Economic Duress

Question 1

economic duress intro

Answer 1

Any contract made where one party is forced into it should not be valid.

eg. made as a result of :
• undue influence
• duress
• economic duress.

E.g. Make a contract with me on these terms or else there will be no contract and you will be ruined

Question 2

Effect of finding economic duress

Answer 2

the contract is VOIDABLE (can be set aside by V)

Question 3

undue influence

Answer 3

undue influence = there is a relationship between the parties which has been exploited by one party to gain an unfair advantage.

occurs where one party entered contract as a result of pressure which deprived that party of independent judgement.

This is presumed where the relationship is one of trust and one party will benefit at the expense of another.

eg relationships such as doctor and patient, solicitor and client where there is a presumption of undue influence.

Question 4

duress

Answer 4

duress = when someone enters contract as a result of threats of violence to the person which would amount to crimes or torts if those threats were carried out.

contract signed under duress may involve threats, or even violence to persuade one party to sign the contract.

Question 5

economic duress

Answer 5

Economic duress = When someone enters contract as a result of financial threats.

Threat to damage a business or person financially.

Threats must be ‘improperly coercive’, though not necessarily unlawful.

The difficulty is to decide when the line is crossed between, eg, tough business bargaining, exploiting weaknesses to advantage, and the use of improper pressure.

Atlas Express v Kafco

Question 6

elements for ED

Answer 6

there must be pressure:

1. the practical effect of which is that there is a lack of practical choice for the victim
2. which is ILLEGITIMATE (not necessarily unlawful)
3. which is a significant cause inducing the claimant to enter into the contract

Universal Tankships v ITWF

Question 7

1. lack of practical choice

Answer 7

no realistic alternative but to give in to the demand (B&S Contracts v Victor Green)

Question 8

2. illegitimate pressure

Answer 8

Pao On v Lau Yiu Long: factors to decide whether economic duress was present:

(1) Did the person claiming to be coerced protest about the pressure?

(2) Did they have any other available course of action that was
reasonable?

(3) Were they independently advised before taking the action? (prof/legal advice -> informed decision)

(4) After entering into the contract, did they take steps to make the
contract void? (delay ->accepted the pressure)

often involves unlawful threats but doesn’t have to (Progress Bulk Carriers v Tube City)

Question 9

3. significant cause inducing the claimant to enter into the contract

Answer 9

significant reason, doesn’t have to be only

Question 10

remedies for ED

Answer 10

courts can make order for:
• restitution of property or money extracted under duress
• recission: avoidance of any contract that has been induced by it

RESTITUTION restores a person to the position they would have been in if not for the improper action of another.

Equitable remedies -> discretionary