Duress Flashcards
(23 cards)
A contract can be set aside on the ground he has been entered into under duress. 4 types :
- duress of the person
- duress of the goods
- economic duress
- lawful act duress
Step of recognition :
-duress of the person
-duress of good = stunted many years because of the Skeate v. Beale case
-economic duress -> slow to devlop : 1976 for economic duress
csquence : a number of questions remains unanswered in relation to the scope of the doctrine
2 central elements in duress
- illegitimate pressure applied by one party
- transaction = which constitutes a (significant) cause inducing the other party to enter into the contract
Illegitimate pressure
-includes a threat to commit a crime and a threat to commit a tort
-a threatened breach of contract can can constitute illegitimate pressure BUT it is not clear whether all threatened breach are illegitimate for this purpose ( difficult case when the threat is made bona fide that has been threatened is not a breach of )
≠ a refusal to contract unless certain conditions are met and a refusal to waive existing contractual obligation do not constitute the application of “illegitimate” pressure ( CTN Cash and Carry v. Gallaher)
The test to determeine whether there is a sufficient link between the illegitimate pressure and the entry by the claimant into the contract :
- depends upon the form that the duress assumes
- duress to the person = sufficient that the illegitimate pressure was “a” cause of the claimant’s decision to enter into the contract
- economic duress = illegitimate pressure must have been “significant” cause of decision to enter into the contract
Additional factor taken into account when deciding whether or not economic duress has been established -> relevant to establish the link illegitimate pressure/ contracting HOWEVER the courts appears to regard them as distinct, free-standing elements which must be taken into account
- whether the victim had any realistic practical alternatie to submit to the pressure
- whether the victim protested at the time
- whether he affirmed and sought to rely on the contract
Barton v Armstrong (1976) Privy council decision -> persuasive authority
Duress of the person
-Facts : A negotiation arose and was conclude under threats that he would be mudered and by the exertion of other unlawful pressure over him.
-Solution :
1/ illegitimate pressure = to threat to murder : self- evident illegitimate
2/ the relationship between the illegitimate mean used and the action taken = “ a” reason for the party to enter into the contract
- PC reversed CA decision -> the but for test is a too high threshold to reach in case of personal violence = ‘If Armstrong’s threats were ‘a’ reason for Barton’s executing the deed he is entitled to relief even though he might well have entered into the contract if Armstrong had uttered no threats to induce him to do so’.
- > onus of proof = on the defendant -> that the “illegitimate presure” contributed in nothing to the C’s decision to sign
- > held the deed is void /!/ -> normal solution is VOIDABLE cf Pao On v. Lau Yiu Long
- Dissent L. Wilberforce : issue of fact in this case -> does not challenge the fact that it only needs to be “a” reason BUT must be a conscious reason and evidence of it must be brought and found to be honest and accepted.
- > The absence of choice in the sense you fell you had no other choice than to act = ø negate consent -> The pressure must be one that the law does not regard as legitimate.
Astley v Reynolds (Pawnbroker) (1731)
- Fact : to pay interests or he wont give back the plate
- Court : he was entitled to recover the interest because the threat was an illegitimate form of pressure which induced him to give an additional amount of money.
Economic duress
= one party uses his superior economic power in an illegitimate manner in order to compel the other party to agree to enter into a contract or to enter the contract on particular terms.
Substantive unfairness ( i.e unfairness of the terms of the contract)
= common feature to the duress cases -> but not enough to constitute duress
Reason : what is wrong with the contract -> ø the fairness or unfairness of the terms BUT the nature of the threats that have been used in order to induce to enter into the contract.
-> duress = example of “procedural unfairness”.
Dimskal Shipping Co SA v ITWF (The Evia Luck) (No 2) [1992] 2
Duress of goods = The threat in the context must be a “significant cause” of the transaction.
Huyton SA v. Peter Cremer :
L. Mance discussed the relationship between Burton and The Evia Luck = the relaxed view of causation in the special context of duress to the person cannot prevail in the less serious context of economic duress or duress of goods = although it is not clear how strict that the test is. In this case scenario = must take into account a “but for test” and the possibility of a real choice available to the party and therefore to resist the pressure.
Occidental Worldwide Investment Corporation v Skibs A/S Avanti (The Siboen and the Sibotre) [1976]
Fact : shiner are asked to refuse price of charter on the ground that they charters would go bust unless reduction. Did the amount to a form of economic duress ?
The court held NO. There was a threat but did not cause the reduction in the price of the charter. Reasoning is problematic because ship owners provided evidence showing that they did not have the choice to reduce.
If victim of threat didn’t agree this would have meant that:
They would have to find alternative charterers, and it was unlikely that they could; and,
Due to the insolvency of the charterers, any rights against them would be worthless.
And yet the court said in this case no academic duress.
