‘Lawful acts should never
constitute illegitimate pressure for the purpose of the doctrine of duress’
Discuss.
Duress is a common-law concept in which illegitimate pressure vitiates the consent of a party to a contract. Illegitimate pressure consists of one main practice being coercion which is going against a person’s rights and which will make the contract voidable as the use of force is used[1]. An example is the act of threatening; this makes the contract involuntary as there is seen to be ‘no real choice’ in the matter at hand. The scope of duress at common law was very narrow and confined to unlawful physical violence to the person or constraint of the other party by being threatened. Particularly the early cases, as they refused to recognise “duress of goods” as invalidating a contract. Whereas, modern cases indicate a more flexible approach: “the Siboen and the Sibotre 1976, it was said that a person coerced into a contract by the threat of having his house burnt down or a picture slashed could plead duress”[2].
ECONOMIC DURESS
Based on Pao On and other cases, the courts have developed a
doctrine of ‘economic duress.’ Economic duress must amount to a ‘coercion of
will, which vitiates consent[3].
It must be demonstrated that the payment made or the contract entered into was
not a voluntary act.’ (Lord Scarman)[4]. A
case concerning economic duress is Atlas Express Ltd 1989, whereby the
defendants were contracted to supply basketware to branches of Woolworths and
entered into a contract with the claimants to deliver the baskets at an agreed
price[5].
However, the claimants set the price too low, furthermore, they refused to
deliver the goods unless the defendants paid a higher price. Fearing that they
would be incapable of finding another carrier, coupled with the damaging effect
of breaching a contract, the defendants under protest paid the extra sum. The
fundamental concept of lawful acts suggests a legal act performed in accordance
with the forms and usages of the law or in a technical manner. Nevertheless,
through the defendants fearing that they would be unable to find another
carrier, it then forced them to pay the extra sum. This led to the agreement
vitiated by duress as the defendants had no real alternative for they had felt
that they were ‘over a barrel.’ The threat to break the contract was explicit
and direct in this case.
In order to maintain a claim of economic duress, Dyson J set
out factors: “the ingredients of actionable duress are that there must be
pressure, also whose practical effect is that there is compulsion on, or a lack
of practical choice for the victim. Which is then illegitimate and which is a
significant cause inducing the claimant to enter into the contract.”[6]. In defining whether there has been
illegitimate pressure, the court takes into reason a range of factors:
including, whether there has been illegitimate pressure, a definite breach of
contract; if the person who is pressurizing has acted in good faith; if the
victim had any other course but to yield to the pressure; and whether he wanted
to rely on the contract.
UNFAIRNESS
One can avoid a contract if they were seen to be forced into
it. Illustrations of unlawful pressure include blackmail or threating one’s
life, which causes the person to agree through coercing their will and making
them do something involuntary[7].
The law regards such coercion unjust. An
example of unfairness duress would be the case of Billiouris v. Biliourious which
does not appear to be a traditional legal doctrine, as one of the parties named
Timothy stated to the defendant Mary,
that he would marry her only if she signed a prenuptial agreement.[8] Mary
had been crying and told Timothy and his lawyer that she did not want to sign, she
stated she was doing so against the counsel of her attorney who was not present
at the time. After nine years of marriage, Timothy filed for a divorce and Mary
filed an answer and counterclaim seeking a divorce of the alternative grounds of
cruel and abusive treatment or irretrievable breakdown of the marriage. This
led to Timothy enforcing the agreement of the prenuptial agreement and Mary argued
that the agreement should not be enforced because she had signed it under
duress. The court of appeals rejected Mary’s claim of duress and affirmed the
trail courts conclusion that the prenuptial agreement was fair at the time of
its execution and was thus enforceable. Timothy retained in conclusion assets
worth over eighteen times more than Mary’s assets. Further showing that the
lawful act of a prenuptial agreement can be constituted as illegitimate
pressure because although it was a lawful agreement, Mary was pressured into
signing the agreement.
TYPES OF UNFAIRNESS
Contract law typically steers clear of investigating into
the fairness of contracts, procedural fairness looks at the process of reaching
agreement compared to substantive fairness which looks at whether the bargain
itself is reasonable. “Substantive fairness was first introduced by the unfair
contract terms 1977”[9].
