#2124 - Duress - Contract Law

Duress

What must be proved

1. Illegitimate pressure applied by enforcing party

• Universe Tankships v International Transport Workers’ Federation [1983]:

  • Lord Diplock:

    • The threats must be so catastrophic so as to vitiate C’s will, vitiating their consent to various agreements

      • It is not that the party seeking to avoid the contract did not understand the terms of the agreement

        • It is that his apparent consent was induced by pressure exercised upon him which the law does not feel to be legitimate.

  • Lord Scarman:

    • Whether the threat is illegitimates depends on the nature of the threat and of the demand

      • If the threat is independently unlawful (e.g. I will kill your family, or a threat= a breach of duty by the enforcing party)

        • then the threat is “generally” treated as illegitimate

• With threats to the person and property (detaining/doing violence to)

  • Barton v Armstrong [1976]: C agreed in a deed to buy out D’s interest in Landmark after entering into it because of D’s threat to have him killed. D argued that commercial advantage also a reason for it, so no duress.

    • Lord Cross: act is unlawful and therefore constitutes illegitimate pressure.

• Economic Duress: Threats to breach a contract

  • Where one party threatens to breach an existing contract unless the other party pays more or accepts less performance than was originally due.

    • Chen Wishart: this is treated as illegitimate pressure as it amounts to a threat of unlawful conduct (breaching a contract)

  • BUT when should these re-negotiations be enforced?

    • Doctrine of Consideration: never – if not additional consideration, then modification not enforceable

      • Atlas Express Ltd v Kafco Ltd [1989]: C undervalued costs of carriage for D to W, whom D had a lucrative contract with. C attempted to renegotiate, but after failing, demanded that D sign new agreement or C would not carry goods. D, under pressure b/c no alternative carrier, signed new document. Then attempted to set aside.

        • Tucker LJ:

          • D certainly signed the document under compulsion

            • Is true that economic duress is distinct from commercial pressure

          • But economic duress will occur where D’s apparent consent was induced by pressure that was illegitimate

            • Equally, there was no consideration to support the new agreement so it ain’t legit.

        • Burrows: doesn’t say why pressure was illegitimate

          • Moi: but that was because D believed they could not get a new carrier at such short notice and that they would breach their contracts otherwise

    • BUT promissory estoppel: can enforce promises of same for less in limited circumstances

      • But doctrine not applicable if the promisee had applied illegitimate pressure to obtain it (“he who seeks equity must come with clean hands”)

      • Williams v Roffey Brothers [1991]:

        • Russell LJ:

          • Where a party undertakes to make a payment because by so doing it will gain an advantage arising out of the continuing relationship with the promisee

            • the new bargain will not fail for want of consideration as estoppel will apply.

  • Relevance of good faith/bad faith to economic duress

    • CTN Cash and Carry v Gallaher Ltd [1994]: D supplied cigarettes to wrong warehouse of C, goods stolen. Mistakenly thinking risk had passed to C, D demanded payment, threatening to cut credit of C if failed to pay up. C paid up, then tried to set aside agreement for duress.

      • Steyn LJ:

        • Since D thought in good faith that the goods were at the risk of C and that C owed D the money in question

          • D’s motive in threatening credit withdrawal was an exercise of lawful commercial self interest in obtaining a sum they thought due to them.

        • Law should not open good faith threats of lawful action and look over them when parties fall out

          • It would introduce a substantial and undesirable element of uncertainty to the law.

    • Huyton SA v Peter Cremner [1999]:

      • Mance J:

        • Authority suggests that good faith and bad faith may be relevant considerations,

          • especially since the state of mind of a party making a threat may be significant

            • Even where threatening or in actual breach of duty.

• Economic Duress: Lawful Act Duress

  • Universe Tankships v International Transport Workers’ Federation [1983]: C had ship blacklisted by D, so no tugs to help it out. C paid $6480 to pension fund, then claimed it back.

    • Lord Scarman:

      • Threats of lawful conduct are generally legitimate,

        • but may exceptionally be illegitimate if they are “immoral or unconscionable” when coupled with an illegitimate demand

          • The more unfair the demand

            • The more likely the threat used to support it will be illegitimate.

