Duress

Question 1

Duress - Topics

Answer 1

• Doctrine of Duress
• Economic Duress
• Two-Pronged Test
• Atlas Express v. Kafco [1989]
• North Ocean Shipping v. Hyundai Construction [1979]

Question 2

Doctrine of Duress

Answer 2

• The common law doctrine of duress: validity of a contract depends on the consent of the contracting parties. If one party forced the other to enter the contract against his will, this absence of voluntariness will be a factor which can vitiate the contract.
• North Ocean Shipping: Duress renders the contract voidable. As a result, a claim of duress may be lost through delay or approbation: it is not void ab initio.

Question 3

Economic Duress

Answer 3

• Where the financial or economic interests of a person are threatened.
• Atlas Express v. Kafco: ordinary commercial pressure insufficient to vitiate consent.

Question 4

Two-Pronged Test

Answer 4

1. the illegitimacy of the threat
2. the lack of reasonable alternatives

• Causation: the threat must have operated to induce the party to enter the contract
• McDermott: Threatening to breach a contract hours before a performance could be seen as an illegitimate act or threat.

Question 5

Atlas Express v. Kafco [1989]

Answer 5

• Kafco contracted with Atlas Express for the delivery of cartons of basketware to various branches of Woolworths. The original price proved uneconomic for Atlas due to a miscalculation and they demanded a higher rate.
• Kafco agreed, being heavily dependent on the contract with Woolworths, unlikely to find another carrier on short notice, and concerned that Woolworths might sue them.
• Held: Kafco’s consent to the increased rate was induced by illegitimate pressure.
• Held: There was no consideration for the new agreement to pay the increased rate.
• Held: economic duress has to be more than ordinary commercial pressure.

Question 6

North Ocean Shipping v. Hyundai Construction [1979]

Answer 6

• A ship-builder who had agreed to build a tanker for a fixed price threatened to refuse to complete the ship unless the plaintiff paid an extra 10% above the originally agreed price.
• Held: this extra money had been procured through economic duress
• Held: the plaintiff lost its right to have the contract set aside by virtue of affirmation. Received the ship in November 1974 but waited until July 1975 before seeking to recover the money. Once received the ship, the company was freed from the duress.