Duress, Undue Influence and Mistake Flashcards Preview

LAWS1001 Advanced Contract Law > Duress, Undue Influence and Mistake > Flashcards

Flashcards in Duress, Undue Influence and Mistake Deck (37)
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what is duress

pressure exerted by one party to coerce another to contract on particular terms” (Graw 13.20)
- “Illegitimate pressure”


is legitimate pressure okay?

› Commercial pressure is ok. Persuasive.
› Smith v William Charlick Ltd (1924) 34 CLR 38
§ Commercial pressure to stop supplying.
§ It was paid unwillingly but had the facts and made the choice voluntarily.
§ No duress.


resistible v irrestible pressure

› ‘is the pressure such that it would not be reasonable to expect a person, possessed only of that ordinary degree of firmness to resist it’ (Graw 13.20)


effect of duress

› Voidable, not void.
› Can choose to void


duress and weaker party being overborne

› Lynch v Director of Public Prosecutions (Northern Ireland) [1975] AC 653 at 695 per Lord Simon, “the will is deflected, not destroyed”.
› Crescendo Management Pty Ltd v Westpac Banking Corp (1988) 19 NSWLR 40 at 46 per McHugh JA, he or she “chooses to submit to the demand or pressure rather than take an alternative course of action”.


modern test for duress

1. Is there any wrongful conduct or an unlawful demand which constitutes illegitimate pressure?
2. Did that illegitimate pressure cause the victim to enter into the contract?
3. What relief or remedy is available to the victim?


types of duress

- duress to person
- duress of goods
- economic duress.


duress to persons

› Actual violence
› Threat of violence
› Actual or threatened imprisonment
› Barton v Armstrong [1976] 2 AC 104 (threats against his life)


duress of goods

› Actual or threatened dealing with goods
› Traditionally not actionable - Skeate v Beale (1841) 11 Ad & E 983 at 990; 113 ER 688 at 690
› Modern approach - Hawker Pacific Pty Ltd v Helicopter Charter Pty Ltd (991) 22 NSWLR 298


economic duress

› Fairly recent (1970’s)
› North Ocean Shipping v Hyundai Constructions Co Ltd
§ Threatening to break a contract will generally constitute unacceptable commercial pressure.
§ But the plaintiff needs to take action reasonably quickly.
› Must prove irresistible and illegitimate pressure rather than commercial pressure (hard to distinguish)
› Can take forms:
§ Inducing a contract.
§ Threatening to break a contract
§ Obtaining benefits/advantages not entitled to under the contract (renegotiating or varying the terns of an existing contract.


duress relief and remedies

- Voidable by the coerced party.
› Barton v Armstrong.
- Ratification and affirmation – loss of right to void contract?
› North Ocean Shipping v Hyundai Co Ltd
- Restitutio in integrum
› Parties restored to original positions
- Is there an entitlement to common law damages?
› Generally, not.
› Action in tort – intimidation.
- Statutory remedy also available
› S50(1) ACL


Whats undue influence

- Pressure falling short of duress.
- Improper use of position (abusing position of trust).
- Gained from a party’s particular position or due to prior relationships (built up trust).
- To obtain an ‘undue benefit’
- Used for
› Securing a gift; or
› Attaining the consent of a contracting party.


when does UI occur

- Presumed and actual undue influence.
- Special relationship (presumed, law)
› Tate v Williamson (1866) LR 2 Ch 55.
- Other Relationships (actual, facts)
› Johnson v Buttress
§ Highly excitable, very stupid, mentally unstable, illiterate.


presumed undue influence

- Has the weaker party agreed to a transaction or arrangement because of the UI exerted by the stronger party over the weaker party?


presumed UI 2 step process

1. Is there a special relationship of influence between the stronger party and the weaker party as a matter of law or on the facts? These are presumptions (if you have this relationship, UI is presumed. Don’t need to prove, contending party rebuts presumption)
2. Is the quantum or improvidence of the transaction such that it cannot be explained on the grounds of friendship, relationship, charity or other ordinary motives?
- If the answer is yes than a presumption of UI arises.


