Vitiating Factors Flashcards
Atlas Express v Kafco
1989, QB (UK)
DURESS
Kafco imported basket ware and contracted with Atlas to sell and deliver the baskets. Atlas said that if trailer was not returned with new minimum of 440 pounds worth of goods it would be driven away unloaded. Kafco reasonably believed there was no negotiating out of the terms so felt compelled to sign agreement with new terms.
Held that this was economic duress because they had no other choice - it was a take it or leave it situation.
Economic duress must mean that the plaintiff had no other choice because duress is not a voluntary act.
Duress must be more than mere commercial pressure.
Need to look at whether they protested, whether they had an alternative course of action such as legal remedy, whether they got legal advice and whether after entering the contract steps were taken to avoid it.
Pharmacy Care Systems v AG
Elements of Duress:
(1) That pressure must be brought upon the innocent party
(2) The pressure is illegitimate
(3) The pressure is why the party entered into the contract
McIntyre v Nemesis DBK
2010, NZ
DURESS
Manger of a joint venture asks for additional payment due to building it taking 11 years rather than 3 years. Plaintiff claims that additional payment was made under duress.
Held that it was no duress because the claim was brought late and therefore making the additional payment amounted to affirmation - carried out the demand even after the pressure ceased to exist.
Also had legal advice then carried on dealing, held that there was a number or alternatives, and there was not enough causation for duress. This was not a take it or leave it option it was just the best option available to them. Cases shows that just because you make a commercial decision that is not ideal, does not mean it was duress.
(4) Element of Duress is if the defendant can rebut the presumption - case held that to do so access whether plaintiff had independent legal advice, affirmed the contract after influence ceased and/or transaction was genuine commercial bargain.
Times Travel v Pakistan International Airlines
2020, UK
DURESS
Travel agency sold majority of tickets for Pakistan airlines. Travel agency demands additional commission from airline which is refused and the airline threatens to reduce sale of tickets to company and not renew the contract between them. Basis of the threat is the airlines contractual hold up (power imbalance).
Times Travel involved situation where party threatened to not have contact renewed and instead offered a less appealing one.
Held not to be duress because not illegitimate pressure. The pressure was legitimate because the airline believed in good faith that it was entitled to act the way they did, therefore they are entitled to make the demand- no evidence it was done in bad faith.
Shows that if the inducer bona fide believes that they have a right to act the way they did then it is not illegitimate regardless of whether it was reasonable or not.
Bad faith demands are not uncommon in commercial dealings.
Dold v Murphy
2020, COA (NZ)
DURESS
Murphy has smallest shares in a business, yet as a solicitor he provides a lot of human capital (knowledge) which helps increase the value of the business significantly. In order to sell the business all 3 shareholders are required to sign a memorandum. 5 days before it was required to be signed M says he will not sign unless he is paid additional $5 million. The two shareholders agree to paying $4 million.
Held that this was not duress because a threat not to enter a contract is not prima facie an illegitimate act. His demand was held to be legitimate because he had proper basis to ask for the additional payment.
Told argued that because the demand was made under time pressure that they had no other option to negotiate alternatives. This was declined because they had the time to negotiate 5M down to 4M suggesting there was sufficient time.
Showed that there is no current duty of good faith in contract law and this means that parties can do “immoral” things and it not be held to be illegitimate pressure.
Entridge
UNDUE INFLUENCE
In order for plaintiff to prove that there was presumed undue influence must:
(1) prove there is a relationship of trust and confidence
(2) prove there was a transaction that calls for an explanation
Held that a third party is put on notice when there is a non commercial relationship.
Hogan v Commercial Factors Limited
2006, COA (NZ)
UNDUE INFLUENCE
Parents claimed they signed guarantee of their sons company under undue influence.
Held not to be undue influence because it was a commercial relationship as the father had a lot of knowledge in the business.
Presumed undue influence comes from relationship which are heavily based on trust and confidence such that they are basically forced to accept the advice. This relationship was not such because the father knew what was going on himself and had sufficient knowledge to make rationale decision himself.
