duress Flashcards
Economic duress
A contract is a voluntary agreement. If one party has been forced into it then it should not be valid. This could be because of undue influence , duress or economic duress.
What is undue influence?
One party entered the contract because of pressure from the other party .
- this is meant that the party had no independent judgement.
- These are circumstances where undue influence would be presumed . These include:
Doctor and patient , solicitor and client and religious advisor and disciple
For example in the case of Allcard v Skinner 1882 a novice nun gave nearly all her money to the mother superior.
More subtle than duress
What is duress?
If a contract is signed under duress they have been a victim of violent threaded which resulted them into signing the contract.
This could include blackmail violence or threats .
These threats of violence would amount to crimes if those threats were carried out. Threats to property were not usually treated as duress. Instead we have economic duress as a separate entity. This combines the ideas of undue influence and duress.
What is economic duress? 2
This is the threat to damage a business or a person financially.
- The courts will look at each case subjectively.
- They will take all the facts of the case into consideration in order to award an outcome.
- The threats must be improperly coercive ie pushing their boundaries of commercial pressure. However, the threats may not necessarily be unlawful.
- Courts have to look at each case individually because it is difficult to say when the line has been crossed from tough business bargaining. Exploding business weaknesses and the use of improve pressure.
In the case of universe tankships in of Monrovia v International transport workers federation the courts saw duress as recognition of the victims submission arising from the realisation that there is no practical choice open to him.
Essentially this means that the victim had no other choice but to agree, due to the pressure , or duress that the other party was putting on them.
The courts began by developing the idea that serious threats to property should be considered as duress previously threats to property could not amount to duress only threats to the person could. The idea was developed in the case Atlas express v kafco
Atlas express v Kafco
Kafco had secured a contract with wooolworth to supply goods to their stores around the country. Kafco signed a contract with atlas express to deliver their goods. They agreed that the delivery charge would be £ 1.10 per box. They hadn’t specified the amount of boxes per load, and it turned out to be less than they thought. Atlas therefore demanded more money to deliver the goods as they
What are the key requirements for economic duress :
1 there must be pressure which has a practical effect of there being a lack of practical choice for the victim.
2 there must be a pressure which is illegitimate
3 there must be. Pressure which is a significant cause for the claimant to enter into the contract
The threefold test can be seen in the case of universe tank ships including of Monrovia v International transport workers federation 1983
Universe tankships were being threatened by the ITWF. unless the tankships complied with ITWF,s demands in terms of rates of pay and other terms of employment of the crew, the would not tug the ship . This would mean the tankships could not leave the port. Tankships agreed so the ships could leave the port. The court decided that the money had been extracted as a result of economic duress and must be repaid.
What makes pressure illegitimate?
The case of Pao on v Lao yiu long 1979 identified three factors which help to decide whether economic duress was present:
What were the three factors pao on identified ?
1 did the person claiming to be coerced protest about the pressure ?
2 Did the person have any other available course of action that was reasonable ?
3 was he or she independently advised before taking the action
4 after entering into the contract did he or she take steps to make the contract void
Those four points help courts to decide whether the pressure amount to be illegitimate or not. Illegitimacy and unlawfulness are not synonymous. Pressure can still be illegitimate even though the action is lawful.
What case had pressure which was illegitimate but the action was still lawful?
Progress bulk carriers Ltd v Tube city 2012
In this case Cooke j stated that ‘ illegitimate pressure can be constituted by conduct which is not itself unlawful ‘
However they also said in this case that it would be unusual for pressure to be lawful but illegitimate. There is no consideration for economic duress as the passing of what would otherwise be consideration is not Done voluntarily as part of freely negotiated contract. Duress is not about the absence of consent but rather the wrongful nature of threats inducing consent and thus has a different and separate role to consideration.
Tip for exam if the scenario talks about a business with financial difficulties always consider economic duress
What are the remedies ?
If ecomic duress is present the contract will become voidable.
There is no award of damages for economic duress.
Instead the courts can make an order for restitution of property or Money taken under such duress
Restitution means giving back the property to the victim and restoring the money they gave away under duress.
It is an equitable remedy that restores a person to the position they would have been in beforehand.
It is discretionary, meaning the courts don not have to do it.