A doctrine which is
developed in English contract law is duress and it is related to procedural
unfairness of contracts. A party who has entered into a contract by coercion,
can rely upon duress to come to the conclusion that the contract is voidable. There
are three categories of duress; the first one is duress to a person which
comprises of violence to the claimant of his family and it is cited in Barton
v. Armstrong. Armstrong was the
chairman and had the largest sharing holding in Landmark Corporation Ltd, a
public company[10]. Barton was the managing
director and moreover had a considerable shareholding. There were two other
directors named Bovil and Cottrel. There had been a lengthy history of hostility
amongst the parties and a struggle over who should have the most power with
Armstrong being the most forceful. The contract could be set aside. Where
there is duress to the person there was no obligation to show that he would not
have entered the agreement but for the threat, it being adequate that the death
threats were a cause.[11] Secondly,
it is the duress to goods in which the threat consists of the claimant’s goods
cited in The Siboen and The Sibotre. Thirdly, is the economic duress which is
the most divisive one. ‘Until recent times economic and commercial duress
is ignored by the common law due to major conflicts of political power.’[12] This
happens when the one contracting party uses his economic power with an
‘illegitimate’ way to coerce the other party to agree to the terms of the
contract and it is cited in R v. Attorney-General for England and Wales.[13]
Both duress and
undue influence are factors that may affect mutual assent considering that one
of the parties has been pressured or coerced to sign. It
is argued that it is difficult to draw the line between coercion and consent as
how can we distinguish genuinely free, autonomous agreements from unfree forced
ones. An example is torture, if someone gives in under torture and gives up
information or confesses, we
do not see this as a free or voluntary act: we say they were coerced. This is
not because they did not choose, but because they chose in a context
that undermined their autonomy. This is evident through an example of a father
who is eighty-three and suffered a stroke. His power of attorney was given to
his son Michael[14]. Which implies that his
son can make decisions for his father such as whether his father’s roof needed
to be repaired and whether his father should sell certain properties he owns
and other financial matters. This leads to Michael asking his father to invest
$10,000 from his savings into Michael’s new tattoo shop. Paul did not want to
invest as his son had been unsuccessful at several other businesses. Michael then tells his dad he will no longer
take care of things for him, if he does not care enough to invest in his
business. Paul does not have relatives close enough to aid him with these
issues and so he transfers money from his savings account to Michael. The contract
Michael offers to him labels the transaction as an ‘investment’ instead of a ‘loan’. When the business fails after a brief time, Paul attempts to hold his son
accountable for repaying the money by filing a civil suit. Michael presents the contract to the
court, asserting the money was an investment in a unsuccessful business rather
than a loan. In this case Michael is portraying himself as trustworthy- having counselled
his father on various monetary matters, and managing his dealings. Coercing his
father by intimidating him to stop doing these things is unwarranted and left Paul
feeling that he had to give his son all his savings. The court would view this
case as undue influence and give Paul the option of voiding the contract, in
which Michael would then have to repay the money.
ESSENCE OF DURESS
ILLEGITIMATE OF PRESSURE
The legitimacy of the pressure must be examined from two qualities:
primarily, the nature of the pressure and secondly, the nature of the request
which the pressure is applied to support: the danger of any form of unlawful act
will be deemed as illegitimate. On the other hand, the threat being lawful does
not necessarily make the pressure legitimate.
As Lord Atkin said:
“The ordinary blackmailer normally threatens to do what he has a perfect right
to do – namely, communicate some compromising conduct to a person whose
knowledge is likely to affect the person threatened … What he has to justify
is not the threat, but the demand of money.”[15]
This is evident in the case of Dimskal Shipping v
ITWF (The Evia Luck) [1991][16]. The
plaintiff ship-owners had been persuaded by industrial action against a container
in Sweden. These actions would be lawful under Swedish law. To assume to enter
into written contracts with the ITF under which more substantial agreements
were to be entered into for imbursement of the crew; back dated and back pay
was to be paid under these. One of the documents signed implied that the task
was to be administered by English law. The plaintiffs professed to evade the
agreements for duress and to retrieve the dues that they had paid under them.
The contract has to be avoided before a claim for restitution could be
maintained. In order to validate
avoidance of a contract, the economic pressure must be considered illegitimate.
Lord Diplock suggested
‘his apparent consent was inducted by pressure exercised upon him by that other
party which the law does not regard as legitimate’[17]
UNLAWFUL THREATS
Lawful threats may also be treated as illegitimate, In
Huyton SA, Mance Jsaid that the question of good or bad faith “may be
particularly relevant when considering whether a case might represent a rare example of
‘lawful act of duress”[18] This
is apparent though the case of CTN contracted with Gallagher[19] for
the consumption of cigarettes. Gallagher sent the cigarettes to the wrong
address where they were stolen before he could correct the error. The concern
was that Gallagher insisted that CTN to pay for the cigarettes despite those
not being delivered due to Gallagher’s own mistake. Gallagher argued that the
risk had passed to CTN already when the goods were delivered to the incorrect
warehouse. Gallagher threatened to discontinue CTN’s credit facilities for
future dealings if CTN failed to pay. To prevent the loss of its credit
facilities CTN paid. However, CTN sued for repayment on grounds of economic
duress – in other words, CTN argued that the contract was voidable owing to
duress and inequality of bargaining power. The court found against CTN. There
is no doctrine of inequality of negotiating power in the commercial context
under common law which means that cases need to be decided on their individual
facts.
The Court based its
decision on three factors here. First, the agreement/dealings in question took
place between two commercial bodies, two companies, and not between a supplier
and a consumer. Second, Gallagher had the right to refrain from future dealings
with CTN for any reason it chose. Thus, because a decision to discontinue
dealings with CTN was lawful, it was also lawful for Gallagher to threaten CTN
with credit withdrawal in the absence of payment of an invoice that was already
due. Thirdly, and most important, Gallagher acted in good faith when it
demanded payment from CTN – it genuinely felt entitled to the payment. In the
absence of malice or any other form of bad faith, economic duress could not be
established.