B & S Contracts and Designs Ltd v Victor Green Publications Ltd [1984] Court of appeal
Fact ; agreed to build exhibition stands in a stadium. In the context of building those stands, B&S contracts run into trouble as a result a number of employee refused to erect of stand unless they were paid severance pay. As a result B&S asked for the defendant more money. And in that case CD agreed to pay additional money ( 10 000£).
Court : Although no explicitly threat , there was an implied threat to breach the contract. This one was an example of B&S exercising illegitimate pressure on Victor green. So does that pressure cause Green to enter in the transaction ?
-The court -> “causal test” satisfied for 2 reasons : If victim of threat didn’t agree this would have:
Damaged its reputation; and,
Meant that it would have been liable to exhibitors.
-Griffiths -> defendant in an impossible situation as they would have not been able to erect the stands in this part of the exhibition and even if no overt demand it was implicit in negotiation between the parties that the defendant were plaintiffs were putting the defendant into a corner
-Griffiths + L. Kerr = based their decision primarily upon the lack of reasonable alternatives open to the defendants
-Note : what matters is not the lack of alternates as such but the role of the party exerting the pressure in reducing those alternatives
Pao On v Lau Yiu Long [1980] AC 614 (PC) 635 (Lord Scarman)
Economic duress case
Facts = the claimant threatened not to proceed with the sale of shares unless the D agreed to renegotiation on other peripheral issues. The defendant wanted to avoid litigation and were anxious to reach agreement for the sale of the shares so agreed. The C tried to enforce the agreement but the defendant resisted on the basis of duress.
PC -> in favour of the C on the basis that the fact disclosed ordinary commercial pressure that was not sufficient to amount to duress.
Lord Scarman = Relevant to causation is whether the victim:
-Protested;
-Had a practical alternative, eg, an adequate legal
remedy;
-Received independent advice; and,
-Acted promptly to avoid renegotiation.
-> also defined duress more generally “ a coercion of the will so as to vitiate consent”
North Ocean shipping Co v. Hundai Construction co ( The Atlantic Baron) QB 1979
Economic duress pressure -> the acceptance of the proposition that a threatened breach of contract can constitute economic duress.
Fact : a contract existed for the construction of a boat but the shipbuilder sought to increase the price after building had commenced due to fluctuation in exchange rate. The purchaser did not want to agree to variation in the terms but feared that refusal would delay the completion of the boat which would have jeopardised a lucrative charter agreement that was being negociated on the basis of the original completion date of the boat. The purchaser paid the increased price but, eight month after delivery of the boat, sought to recover the additional sum by claiming that their agreeement had been obtained by duress.
Legal principle = pressure of this nature -> amount to duress.
- essence of duress = had been “compulsion of the will” = can arise just as much from economic pressure as it could from threats of violence.
- Here = claim unsucessful -> not due to the nature of the pressure but to the delay in commencing action.
- the need to act quickly once freed from business -> a party who is dilatory in making a complaint of duress is likely to be held to have affirmed the contract.
CTN Cash & Carry v Gallagher [1994] Court of Appeal
Facts : The defendants sent a consignment of cigarettes to the wrong address. The cigarettes were then stolen. The defendant mistakenly believed that the cigarettes were at the claimant’s risk and sent them an invoice. The defendant threatened to withdraw the claimant’s credit facility unless the invoice was paid. The claimants needed the credit facilities and so paid the invoice and then sought to reclaim the money on the grounds of economic duress.
Held: A refusal to contract does not constitute the application of “illegitimate pressure” for the purpose of economic duress. The threat to withdraw credit facility was lawful since under the terms of the credit agreement credit could be withdrawn at anytime. Therefore the threat was legitimate and consequently, economic duress could not be established.
Steyn J =
- > the dispute arises out of arm’s length commercial dealings between 2 trading companies. No duress even though the D were in a monopoly position ( the control of monopoly is a matter for the Parliament)
- > the D = in law entitled to refuse to enter into any future contract for any reason whatever
- > the D bona fide thought the goods were at the risk of the P and the P owed the sum in question -> exerted commercial pressure
➔ A refusal to contract does not constitute the application of “illegitimate pressure” for the purpose of economic duress.
R v Attorney General for England and Wales [2003] UKPC
Fact : R was a member of the SAS. He was a member of the patrol Bravo Two Zero which became infamous after other members of the patrol had published books on the activities and a film was made based on the books. The publicity lead to controversy amongst the patrol as it was motivated by commercial gain and distorted the truth placing blame on some of the dead and surviving members of the patrol. In response to this the Ministry of Defence introduced confidentiality agreements to prevent future publications. R was told that he must sign the confidentiality agreement if he wished to continue in the regiment or be Returned to Unit which would be a considerable demotion for the claimant and was generally given as a form of punishment. R asked if he could take legal advice on the agreement and was told that he could not. He signed the agreement in Oct 1996 and in March 1997 took the decision to leave the Army. The following year he wished to put his side of the events of Bravo Two Zero to correct the earlier errors and save the memories of his lost colleagues. He entered a contract with a publisher and the Attorney- General brought a claim seeking an injunction to prevent publication. R sought to have the confidentiality agreement set aside as it was signed under military orders he raised both duress and undue influence in his defence.
