economic duress- vitiating factor Flashcards
vitiating factor makes the contract…
void/voidable
economic duress
when someone enters into a contract as a result of financial threats
(threat to damage a business or person financially)
recquirements:
> serious financial threat
which amounted to illegitimate pressure
which induced C to agree to the contract/to new terms in an existing contract
in the past this type of claim was not allowed as in
Skeate v Beale
However, it has been allowed since
The Simeon v the Sibotre if the threats were serious
Atlas v Kafco
Atlas demanded he was paid more or wouldn’t deliver - Kafco agreed as they were a small company who signed a big order from a big company + needed it delivered on time.
Kafco then refused to pay it as the agreement was made under economic duress + court agreed
The threat must involve…
illegitimate pressure/compulsion or lack of choice for the victim - more than normal commercial pressure as seen in
Universe Tankships v ITWF
Universe Tankships v ITWF
ITWF said that unless the owners of the vessel complied with demands they couldn’t leave the port- owners agreed so the ship could leave the port
Court decided the one had been extracted as a result of economic duress + must be repaid
Pao On v Lao
sets out criteria for what counts as illegitimate pressure
> The person who was being pressured protested about the power
the person being pressurised had no other reasonable course of action (so had to agree)
the person being pressurised didn’t have independent advice before agreeing
took steps after the contract to make it void (act fast)
CTN cash v Gallagher
Normal lawful commercial pressure will not be seen as ‘illegitimate’
G sent cigarettes to the wrong address + they were stolen. G believed they were at Gs risk + sent an invoice. Then threatened to remove CTNs credit facility unless invoice was paid.
G was just trying to get back what they were entitled to , not to gain an advantage.
illegitimate is not synonymous with unlawful
However, there may rarely be illegitimate pressure when Ds conduct is lawful
Progress Bulk v Tube City
There was a delay by D in providing a promised ship for C. D refused to supply a substitute ship for C unless C gave up their right to claim compensation.
Ship owners took advantage of a consequence of the breach, this was illegitimate pressure, even if not unlawful in itself.
The recent case of
Times Travel v Pakistan airlines
has given very strictly limited situations where lawful threats could be illegitimate pressure.
Two parties in dispute over commission + Pakistan airlines gave notice to terminate the contract. As a condition of the new contract, required times travel to provide a waiver of all prior claims, including disputes over commission.
Where only lawful acts have been committed, economic duress will not be available as a defence unless bad faith can be proved, which wasn’t the case here.
remedy
restitution - any money/property obtained must be returned
remedy can be barred if…
a moment has passed(delay)
Atlantic baron
Cs delayed 8 months before bringing the claim
