WS 8 - Duress Flashcards
William v Roffey exception to rule in Stilk v Myrick: 5 factors?
i. There is a contract to do work/supply goods and services in return for payment
ii. B doubts whether A will complete his obligations
iii. B promises additional payment if A completes obligations on time
iv. As a result of giving this promise, B obtains a practical benefit/obviates a disbenefit
v. B’s promise was not given as a result of ECONOMIC DURESS or fraud on the part of A
Define duress
Duress is some sort of violence, illegitimate threat or pressure. To amount to economic duress, the threat must be improper or illegitimate (i.e. a threat to breach a contract or to commit a tort). The burden of proving duress is on the party who alleges it. Effect of duress is to make the contract (or variation) voidable (i.e. contract is valid and binding unless and until it is rescinded by innocent party)
a. Barton v Armstrong [1975]
Armstrong had threatened to kill Barton if Barton did not buy his shares in the company. Barton agreed to do so, but not only because of the threats to his life. There was evidence to suggest that he thought it to be a satisfactory business arrangement in any event (he believed it would prompt the company’s principal lender to advance further money to it). Nevertheless, it was held that Barton should not be bound by the agreement. – Lord Cross of Chelsea: Duress need not be the only reason why the innocent party entered the contract.
What would be legitimate commercial pressure?
Normally: threat to take business elsewhere, sell to a competitor, or not to give a discount in the future.
What did Dyson J in Carillion Construction v Felix say the innocent party must establish there has been?
a. An illegitimate threat or pressure
b. Whose practical effect is that there is compulsion on, or lack of practical choice for, the V
c. Which was a significant factor in inducing him to enter the contract or variation (but need not be the only reason why innocent party entered contract - Barton v Armstrong)
Factors to consider when determining whether or not there has been illegitimate threat or pressure?
- Whether there has been ACTUAL OR THREATENED breach of contract
- Whether the person allegedly exerting the pressure has acted in GOOD OR BAD FAITH;
- Whether the victim has any REALISTIC PRACTICAL ALTERNATIVE but to submit to the pressure;
- Whether victim PROTESTED AT THE TIME
- Whether he AFFIRMED and sought to rely on the contract
Can duress be used as a defence?
yes, if the other party tries to enforce a variation of contract (Atlas Express v Kafco)
Effect of duress?
- Is the contract voidable?
2. only remedy: Recission (provided not barred)
Atlas Express v Kafco (facts)
C were road haulage company. Ds had a contract to supply goods to Woolworths nationwide. Hired Cs to deliver. Agreed price per carton. Cs thought there would be more cartons to deliver and said they refused to make the delivery until further payment made. Ds said they would pay, deliveries made, but in the event they didn’t pay. Kafco sued for the extra money but argued that the agreement to pay more was obtained through economic duress.
Atlas v Kafco (decision)
HELD – there had been duress. Kafco had no practical alternative, small business that could not afford to have its reputation with Woolworths damaged. ALSO – Kafco argued no consideration given for its promise to pay more money, Atlas was simply performing an existing contractual duty (Stilk v Myrick): Court agreed
Is the contract voidable? (Kafco)
if conditions #1-4 in Roffey are satisfied but we lack #5, it means there is no consideration and there is economic duress. Hence the contract is VOID.
Is the contract voidable? (Opel)
Current position (Opel v Mitras Automobile) - if conditions 1-4 of Roffey are satisfied but we lack 5, it means there is consideration, but there is no economic duress. Hence, contract is voidable (i.e. C has choice to rescind or to affirm)
What must the innocent party do to rescind the contract?
Must inform the other party that it wants to rescind. If the other party cannot be found or refuses to return money/property, they must inform the police (Car and Universal) or apply for a court order of recession.
Effect of recission
Return of money/property and neither party has any future obligations. All money and property should be rescinded.
What are the bars to recession?
Delay (c left it 8 months before alleging duress - Atlantic Baron)
Affirmation (Atlantic Baron - C paid while not under any pressure)
Impossible to substantially return the goods/property
Innocent party has acquired an interest