Held:
L. Hoffman 2 elements of the wrong of duress :
- pressure amounting to compulsion of the will of the victim = here defendant no practical alternative but to sign the contract
- the illegitimacy of the pressure : must be examine from 2 aspects :
-> nature of the pressure
-> the nature of the demand which the pressure is applied to support
Universe Tankships Inc of Monrovia v ITWF (The Universe Sentinel) [1983] 1 AC 366 (HL) 401 (Lord Scarman)
Fact : a strike organized by ITF was delaying the production of a ship that was being built for the C. ITF agreed to end the strike if payments were made into the funds. The C made a payment but then sought to recover the payment on the basis that it was obtained by duress
Legal principal : not appropriate to talk about duress in terms of involuntary agreement and absence of choice as the innocent party always had a choice even if this was btween 2 unpleasant alternatives e.g either pay into the union funds or lose income because the production of the boat is delayed.
- > L.Diplock stated that it was more appropriate to formulate a test in terms of whether the innocent party was given any practical alternative other than to comply with the other party’s demand
- > here Scarman dissent.
The Port Caledonia and the Anna [1903] P 184 (‘£1,000 or no rope’).
Fact : 2 vessels and storm -> one drag closer to the other one. A rescue boat arrived and the manager of the top boat arrived and propose to help against £1000. The threat is not to help : what they threat is lawful. But asked an amount of money 5 times the commercial rate usual.
The court felt the demand was illegitimate or unfair. Because of that court set aside the transaction. But they said that some money would be owed but only the market rate ( don’t want this tup boat to be out of business).
Mutual Finance Ltd v John Wetton & Sons Ltd [1937] 2 KB 389 (KB)
Fact : John Welton false his brother and father signature in order to guarantee a higher purchase arrangement that his friend had entered into with his company mutual finance. His Friend fail to keep up with the repayments on the higher purchase agreement and mutual finance discovered the fraud. They went to the father and brother to say they will prosecute the son except if they really sign. Accept because the father was really unwell at this time so he agree to pay off the debt and took mutual finance to the court.
The court said that the transaction could be set aside even though mutual finance was threatening a lawful thing ( prosecute a criminal) but what was problematic is to exploits the emotional bounds between the brother / family. That made the threat illegitimate.
Williams v Bayley (1866) 1 LRHL 200 (HL) (threat to prosecute victim’s son)
Fact = A son forged his father’s signature on promissory notes and gave them to their bankers. At a meeting of all the parties at the bank, one of the bankers said to the father: “If the bills are yours we are all right; if they are not, we have only one course to pursue; we cannot be parties to compounding a felony.” The bank’s solicitor said it was a serious matter and the father’s own solicitor added, “a case of transportation for life.” After further discussion as to the son’s financial liability the bank’s solicitor said that they could only look to the father. The father then agreed to make an equitable mortgage to the bank in consideration of the return of the promissory notes. The father succeeded in an action for cancellation of the agreement.
Court = It was held by Lord Westbury that the security given for the debt of the son by the father under such circumstances, was not the security of a man who acted with that freedom and power of deliberation that must be considered as necessary to validate a contract to give security for the debt of another.
Unlawful action / lawful action
It is generally accepted that unlawful action will amount to illegitimate pressure but there are situation in which threats of lawful action may amount to duress if they leave the innocent party with no reasonable alternative other that to acquiesce to the other party’s demand.
THREATS OF UNLAWFUL ACTION = Atlas Express v. Kafco 1989
Fact : K was a small company that made basket ware and had secured a contract to supply woolworths. It engaged the claimant to transport the goods but, due to a miscalculation of the costs involved, the claimant increased the price of delivery after the contract had commenced and threatened to cease delivery in breach of contract if the new price was not accepted by the defendant. As failure to supply goods to its major client in the pre-Christmas period would lead to loss of customer, the defendant felt impelled to accept the higher price but later refused to pay, claiming duress.
Court = amount to economic duress -> the threat to the breach of contract = illegitimate pressure and due to the timeframe involved the claimant would not have been able to find an alternative means.
THREAT OF LAWFUL ACTION = CTN Cash & Carry v. Gallagher
Court : lawful action could amount to illegitimate pressure but ø here -> noted that it would require extreme circumstances before “lawful act duress” would be recognized in a commercial contract.