Gardiner v Westpac NZ
2014, COA (NZ)
UNDUE INFLUENCE
G signed a guarantee for Westpac for business which comprised of them and their son. G claim guarantee was signed under undue influence from their son therefore void and that Westpac was arguably on notice to the fact.
Westpac was not held to be a liable third party because they were not on notice to the potential undue influence. Even if they were they took sufficient steps to insulate itself from liability by ensuring the parents had independent legal advice.
This judgement suggests there are two tests for when a third party is put on inquiry: Entridge when the relationship is non-commercial and Wilkinson when the financier has knowledge of factor which would lead to a presumption of UI.
LEAD Training v Evans
2010, HC (NZ)
UNDUE INFLUENCE
Evans received counselling and training from LEAD. Entered into licensing agreement with LEAD to be in a coaching network (life coach).
Held that student was under undue influence –> a student-teacher and counsellor-patient relationship is that presumed undue influence will occur.
Established that the ones is on the defendants to rebut the presumption and the greater the disadvantage the stronger the evidence must be to rebut the presumption must be.
Must be causation - if the undue influence does not cause you to make the unfair bargain then not liable.
Allcard v Skinner
1885, COA (NZ)
UNDUE INFLUENCE
Plaintiff was a sister of a sisterhood. Upon committing herself she had to give all her property up to the sisterhood. 5 years later when she left she sought to get back property on the basis of undue influence.
Held not to be undue influence as presumption rebutted because she took 5 years to make any claim.
Judgement held that if a gift is so large that it cannot reasonably be explained by notion such as friendship then the burden is on the donee to prove it was made of their own free will.
Pressure doesn’t need to be inherently wrongful, or done in bad faith - if can just be inherent from the relationship.
Thorne v Kennedy
2017, HC (AUS)
UNCONSCIONABLE BARGAINING
Ms Thorne signed was her solicitor told her was the “worst pre nuptial agreement” in order for her wedding to go ahead. She claimed she done so under pressure because it was given to her only 4 days prior to wedding and everything was already planned and her family had flown over.
Held to be unconscionable bargaining because there was a very clear imbalance in bargaining power and financial positions. The vulnerability was emotional and financial dependance and pressure from pending wedding.
UB is all about equity.
Nichols v Jessup
1986, (NZ)
UNCONSCIONABLE BARGAINING
Neighbor convinced older women to merge driveways to create a mutual right of way. This increased the value of his property and decreased the value of hers.
Held that this was unconscionable bargianing. The older women was “unintelligent and muddleheaded” and wasn’t allowed independant legal advice. She was essentially manipulated into a very one-sided bargain as he continued to badger her about the agreement and then passively accepted a very one sided bargain.
Ordered for the contract to be reconsidered.
Held that knowledge of vulnerability can be actual or constructive. It is a mixed objective/subjective test as to whether they had knowledge = reasonable person in the position of the plaintiff.
Bridgewater v Leahy
Agreement to B to sell farm to nephew for significantly reduced price.
Held that this was UB because there was a strong emotional attachment between the parties as B treated nephew like a son. The nephew knew about this strong emotional attachment and then initiated for the low price sale passively accepting it.
Gustav v Macfield
UNCONSCIONABLE BARGAINING
Elements of unconscionable bargaining:
(1) Plaintiff has a significant disability or special disadvantage (which meant they were unable to make an informed judgement for themselves).
(2) Defendant had knowledge of this vulnerability (actual or constructive).
(3) Defendant took advanatge of the vulnerability
(4) In order to prevent UB being found onus on defendant to show that contract was nevertheless fair and reasonable and thus should be upheld.
CF Assets Finance v Okonji
2014, COA (UK)
NON EST FACTUM
O, who is a solicitor, signed documents which she understood the nature of but mistook what it was to be used for. Turns out they were a guarantee.
Held that eventhough what she signed was in in form different, Non-Est Factor not available because was not radically different in substance. She knew what she was signing just mistook the effect.
Held NEF is it only applied when the person doesn’t know what they are signing, not just when they are mistaken as to the effect of the document.
O was negligent in signing the document - she should have taken more care to read and understand it particularly someone who is a lawyer (and held to higher standards).
Fraud alone is not enough for NEF.
