Economic duress

Question 1

What is economic duress?

Answer 1

This is where you are forced into a contract due to the possibility of financial damage.
- This is a vitiating factor which ruins the validity of the contract.

Question 2

What is the definition of economic duress?

Answer 2

• The threat or pressure of financial damage if you do not enter into the contract.

Question 3

What is PILS?

Answer 3

1. Pressure
2. Illegitimate
3. Lack of choice
4. Significant

Question 4

Whats meant by pressure?

Answer 4

It has to be more than ‘normal commercial pressure’

The Sibeon and The Sibotre-

• Told ship owners needed to reduce prices else they would go out of business during a worldwide shipping recession so they felt they had no choice.
• They failed as it was not a true threat, just commercial pressure.

Question 5

What is meant by Illegitimate?

Answer 5

The threat must be unlawful.

Atlas Express V Kafco-

• National carrier told small business they wouldn’t deliver their goods unless they increased the rate. Had no choice but to accept else they would have gone out of business.
• Economic duress.

CNT Cash & carry V Gallagher-
- There was no economic duress and G were perfectly within their rights to withdraw credit at anytime as it was a term in their contract.

Progress bulk carrier V Tube city-
- Was a legitimate threat as they would not have been in breach of the contract but they could still claim for economic duress.

Question 6

What is meant by lack of choice?

Answer 6

This is when the business has no other possible option but to accept the contract else they would suffer a substantial loss.

The Universe Sentinel-
- They had to pay the extra money as they had no other possible option and if they did not they would have been in breach of their time charter and would suffer a loss.

Question 7

What is meant by Significant/substantial?

Answer 7

In order for for it to be economic duress they must suffer a substantial loss. E.G. Bankruptcy.

Question 8

What was set out in the case of Pao On V Lau Yiu Long?

Answer 8

The courts set out some guidelines as to what to look for to identify whether economic duress has taken place or not (PAAA):

1. Did the person Protest at the time?
2. Was there an Alternative?
3. Was independent Advice taken?
4. Did they take step to try to Avoid the contract?

Question 9

What was established in the case of Atlantic barren?

Answer 9

The longer it takes to bring an action of economic duress to the courts the less likely they will consider it to be economic duress.

Question 10

What remedy is available for economic duress?

Answer 10

Restitution, is an order by the court which restores the person to the position they would have been in before the improper act.

• This is only an equitable remedy therefore is at the discretion of the courts. Each case will be decided based upon it’s particular facts.
• There is no award of damages.