  • Lawful pressures which are legitimate

    • Threat not to contract

      • This is implicitly present in all pre-contractual negotiations and should not be considered illegitimate pressure

    • Refusal to waive an existing contractual obligation

    • Exercise of a party’s right for legitimate purposes

      • R v AG England and Wales [2003]: SAS solider (X) attempted to publish account of experiences, breaching a confidentiality agreement. X claimed that the agreement was voidable for duress as the Crown had threatened to transfer him from his elite unit to a regular unit if he did not keep it

        • Held that threat was lawful as

          • Crown had right to transfer soldiers

          • Exercise of right was reasonable in order to protect unauthorised disclosures which may have threatened its personnel and operations

  • Lawful pressure which is illegitimate

    • Blackmail

    • Threats not to offer relief unless extortionate terms are agreed in an emergency

      • The Port Caledonia: Ship Y went dangerously close to Ship Z in a storm. A tug was requested but the master of the tugs demanded 1000 or no rope.

        • Held demand was extortionate, so agreement under compulsion. Need only pay reasonable demand of 200 instead.

    • Threats to harm the threatened party or his loved ones

      • E.g. prosecution

      • Or publication of information

2. Causation

• Threats to people

  • Barton v Armstrong [1976]:

    • Lord Cross:

      • If C had not allowed the representation to affect his judgement per misrepresentation, then there would be no relief

        • But if it had affected his judgement, it would have been misrepresentation even if there were other weightier considerations

      • Therefore, so long as the threat is “a” reason for entering into a contract, a party is entitled to relief

        • even though he might well have entered into the contract if X had uttered no threats at all.

• Threats to property

  • Dimskal Shipping Co SA v ITWF [1992]: C, owners of ship, threatened by D that ship blacklisted unless it entered into contracts with D. C therefore made a number of contracts, totalling $140,000. C sought an action seeking a declaration of economic duress.

    • Lord Goff:

      • It is now accepted that economic pressure may be sufficient to amount to duress

        • Provided that the economic pressure may be characterised as illegitimate and constitute a significant cause of C entering the relevant contract.

      • Has been said that C’s will must have been coerced so as to vitiate the consent

        • But this approach is unhelpful.

    • Burrows: why is this unhelpful?

      • Moi: may be that anyone’s will can be coerced into a decision by normal pressures (e.g. that I will withdraw from the contract negotiations if you don’t give me what you want)

        • Is only when this is illegitimate that this matters (pay me money or else).

  • Chen Wishart: while the focus is on the threat rather than the fairness of the demand,

    • the unfairness of the demand may assist C in showing that a reason he entered the contract was down to the threat.

• Threats to breach a contract (economic duress)

  • So control is exercised through causation – which is stronger than for duress re: persons and property

    • Dimskal Shipping Co SA v ITWF [1992]:

      • Lord Goff:

        • Once thought that only threats to persons would be considered duress

        • However, it is now accepted that economic pressure may be sufficient to amount to duress

          • Provided that the economic pressure may be characterised as illegitimate and constitute a significant cause of C entering the relevant contract.

    • Huyton v Cremer [1999]:

      • Mance J:

        • Illegitimate pressure must constitute a significant cause in cases of economic duress

          • This suggests that a person cannot prevail as easily with economic duress than with duress involving threats to property or persons.

            • Seems to be a “but for” test.

    • Pao On v Lau Yiu Long [1980]:

      • Lord Scarman:

        • In order to see whether illegitimate pressure caused the coercion, it’s important to investigate whether

          • At the time of the duress, the person under pressure protested

          • Whether he had an alternative course open to him

          • Whether he was independently advised

          • Whether after entering into the contract he took steps to avoid it.

    • Kolmar Group v Taxpo Enterprises [2010]

      • Clarke J

        • (i) economic pressure can amount to duress...if it has constituted a “but for” cause

          • McK: so suggestion that not just a cause, but the key and sole “but for” cause of entering into the transaction

            • This is different from the rules on physical duress

        • (ii) a threat to break a contract will generally be regarded as illegitimate, particular where D must know there will be a breach of contract if the threat was implemented

• Economic Duress: Lawful Act duress

  • Chen Wishart: no final word on this, but likely to require “but for” threat/demand, contract would not have been agreed

    • As the required level of causation

3. The victim had no practicable alternative?

• Chen Wishart: unclear whether this is necessary only for economic duress...