Lecture 15- Duress Flashcards
Duress
Threats that illegitimately seek to coerce the will of the other party
Vitiating factor- a contract will be voidable
Types of Duress (3)
1.Duress to Person
2.Duress to Goods
3.Economic Duress
Duress to the Person
This is all about physical threats (it must be a threat to the person- it must be a factor in the contractual process)
Barton v Armstrong [1976]
A threat to kill someone (unless they sign a contract) renders a contract voidable!
Duress to Goods
This applies where there is a threat of damage to the victim’s goods or a threat to deny the victim access to their goods, rather than to his person
Hawker Pacific Pty Ltd v Helicopter Charter Pty Ltd (1991)
Business chartering helicopters. One of the helicopters required re-painting. The business were not satisfied with the quality of the painting, however they needed the helicopter for a charter. They felt that they had to pay to get the helicopter back-agreement was voidable for duress. There were threats to deny the V access to the good.
Economic Duress Overview
Where one party uses her superior economic power in an ‘illegitimate’ way so as to coerce the other contracting party to agree to a particular set of terms
For example, threating to cancel a contract (if certain terms are not agreed to) or threatening to boycott a person’s business if they do not sign new terms
ED Starting Case
The Sibeon and The Sibotre [1976]
Contract was not voidable in these circumstances (it was expected within the commercial circumstances at the time) but Justice Kerr unlocked the door to the development of the notion of economic duress
Elements of ED
1.Coercion of will
2.Illegitimate pressure
3.Induces the party to enter the contract
Coercion of Will
More commonly referred to now as the lack of a practical or realistic choice/alternative.
Did the claimant have any realistic choice in agreeing to the defendant’s demands?
Coercion of Will Case
Pau On v Lau Yui [1980]
Lord Scarman identified two of the essential conditions for the operation of the doctrine:
Coercion of the will that vitiates consent
The pressures or threat must be illegitimate
Four Factors for Coercion
1.it is material to enquire whether the person alleged to have been coerced did or did not protest
2.whether, at the time he was allegedly coerced into making a contract, he did or did not have an alternative course open to him
3. whether he was independently advised
4.whether, after entering the contract, he took steps to avoid it
No Practical Alternatives Case
B&S Contracts and Design v Victor Green Publications [1984]
No practical alternatives= a coercion of will
Threat must be Illegitimate
The Universe Sentinel [1983]
The action was unlawful and therefore illegitimate
Pressure is Illegitimate in 2 ways
1.The conduct which has been threatened might be unlawful or illegal e.g. threat to breach contract
2.The threat may be one of lawful action, but the way in which the pressure is exerted is illegitimate e.g. blackmail BUT this is the exception rather than the rule
Military Case
R v Attorney General for England and Wales [2003]
The threat was lawful and legitimate as it was justifiable on the basis of disclosure of military operations
Illegitimate Case + 5 Factors
DSDN Subsea Ltd v Petroleum Geo Services ASA [2000]
Has there been an actual or threatened breach of contract?
Did the person exerting the pressure act in good or bad faith?
Did the victim have any realistic practical alternative other than submitting to the pressure?
Did the victim protest at the time?
Did the victim confirm, and then seek to rely on the contract?
Distinct types of Illegitimacy (3)
Refusals to contract
Threats to breach contract
Threats of lawful acts
Refusals to Contract
Courts are reluctant to find duress where there has been a refusal to enter into a contract
Demand for Guarantees Case
Bank of India v Riat [2014] A demand by a bank of a personal guarantee is legitimate
Bank of Scotland v Cohen The bank’s demand of guarantees was not illegitimate
Threats to Breach a Contract
A threat to breach an existing contract is more likely to be illegitimate than a threat to back our of an as-yet-unformed contract.
Breach Cases
Atlas Express v Kafco [1989]
There was no reasonable alternative to Kafco AND the threat to breach contract would cause unlawful damage to the other party’s economic interests
B&S Contracts and Design Ltd v Victor Green Publications Ltd [1984]
The fact that the demand is based on actual commercial exigencies, such as dealing with an unexpected cost, does not make it legitimate.
Threats of Lawful Acts
What of blackmail? Threat is lawful but it is used to attain a goal which is unlawful.
General rule = threat to do something lawful will not amount to illegitimate pressure
For example, stating your intention to enforce your contractual rights is pressure, but it is NOT illegitimate- Bernsten v National Westminster Bank [2012]
Good Faith Requirement
CTN Cash and Carry Ltd v Gallaher Ltd [1994]
The defendants acted in good faith and within their commercial position even if they were wrong in enforcing their contractual rights
Second Factor
Lawful act duress is possible – the lawful act may be improper if the threat is connected with unreasonable demands
But the circumstances in which this may occur, at least in the commercial context, are limited and rare
Progress Bulk Carriers v Tube City IMS [2012]
Narrowing Case
Pakistan International Airline Corp v Times Travel (UK) Ltd [2021]
Duress cannot be extended to lawful acts made in bad faith (narrow approach)
Two categories of cases where lawful duress is accepted
1.One party has exploited knowledge of criminal activity by an individual or a member of their family to procure an agreement - Williams v Bayley
2.where illegitimate means have been used to manoeuvre the claimant into a position of weakness to force him or her to waive their claim - Progress Bulk Carriers v Tube City IMS [2012]
Standard of Behaviour
In both cases, the illegitimacy of the conduct stems from the fact that the defendant has engaged in “morally reprehensible behaviour” which makes enforcement of the contract unconscionable.
The doctrine of lawful act duress is therefore ‘extremely limited’ - Leverage and/or pressure applied in negotiations will rarely meet the required standard of “illegitimate pressure or unconscionable conduct”.
Inducement
The extent to which duress must be a contributory factor depends on the type of duress. As far as duress to the person is concerned, the test is similar to that in misrepresentation. It is sufficient if the duress was a factor. It does not have to be the sole factor or even the primary factor.
ED Inducement
For economic duress, the person claiming duress must prove that he would not have entered into the contract ‘but for’ the duress
The Evia Luck [1992]– the duress must have been a ‘significant cause’
It must be ‘decisive or clinching’ - Huyton SA v Peter Cremer GmbH [ 1999]
