#7501 - Duress - GDL Contract Law

General definition

• Poole J: ‘some form of coercion or threat to the person, property, or to a person’s financial interests’

• Vitiating factor: Contract entered into under duress is voidable – can be undone at the innocent party’s request

Duress to the person

• Leading case: Barton v Armstrong – A uttered threats to kill B - sign this agreement ‘or else’

  • Burden of proof on the D to prove that the threats and unlawful pressure contributed nothing to C’s decision to execute the agreement

  • Causation test for duress to the person is not a difficult one to overcome

    • Duress need not be the only reason for the contract: must merely be one of them

    • Contrast with test for economic duress which is much more stringent and where T’he minimum basic test of subjective causation in economic duress ought, it appears to me, to be a ‘but for’ test’’ (Huyton SA v Peter Cremer GmbH &Co)

• Williams v Bayley – threat of imprisonment constitutes threat to the person

Duress to goods

• Siboen and The Sibotre – contract CAN be avoided where there is a threat to seize the owner’s property

  • Per Kerr J – ‘if I should be compelled to sign a contract...under an imminent threat of having my house burnt down…I do not think that the law would uphold the agreement’

• But for test – but for the duress you wouldn’t have agreed

Economic duress

Historical development

• Idea that economic duress may be grounds upon which a contract could be set aside – origins in Investment Corporation v Skibs A/S Avanti, (The Siboen and the Sibotre)- Justice Kerr

• Decision of Kerr – affirmed by Lord Scarman in Pao On v Lau Yiu Long (Privy Council)

1. Protest

2. Alternative causes of action open to him?

3. Acquired independent legal advice?

4. Took steps to avoid contract as soon as possible?

• Judgement of Lord Scarman in Universe Tankships v International Transport Workers’ Federation: move away from vitiation of consent approach (duress doesn’t deprive victim of choice but presents him with too much: choice between the lesser of two evils: emphasis on the illegitimacy of the pressure exerted, pressure, the practical effect of which is compulsion or the absence of choice

Current Approach

Definition set of by Mr Justice Dyson in DSND Subsea Ltd v Petroleum Geo Services ASA (2000) confirmed in Kolmar Group AG v Traxpo Enterprises PVT Ltd and Carillion Construction v Felix

• Must be pressure resulting in:

1. Compulsion or lack of practical choice for the victim

2. Which is illegitimate, and

3. Which is a significant cause of the victim entering into the contract

Dyson: importance of distinguishing illegitimate pressure from the ‘rough and tumble’ of commercial exchanges

• But duress will rarely work due to judicial reluctance to interfere with freedom of contract:

1. The parties are allowed maximum licence in setting the terms of their contracts and

2. Those parties must then be held to those agreed obligations

1. Lack of practical choice : ‘whether the victim had any realistic practical alternative but to submit’ – Dyson

   • Litigation rarely viable alternative

   • B&S Contracts v Victor Green Publications (1984):

   • Victor Green contracted B&S to build stand at Olympia for the defendant: C threatened to cancel contract if D didn’t pay extra 4.500, so D agreed to, but then deducted the amount from their final payment. C sued but it was held that they were not entitled to the extra money as it had been agreed under economic duress. Note that here the D acted promptly (vs. Atlantic Baron)

• Carillion Construction v Felix (2001)

  • In order to meet their contract, Carlillion sued to recover the extra they’d paid to Felix and won because the reason they had little practical choice but to pay more: needed the materials Felix was providing to complete their own contract

  • Would have been unrealistic to expect Carillion to seek a mandatory injunction (6 week delay)

2. Illegitimate Pressure

Factors to be considered:

• Threatened breach of contract?

  • Atlas Express v Kafco (1989): Kafco contracted with courier company, Atlas to deliver baskets. When making the quote A miscalculated, so contacted K just before Christmas (when delivery was required) and demanded more money. Because of urgency, K agreed to massive increase but then only paid the original amount: when A sued, court held that they were not entitled to extra amount as their threat had been illegitimate (reason for breaching contract was illegit)

  • Carillion Construction v Felix; B &S Contracts v Victor Green

• Pressure applied in good or bad faith? – not all pressure will trigger duress claim

  • Illegitimate threat for lawful end/good faith:

  • DSND Subsea v Petroleum Geo-Services: Commercial divers contracted by Petroleum to help construct an oil rig . During the contract, P asked DSND to perform extra tasks which required insurance over. So DSND asked for more money and to delay starting the work until they had insurance and threatened to breach their obligations if their requests weren’t met. Pressure and lack of choice for P: but they were not behaving in bad faith so there was NO illegitimate threat

  • Legitimate threat for an unlawful end: Can there be lawful act duress?

  • CTN v Gallagher: CTN (cigarette retailers) contracted with G (wholesalers): thief stole cigarettes from G’s warehouses –both thought that the other was responsible for insuring the goods. G said they would withdraw credit wouldn’t contract with CTN again, so CTN had no practical choice but to agree. Contract was then found and it was in fact G who were responsible.

    • Court held that G’s threat was not illegitimate: acceptable as they were threatening to do something which they had every right to make and because they truly believed it was the other party’s responsibility: defendants were using the threat as a means of getting money they believed was due to them and not as a means of extorting money they knew not to be due

    • Seems harsh on CTN (policy reasons): ‘lawful act duress’ will be rare – especially if the defendant bona fide considered that his demand was valid

  • Contrast: Legitimate threat but for unlawful purpose:

  • The Universe Sentinel: (shift in focus from the ‘coercion of will’ of the C to the compulsion of the will and the legitimacy of the pressure applied by the D)

    • No duress if simply trying to do is get paid on time (allowed to strike so the strike itself was legitimate) – but only for their legal rights: they were attempting to get more (pension fund), so while the threat itself was legitimate, it had an illegitimate purpose

  • Universe Tankships v International Transport Workers: HL majority held that threats were prima facie lawful (threat by TU to ‘black’ vessels – refusal to provide tugs to assist vessels to leave harbour) – but lawful threat can constitute duress if used, as here, to further an illegitimate purpose such as blackmail

• If there is no illegitimate pressure then there is no duress: hard bargain

  • Alec Lobb v Total Oil (1983): offered to sell his business to the supplier so that he could then lease it back from them: bad idea for him – they told him that he was being stupid – but he still wanted to do it – entered agreement and then went bust again and then sued. Just because it was a bad deal (he had been advised against it) doesn’t make it duress

• Overwhelming pressure but no duress:

• R v AG of England & Wales (2003): ex-SAS soldier told he wasn’t allowed to publish book – he had signed Official Secrets Act – was under overwhelming pressure (threat of RTU – return to unit) – but there was good reason for threat – to protect UK secrets – policy reasons – held that the threat of RTU was lawful and justifiable as anyone unwilling to accept obligation was unsuitable for the SAS

• Clear illegitimate pressure:

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