Unit 8 Flashcards
(36 cards)
Upward Variations
Situations where one contracting party promises to pay more than the originally agreed contract price for the other party’s existing contractual duties.
Stilk v Myrick
Sailors promised extra wages for doing the work of deserting colleagues. Held: No valid consideration for the promise because they were already contractually obligated to do that work. Performing an existing duty owed to the same promisor is not good consideration.
Hartley v Ponsoby
Significant number of desertions made the remaining voyage more dangerous. Held: This amounted to something extra being provided beyond the original contractual duty. This extra burden was good consideration for the promise of extra pay.
Williams v Roffey - Practical Benefit
Carpenter subcontracted. Financially troubled, Roffey promised extra payment to ensure completion and avoid penalty clause. Held: Consideration found in the practical benefit to Roffey of avoiding the penalty and the hassle of finding a new carpenter, even though Williams was only performing his existing duty.
Williams v Roffey - Duress Warning
The practical benefit consideration in Williams v Roffey will be negated if the promise to pay more was made under duress. If duress is established, the variation will be voidable by the party who was coerced.
Upward Variations - Answering Advice
No Valid Consideration: Applying Stilk v Myrick, argue that performing an existing duty is not good consideration, therefore the upward variation is not valid in the first place.
Valid but Voidable (Duress): If practical benefit consideration exists under Williams v Roffey, consider if the promise to pay more was made under duress. If so, the variation is voidable, and the innocent party needs to take steps to rescind the variation. They might be barred from rescission if a bar applies (e.g., affirmation, undue delay - referencing The Atlantic Baron). Consider if a remedy is still available (e.g., Opel case implications if rescission is barred).
Duress in Contract Law
Contracts must be based on genuine, freely given consent. Duress undermines this consent, making the contract voidable. Ordinary commercial pressure is generally acceptable; only “improper pressure” constitutes duress.
Duress: Traditional View
Historically limited to actual or threatened violence or damage to property that coerced a party into entering or varying a contract.
Duress: Barton v Armstrong[1975]
Threats to kill unless shares bought. Held: Contract voidable. Duress need not be the sole reason for contracting; it only needs to be “a reason.” Burden of proof shifts to the threatening party to show threats had no effect.
Duress: Economic Duress
More prevalent in modern commercial settings. Involves illegitimate threats to a party’s economic or business interests. Crucial to distinguish from legitimate commercial pressure. An “improper threat” is often a threat to breach a contract or commit a tort.
Duress: Atlas Express v Kafco
Atlas demanded increased payment, threatening to halt deliveries crucial for Kafco’s Woolworths contract. Held: Agreement to pay more obtained by economic duress as Kafco had no practical alternative. No consideration from Kafco (referencing Stilk v Myrick). Williams v Roffey practical benefit negated by duress.
Key Elements of Economic Duress (Carillion Construction Ltd v Felix (UK) Ltd [2001] BLR 1, Dyson J):
Pressure resulting in “compulsion” or “lack of practical choice.”
The pressure must be “illegitimate.”
The pressure must be a “significant cause” inducing the contract.
Factors to Consider for Economic Duress (Carillion v Felix)
Actual or threatened breach of contract.
Good or bad faith of the party exerting pressure.
Availability of realistic alternatives for the victim.
Whether the victim protested.
Whether the victim affirmed the contract.
The court also emphasized to differentiate between illegitimate pressure and the normal “rough and tumble” of commercial bargaining.
Effect of Duress - Voidability & Remedy
Voidability:
Duress renders a contract or a contractual variation voidable, similar to misrepresentation.
Remedy:
Unlike misrepresentation, damages are not available for duress.
Rescission is the sole remedy.
Effect of Duress - Rescission Process (Duress)
The innocent party notifies the other party of their intention to rescind.
If the other party is untraceable or uncooperative, the innocent party can:
Notify the police.
Apply to the court for an order of rescission.
Effect of Duress - Bars to Rescission:
These limitations prevent rescission, leaving the innocent party without recourse.
The bars are:
Affirmation: The innocent party affirms the contract despite the duress.
Undue Delay: The innocent party delays seeking rescission for an unreasonable period.
Third-Party Rights: An innocent purchaser has acquired an interest in the property.
Impossibility of Restitution: Returning goods or property to their original state is impossible (e.g., consumption, destruction).
North Ocean Shipping v Hyundai (The Atlantic Baron) [1979]
Facts: Shipbuilders demanded extra payment, threatening to halt construction. The claimants, needing the ship on time, agreed. Later, they sought repayment based on duress.
Ruling: Economic duress existed, but rescission was barred due to affirmation and undue delay.
Reasoning:
Affirmation: Payment after the pressure subsided indicated acceptance.
Undue Delay: Eight months was deemed too long to seek rescission.
Undue Influence
Influence that exceeds what is acceptable, involving abuse of an unequal relationship, rendering a contract voidable.
Undue Influence: Voidability & Remedy
Like duress, undue influence makes a contract voidable. The remedy is rescission, subject to the same bars as duress (affirmation, undue delay, third-party rights, impossibility of restitution). No remedy of damages for undue influence itself.
Nature of Undue Influence
Focuses on the abuse of an unequal relationship, where one party exerts excessive influence over the other, preventing them from exercising free and independent judgment. Law identifies unequal relationships and examines if the dominant party abused that power.
Undue Influence: Burden of Proof
Unlike duress (claimant proves duress), undue influence can involve a presumption. Two types: actual and presumed undue influence.
Actual Undue Influence - Proof Required
Claimant must prove that the defendant used undue influence. Can be challenging due to conflicting evidence.
Actual Undue Influence: Daniel v Drew
Elderly woman signed contract under nephew’s threat of court action (she feared confrontation). Held: Court favored woman’s testimony. Key point: Unlike duress, the threat can be legal.
Presumed Undue Influence - Requirements (Etridge (No 2))
(Royal Bank of Scotland v Etridge (No 2) [2001]) Requires:
A relationship of trust and confidence.
A transaction that “calls for an explanation.”