UI presumed relationships

› Parent and Child: Bank of New South Wales v Rogers (1941) 65 CLR 42
› Guardian and ward: Taylor v Johnston (1882) 19 Ch D 603
› Spiritual advisor and devotee: Allcard v Skinner (1887) 36 Ch D 145
› Solicitor and client: Wright v Carter [1903] 1 Ch 27
› Doctor and patient: Haskew v Equity Trustees [1918] VLR 571
› Trustee and beneficiary: Whereat v Duff [1972] 2 NSWLR 147 (CA)
› There are some relationship which do not give rise to special relationship of influence
 Man and Fiancé: Louth v Diprose (1992) 175 CLR 621
 Husband and Wide: European Asian Bank of Australia Ltd v Kurland


actual UI

1. Is there a special relationship of influence between the stronger party and the weaker party on the facts?
› Does the relationship between the parties involve ascendency and influence on the part of the dominant party and dependence, reliance, trust and confidence on the part of the weaker party?
§ Johnson v Buttress


burden of proof UI

- Presumed – onus on defendant to rebut.
- Actual – onus on plaintiff.


effect of UI

- Presumed influence
› Presumed in certain relationships (unless rebutted) – remedy is recission
- Actual influence
› Must be proven.
- Must act quickly, may be affirmed
› Allcard v Skinner : “The influence of one mind over another is very subtle, and of all influences religious influence is the most dangerous and the most powerful, and to counteract it courts of equity have gone very far.” (this quote has nothing to do with acting quickly).
- Ancillary orders.


Rebutting UI presumption

- Access to independent advice
› Inch Noriah v Shaik Allie Bin Omar [1929] AC 127
- Independent advice would have been disregarded
› Not successful to rebut.
› If it would’ve been bad advice, can sue the lawyer.
- Ability to form independent judgement, sound mind, strong will etc.
› Re Brocklehurst’s Estate [1978] Ch 14


Operative mistake

- Mistake of ‘fact’ and ‘law’
› David Securities Pty Ltd v CW Bank of Australia
› Mistaken motive not relevant.


mistake at CL

Meeting of the minds’ – Consensus ad litem.
› Both parties intend the same thing.
- Principle of Fundamentality
› Psaltis v Schultz (1948) 76 CLR 547 at 561: “for no contract to come into existence through fundamental error, the mistake must be as to the identity of the other party – as opposed to his attribute; as to the substance of the subject matter – as opposed to its qualities; or as to the nature of the transaction – as opposed to its terms.”
- Only useful if fundamental mistake.
- Effect - Void ab initio (nothing to enforce).


mistake and equity

- May be useful if the mistake is not fundamental to the contract but to entering of the contract. Effect -
› Rectification.
› Refusal to order specific performance.
› Voidable (absolutely or with conditions).


common mistake

- Void both at common law and in equity.
› Cannot sue for damages, cannot seek specific performance.
- Both parties are mistaken.
- Each party makes the same mistake.
› Usually around subject matter.
- Relatively rare.
- Res Extincta
- Res Sua


res excincta

› Ceased to exist at the time the contract was entered into (not like frustration which is after).
› Couturier v Hastie
§ Corn in transit perished – ceased to exist.
§ No subject matter, can be no contract.
› S 6 sale of goods act 1895.
› Exception – reckless assertions (one party is at fault),
§ McRae v Commonwealth Disposals Commission (1951) 84 CLR 377
› Liable for reliance damages.


res sua

› The thing was already his
› Cooper v Phibbs (1867) LR 2 HL 149.
§ Uncle died, his will leave properties to daughters.
§ Cooper was to be life tenant (had right to live there)
§ He didn’t realise he had this right, started to lease off daughters.
§ Contract was void ab initio – cant lease something from yourself


common mistake effect

- Void ab initio at CL and equity (equity follows the law).
› The contract never existed.
- But only if fundamental (Res Extincta, Res Sua)
› Otherwise binding but may be voidable in equity (rare).
§ Solle v Butcher [1950] 1 KB 671


mutual mistake

- Both parties are mistaken.
- Each party makes a different mistake.
› Usually different subject matter
› There is no meeting of the minds.
› ‘cross purposes’
› Must be clearly shown – reasonable person test.
- Critical factor is true consent
› Raffles v Wichelhaus


raffles v Wichelhaus

§ The buyer and seller when contracting, both had a different shipment of product in mind.
§ Contract was void – there was no meeting of the minds.


mutual mistake effect

- Void ab initio and equity (equity follows the law).
› Contract never existed; no agreement on subject matter.
- But if not void, equity may ‘step in’ by refusing specific performance if there is:
› Hardship resulting from the ‘reasonable’ interpretation.
› Plaintiff has a hand in inducing the mistake.
› Tamplin v James
› Denny v Hancock