DSND (2000) construction company suspended work on oil rig
until renegotiation of price agreed, which they then sought to enforce. PGS Offshore
Technology AS signed an agreement with DSND Subsea Limited to deliver subsea
work required to connect the vessel to an underwater wellhead[20].
The agreement was formalized in various of documents. The first of these was
the heads of agreement. There was no dispute about the terms of this contract. Successively,
the participants entered into a further document, the memorandum of
understanding. PGS later asserted that this agreement was entered into as a
result of economic duress. DSND had refused to continue work on the vessel until
PGS had agreed to provide assurances as to its insurance cover and security, and
a refundable source of payment. PGS was under extreme economic pressure from
its owner and was at risk of significant damages for deferral. PGS consequently
agreed to these terms. It stated later that it had done so under duress. No
duress was uncovered, the judge reviewed the law of economic
duress in the following test:[21]
There must be a threat or pressure;
The practical result of the threat must be that there is force on, or an
absence of choice for, the victim; it must be unlawful; and there must be
a significant cause prompting the claimant to enter into the contract. This
upholds the extensive contextual approach conveyed in Huyton.
In the final analysis, lawful acts should never constitute
illegitimate pressure for the purpose of duress. All the cases listed above are
real life examples of people being coerced into taking an action they did not
genuinely agree to. Therefore, if someone takes an action because they were
threatened or coerced, that action be it lawful should be regarded as
illegitimate.
References
- ANSON, W. and Guest, A. (1969). [Principles of the English law of contract.] Anson’s law of contract. 23rd ed., by A.G. Guest. Oxford: Clarendon Press.
- COURT, N. (2016). NEW SOUTH WALES LAW REPORTS, 1886,. [S.l.]: FORGOTTEN BOOKS, p.623.
- Duxbury, R. (2006). Contract in a nutshell. London: Sweet & Maxwell, p.128.
- Duxbury, R. (2015). Nutshells Contract Law. London: Sweet & Maxwell Ltd, p.127
- E-lawresources.co.uk. (2018). Barton v Armstrong. [Accessed 12 Apr. 2018].
- E-lawresources.co.uk. (2018). Duress. [online] [Accessed 12 Apr. 2018].
- E-lawresources.co.uk. (2018). Duress. [online] [Accessed 16 Apr. 2018].
- Gillies, P. (1988). Concise contract law. Sydney: Federation Press, p.178.
- Harvardjlg.com. (2018). [Accessed 9 Apr. 2018].
- International Law Office. (2002). Judge Elaborates on Economic Duress [Accessed 12 Apr. 2018].
- Koffman, L. and Macdonald, E. (2010). The law of contract. Oxford: Oxford University Press, p.360.
- Lawjournal.mcgill.ca. (2018). [online] [Accessed 8 Apr. 2018].
- Lawteacher.net. (2018). CTN Cash & Carry Ltd v Gallagher Ltd [1994]. [online] [Accessed 12 Apr. 2018].
- Lawteacher.net. (2018). Role in contract law of fairness. [online] [Accessed 9 Apr. 2018].
- Lawteacher.net. (2018). Role in contract law of fairness. [online] Available at: [Accessed 12 Apr. 2018].
- Lawteacher.net. (2018). Role in contract law of fairness. [online] [Accessed 4 Apr. 2018].
- Legal Dictionary. (2018). Duress – Definition, Examples, Cases, Processes. [online] [Accessed 12 Apr. 2018].
- medico-legal journal. (2018). A doctor’s duty of disclosure and the decline of ‘The Bolam Test’: A dramatic change in the law on patient consent. [online] [Accessed 3 Apr. 2018].
- Poole, J. (2008). Textbook on contract law. 13th ed. Oxford: Oxford University Press.
- Radcliffechambers.com. (2018). KEY DEVELOPMENTS IN CONTRACT LAW: ECONOMIC DURESS. [online] [Accessed 12 Apr. 2018].
- swarb.co.uk. (2018). Dimskal Shipping Co SA v International Transport Workers Federation (‘The Evia Luck’): HL 1991 – swarb.co.uk. [Accessed 6 Apr. 2018].
[1] (E-lawresources.co.uk, 2018)
[2] (Duxbury, 2015)
[3] (Poole, 2008)
[4] (Gillies, 1988)
[5] (Koffman and
Macdonald, 2010)
[6] (Duxbury, 2006)
[7] (Lawjournal.mcgill.ca,
2018)
[8] (Harvardjlg.com,
2018)
[9] (Lawteacher.net,
2018)
[10] (COURT, 2016)
[11] (E-lawresources.co.uk,
2018)
[12] (Lawteacher.net,
2018)
[13] (Lawteacher.net,
2018)
[14] (Legal Dictionary,
2018)
[15] (E-lawresources.co.uk,
2018)
[16] (swarb.co.uk,
2018)
[17] (medico-legal
journal, 2018)
[18] (Radcliffechambers.com,
2018)
[19] (Lawteacher.net,
2018)
[20] (International Law
Office, 2002)
[21] (ANSON and Guest,
1969)
