#17403 - Duress - Contract Law

Duress

There are four categories of actionable duress: whilst the law on duress to the person and to the property is relatively settled, the precise contours of the newer categories of economic duress and lawful act duress are still unclear. The questions to be addressed are the following:

what sorts of pressures are regarded illegitimate by the law?

how much pressure must the illegitimate threat exert on the other party?

What is the justification for the duress doctrine?

Is the current law on duress satisfactory? If not, how might it be developed in the future?

Types of Duress:

• Duress to the person;

• Duress to property;

• Economic duress;

• Lawful act duress

The justification for duress

Although duress was originally explained in terms of the victim’s will being overborne and his or her consent vitiated this is now recognised is inadequate. Atiyah argues that contract law should follow criminal law’s rejection of the ‘overborne will’ theory in DPP v Lynch. He points out that a victim of duress submits knowingly and intentionally. If you yell me to ‘hand over 10,000 or be horribly maimed’, my decision to hand over the money is very real indeed. I know what I am agreeing to, I intend to agree, and I very much want to agree. The real objection is not that I did not consent, but that you induced my consent by illegitimate pressure; the complaint is the nature and acceptability of the choices the victim is left with.

On the other hand, actionable duress is not merely about consenting under pressure, however strong. Valid consent does not require freedom from pressures. I may have ‘no choice’ but to agree to the interest rate set by the lender, or to the prices charged for the food, shelter, or clothing that I ‘need’, but such ordinary pressures will not excuse me from my contractual responsibilities.

Barton v Armstrong:

‘… in life… many acts are done under pressure, sometimes overwhelming pressure, so that one can say that the actor had no choice but to act. Absence of choice in this sense does not negate consent in law; for this the pressure must be one of a kind which the law does not regard as legitimate’. In short, duress is not ruled out by knowing and willing consent, but neither is it indicated merely by the presence of (even overwhelming) pressure.

In Universe Tankships Inc of Monrovia v International Transport Workers Federation, the HL held that ‘the classic case of duress is… the lack of will to submit but the victim’s intentional submission arising from the realisation that there is no other practical choice open to him’. If you distort my decision-making by introducing an illegitimate pressure, which presents me with no practicable alternative but to submit to your demands, the law will not expect me to take the normal responsibility for my apparent exercise of will; it will deem my consent to be vitiated. The illegitimate pressure view of duress explains why:

• the enforcing party must be tainted in the sense that he or she has applied, or at least knows of the pressure.

• Duress makes contracts voidable analogous to misrepresentation, and not void like mistake; and - the standard of causation is less than it might be expected on the overborne will theory; the illegitimate pressure need not be the overwhelming cause of the victim’s consent to contract to qualify as duress.

What must be proved?

In Universe Tankships Inc of Monrovia v ITWF, the HL held that the claimant must show the following:

the pressure applied by the enforcing party is illegitimate: this depends on the nature of the threat and of the demand. If the conduct threatened is independently unlawful the threat is generally regarded as illegitimate. Correspondingly, threats of lawful conduct are generally treated as legitimate, unless they are ‘immoral or unconscionable’ when coupled with an illegitimate demand; the more unfair the demand, the more likely that the threat used to back it up will be regarded as illegitimate;

the illegitimate pressure induced the claimant to enter the contract. the precise degree of causation required varies with the type of duress in question with economic duress posing a particularly difficult category.

The claimant had no practicable alternative but to submit to the demand. This requirement only applies to claims of economic duress.

Duress to the person and to property

Illegitimate pressure

If I do (or threaten to do) violence to you or to detain you (or someone close to you) to induce your consent to contract, I have clearly applied illegitimate pressure – Barton v Armstrong. Chitty suggests that ‘the threat against even a stranger should be enough if the claimant genuinely believed that submission is the only way to prevent the stranger from being injured or worse’. The same applies if I threaten to damage, take or keep your property (Astley v Reynolds) or your money.

