Vitiating factors and remedies Flashcards
Undue influence:
One party entered the contract becuase of pressure from the other party, this meant the party had no independent judgement, it may be presumed i.e.e doctor and patient
in the case of Allcard v Skinner a novice nun gave nearly all her money to mother superior
Duress:
If a contract is signed under duress, they have been the victim of violent threats which resulted in them signing the contract
This could include blackmail, violence and threats, these threats would amount to crime if they were carried out
Threats to property were not treated as duress as economic duress is a separate entity
Combines undue influence and duress
Economic duress:
This is the threat to damage a business or person financially, the courts look at this subjectively. The threats must be ‘improperly coercive’ however they may not 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, exploiting business weaknesses, and the use of improper pressure
Economic duress in the case of Universe Tankships Inc. of Monrovia v International Transport Workers Federation
The courts saw duress as recognition of the victims submission arising from the realization 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 to develop the idea that serious threats to property should be considered as duress (previous threats could not amount to duress, only threats to the person could) developed Atlas Express v Kafco
Atlas Express v Kafco (1989)
The Kafco imported basket ware and entered a contract with Atlas to sell and deliver baskets to Atlas retail stores. Atlas tried to negotiate a further term in the contract for a minimum order of £440 per trailer load. Several days later, an Atlas representative turned up to Kafco’s premises with an empty trailer and told Kafco that if the trailer was not returned with £440 worth of goods as the new minimum, the trailer would be driven away unloaded. Kafco reasonably believed they would be unable to negotiate further terms of the contract and thereby sabotaging their opportunity to trade with Atlas, so they felt compelled to sign the agreement and meet the new terms of minimum stock trade. The agreement continued until Kafco sent them money on account and a letter stating they had signed the contract under duress. Atlas sued for the money on account.
Issue
Whether Kafco signed in duress, even though they had honored the contract.
Decision / Outcome
Judgment was awarded in favour of Kafco. Kafco were found to have signed the agreement under economic duress as they felt that in the circumstances they had no alternative but to sign the varied contract. Kafco had not approved the new terms of the agreement (as they had previously rejected the proposed variation) and further, there was no consideration for the new agreement as the variation placed Kafco in a less favourable position financially. Thus, their non-payment of the money of account resulted from the duress.
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 pressure which is illegitimate
3) there must be pressure which is a significant cause for the claimant to enter into the contract
can be seen in the case of Universe Tankships
Universe Tankships Inc of Monrovia v International Transport Workers’ Federation
An act that would otherwise constitute a coercion of the will does not amount to duress if it has been legitimised as a lawful or non-tortious act by legislation
Duress gives a remedy of restitution not tortious damages
Facts
C’s ship, the Universe Sentinel, had been blacklisted by ITF (D), a trade union
Tugmen on the direction of D refused to operate their tugs and thus the Universe Sentinel was unable to sail
To lift the blacklisting, Cs agreed to pay into D’s seamen’s welfare fund
After C’s ship left, C sued D for economic duress
KEY TEST FOR ECONOMIC DURESS
What makes pressure illegitimate? Pao on v Lau yui Long
1) did the person claiming to be coerced protest about the pressure
2) did that 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 the contract, did he or she take steps to make the contract void
Illegitimacy and unlawfulness are not synonymous
Progress Bulk Carriers ltd v Tube city
The dispute arose out of the sale of a load of shredded scrap that the charterers (hirers of a cargo ship) had to ship to China from Mississippi. The owners of the ship agreed to hire out the ship to the charterers for this voyage. Despite the agreement, the owners then hired the ship out to a third party, rendering the performance of the original contract impossible. However, in order to make up for their repudiatory breach, the owners offered to compensate the charterers’ losses and promised to find another ship to perform the agreement. The charterers relied on this and agreed to a later date of delivery with their buyers. In the meantime, the cargo’s value dropped and the buyers claimed a discount for late delivery. The charterers notified the owners of their intention to claim these losses as well as damages for breach of contract.
Issues
The owners refused to provide the charterers with a ship, unless the charterers withdrew their claims. The owners argued that their promises were not binding. In the absence of an alternative, the charterers were forced to accept the owners’ demands. The charterers later decided to sue the owners on the basis of economic duress. The arbitration tribunal found in favour of the charterers. The owners applied to the High Court for the arbitration award to be set aside on the basis that their actions were lawful.
Decision/Outcome
The High Court held that despite the fact that the owners’ refusal to provide a substitute ship was not a crime, a tort, or even a breach of contract, it still amounted to economic duress. The Court explained that the owners’ unethical behaviour of offering help and withdrawing it in the very last moment was already preceded by a repudiatory breach. Furthermore, the owners action left the charterers without an alternative. Putting the charterers into a situation of false sense of security was in fact a manoeuvre to corner them – and thus it amounted to illegitimate pressure.
Consideration within economic duress:
there is no consideration with economic duress, as it is not voluntary.
Remedies within duress:
If economic duress is present, the contract is voidable, there is no award of damages for economic duress, instead the courts can order restitution for property/ money lost
It is an equitable remedy that restores a person to the position they would have been in beforehand
It is discretionary so does not have to be dn=one
