Lecture 15- Duress

Question 1

Duress

Answer 1

Threats that illegitimately seek to coerce the will of the other party
Vitiating factor- a contract will be voidable

Question 2

Types of Duress (3)

Answer 2

1.Duress to Person
2.Duress to Goods
3.Economic Duress

Question 3

Duress to the Person

Answer 3

This is all about physical threats (it must be a threat to the person- it must be a factor in the contractual process)

Barton v Armstrong [1976]
A threat to kill someone (unless they sign a contract) renders a contract voidable!

Question 4

Duress to Goods

Answer 4

This applies where there is a threat of damage to the victim’s goods or a threat to deny the victim access to their goods, rather than to his person

Hawker Pacific Pty Ltd v Helicopter Charter Pty Ltd (1991)

Business chartering helicopters. One of the helicopters required re-painting. The business were not satisfied with the quality of the painting, however they needed the helicopter for a charter. They felt that they had to pay to get the helicopter back-agreement was voidable for duress. There were threats to deny the V access to the good.

Question 5

Economic Duress Overview

Answer 5

Where one party uses her superior economic power in an ‘illegitimate’ way so as to coerce the other contracting party to agree to a particular set of terms

For example, threating to cancel a contract (if certain terms are not agreed to) or threatening to boycott a person’s business if they do not sign new terms

Question 6

ED Starting Case

Answer 6

The Sibeon and The Sibotre [1976]
Contract was not voidable in these circumstances (it was expected within the commercial circumstances at the time) but Justice Kerr unlocked the door to the development of the notion of economic duress

Question 7

Elements of ED

Answer 7

1.Coercion of will
2.Illegitimate pressure
3.Induces the party to enter the contract

Question 8

Coercion of Will

Answer 8

More commonly referred to now as the lack of a practical or realistic choice/alternative.

Did the claimant have any realistic choice in agreeing to the defendant’s demands?

Question 9

Coercion of Will Case

Answer 9

Pau On v Lau Yui [1980]
Lord Scarman identified two of the essential conditions for the operation of the doctrine:

Coercion of the will that vitiates consent

The pressures or threat must be illegitimate

Question 10

Four Factors for Coercion

Answer 10

1.it is material to enquire whether the person alleged to have been coerced did or did not protest
2.whether, at the time he was allegedly coerced into making a contract, he did or did not have an alternative course open to him
3. whether he was independently advised
4.whether, after entering the contract, he took steps to avoid it

Question 11

No Practical Alternatives Case

Answer 11

B&S Contracts and Design v Victor Green Publications [1984]
No practical alternatives= a coercion of will

Question 12

Threat must be Illegitimate

Answer 12

The Universe Sentinel [1983]
The action was unlawful and therefore illegitimate

Question 13

Pressure is Illegitimate in 2 ways

Answer 13

1.The conduct which has been threatened might be unlawful or illegal e.g. threat to breach contract

2.The threat may be one of lawful action, but the way in which the pressure is exerted is illegitimate e.g. blackmail BUT this is the exception rather than the rule

Question 14

Military Case

Answer 14

R v Attorney General for England and Wales [2003]
The threat was lawful and legitimate as it was justifiable on the basis of disclosure of military operations

Question 15

Illegitimate Case + 5 Factors

Answer 15

DSDN Subsea Ltd v Petroleum Geo Services ASA [2000]

Has there been an actual or threatened breach of contract?

Did the person exerting the pressure act in good or bad faith?

Did the victim have any realistic practical alternative other than submitting to the pressure?

Did the victim protest at the time?

Did the victim confirm, and then seek to rely on the contract?

Question 16

Distinct types of Illegitimacy (3)

Answer 16

Refusals to contract

Threats to breach contract

Threats of lawful acts

Question 17

Refusals to Contract

Answer 17

Courts are reluctant to find duress where there has been a refusal to enter into a contract

Question 18

Demand for Guarantees Case

Answer 18

Bank of India v Riat [2014] A demand by a bank of a personal guarantee is legitimate

Bank of Scotland v Cohen The bank’s demand of guarantees was not illegitimate

Question 19

Threats to Breach a Contract

Answer 19

A threat to breach an existing contract is more likely to be illegitimate than a threat to back our of an as-yet-unformed contract.

Question 20

Breach Cases

Answer 20

Atlas Express v Kafco [1989]
There was no reasonable alternative to Kafco AND the threat to breach contract would cause unlawful damage to the other party’s economic interests

B&S Contracts and Design Ltd v Victor Green Publications Ltd [1984]
The fact that the demand is based on actual commercial exigencies, such as dealing with an unexpected cost, does not make it legitimate.

Question 21

Threats of Lawful Acts

Answer 21

What of blackmail? Threat is lawful but it is used to attain a goal which is unlawful.

General rule = threat to do something lawful will not amount to illegitimate pressure

For example, stating your intention to enforce your contractual rights is pressure, but it is NOT illegitimate- Bernsten v National Westminster Bank [2012]

Question 22

Good Faith Requirement

Answer 22

CTN Cash and Carry Ltd v Gallaher Ltd [1994]
The defendants acted in good faith and within their commercial position even if they were wrong in enforcing their contractual rights

Question 23

Second Factor

Answer 23

Lawful act duress is possible – the lawful act may be improper if the threat is connected with unreasonable demands

But the circumstances in which this may occur, at least in the commercial context, are limited and rare

Progress Bulk Carriers v Tube City IMS [2012]

Question 24

Narrowing Case

Answer 24

Pakistan International Airline Corp v Times Travel (UK) Ltd [2021]
Duress cannot be extended to lawful acts made in bad faith (narrow approach)

Question 25

Two categories of cases where lawful duress is accepted

Answer 25

1.One party has exploited knowledge of criminal activity by an individual or a member of their family to procure an agreement - Williams v Bayley

2.where illegitimate means have been used to manoeuvre the claimant into a position of weakness to force him or her to waive their claim - Progress Bulk Carriers v Tube City IMS [2012]

Question 26

Standard of Behaviour

Answer 26

In both cases, the illegitimacy of the conduct stems from the fact that the defendant has engaged in “morally reprehensible behaviour” which makes enforcement of the contract unconscionable.

The doctrine of lawful act duress is therefore ‘extremely limited’ - Leverage and/or pressure applied in negotiations will rarely meet the required standard of “illegitimate pressure or unconscionable conduct”.

Question 27

Inducement

Answer 27

The extent to which duress must be a contributory factor depends on the type of duress. As far as duress to the person is concerned, the test is similar to that in misrepresentation. It is sufficient if the duress was a factor. It does not have to be the sole factor or even the primary factor.

Question 28

ED Inducement

Answer 28

For economic duress, the person claiming duress must prove that he would not have entered into the contract ‘but for’ the duress

The Evia Luck [1992]– the duress must have been a ‘significant cause’

It must be ‘decisive or clinching’ - Huyton SA v Peter Cremer GmbH [ 1999]