Causation

Threats to a person need only be ‘a’ cause of the victim’s decision to contract. it is enough if the threat contributed in any way to his or her decision to contract. the claimant need not show that it was ‘the’ cause for the contract, or that ‘but for’ the threat they would not have entered the contract. it is insufficient for the enforcing party to show that the claimant might, or would, have consented for other reasons, even without the threat: to enforce the contract, he or she must show that the illegitimate pressure had no effect whatsoever on the claimant’s decision. In Barton v Armstrong, the parties, both major shareholders in a company, were locked in a bitter power struggle for its control. B claimed that he was induced to buy out A’s interests on very generous terms, by A’s threats to murder him and his family. The trial judge accepted that A made the threats but denied relief because B’s main reason for buying out A was to ensure the company’s survival. The PC disagreed, holding that B could succeed if A’s threats were merely a reason for his decision to enter the contract, and even if the threat had no influence on B at all,

‘If Armstrong’s threats were ‘a’ reason for Barton’s executing the deed he is entitled to relief even though he might well have entered into the contract if Armstrong had uttered no threats to induce him to do so’.

In duress of goods cases, the claimant must show that there was a ‘significant cause’ (Dimskal

Shopping Co SA v ITWF) of his or her consent to the contract. Not seen rightly as serious as a threat to injure or hurt someone. Threats to damage property attract a higher threshold for causation than threats of physical harm. In practice, this causation requirement is easily met. In Astley v Reynolds, R told A that he could not redeem his plate unless he paid more than twice the legal interest rate. A paid but then successfully recovered the excess payment for duress. The court was prepared to assume that A ‘might have such an immediate want of his property that [an alternative cause of action, eg a tort action for wrongful interference with goods] would not do’. A did not need to actually prove it.

Skeate v Beale (1841): detention of another’s goods did not constitute duress. However, early authority indicated that money paid to get back unlawfully detained goods could be

recovered: Astley v Reynolds (1731) – pawn of plate – pawnshop asked for more than the maximum legal interest rate to get the plate back. Holt CJ: ‘an action of trover would not do its business’ as the pawnbroker would otherwise have sold the plate on. Goff and Jones (2011): this distinction is irrational – what distinguishes the two cases but a scintilla temporis?

This is no longer good law: Lord Goff per Dimskal Shipping Co SA v International Transport Workers’ Federation (The Evia Luck) [1992].F

Economic duress: threats to breach a contract

Since The Siboen and the Sibotre, the courts have accepted that economic duress may be as coercive and worthy of relief as duress to person or to property. The most important practical application of economic duress is in the area of one-sided contract modifications. That is, where one party threatens to breach an existing contract unless the other agrees to:

pay more for the original performance

accept less performance than was originally due.

When, if ever, should the negotiations be enforced? Traditionally, the doctrine of consideration gave the answer: never, since no additional consideration supports the promise to pay more or accept less. Some exceptions (PE and Williams v Roffey).

What is the definition of economic duress?

Lord Scarman per Pao On: duress ‘is a coercion of the will so as to vitiate consent’ (ie was there causation).

However, the law shifted to an emphasis on the type of threat, not the thought process of the victim: Universe Tankships of Monrovia v International Transport Workers Federation (The Universe Sentinel) [1983]. It also was important to consider whether or not the threat was illegitimate.

Did the claimant have alternative options? B & S Contracts and Design Ltd v Victor Green Publications Ltd [1984]

Dyson J in DSDN Subsea Ltd v Petroleum Geo-Services ASA [2000]:

The Ingredients of actionable duress are that there must be pressure:

• Whose practical effect is that there is compulsion on, or a lack of practical choice for, the victim.

• Which is illegitimate and;

• Which is a significant cause inducing the claimant to enter the contract.

North Sea Shipping Co Ltd v Hyundai Construction Co Ltd (The Atlantic Baron) [1979] QB 705

Facts: 1972 – D entered into a contract under which they agreed to construct a tanker for the plaintiffs. Contract stated USD price...