#16747 - Duress Pq Notes - Contract Law

Duress may be a ground of restitution (A pays money to B as a result of B’s duress, A uses duress as a cause of action in restitution to recover the money) or as a vitiating factor (A enters into a contract or vary an existing contract with B as a result of B’s duress, A uses duress as a defence when B attempts to enforce the contract or variation, or to rescind the contract or variation as against B).

Duress, like misrepresentation, is a vitiating factor. The bars to rescission are therefore also relevant. However, there is no equivalent with duress of the Misrepresentation Act 1967, and therefore no damages remedy to fall back upon.

Previously, the doctrine of consideration dominated in the context of (coercive) increasing pacts (according to the rule in Stilk v Myrick, if B promised to pay A more for the same job, the increasing pact was not supported by consideration because it did not involve A incurring detriment).

But in The Siboen and the Sibotre (1976), duress was extended to encompass economic duress, leaving the path free for a recrafting of the consideration doctrine in the context of increasing pacts (Williams v Roffey Bros & Nicholls). Consequently, A can now invoke the concept of a requested ‘practical benefit’ (A’s willingness to proceed with the same job) to satisfy the consideration requirement. Duress operates independently of any consideration.

Remedy: rescission (consider bars to rescission) but not damages

There is no consolidated approach under English law, but the cases collectively evince the following criteria: (1) Illegitimate threat; which (2) subjectively caused A to contract; and where (3) objectively A had no reasonable alternative but to contract.

Universal Tankships v International Transport Workers Federation (“The Universe Sentinel”): Lord Scarman: “The origin of the doctrine of duress in threats to life or limb, or to property, suggests strongly that the law regards the threat of unlawful action as illegitimate, whatever the demand.” This must include threat to breach contract as that is unlawful.

Though, note that in DSND Subsea v Petroleum Geo-services, the court took a factorial approach: “In determining whether there has been illegitimate pressure, the court takes into account a range of factors. These include whether there has been an actual or threatened breach of contract; whether the person allegedly exerting the pressure has acted in good or bad faith; whether the victim had any realistic practical alternative but to submit to the pressure; whether the victim protested at the time; and whether he affirmed and sought to rely on the contract. These are all relevant factors. Illegitimate pressure must be distinguished from the rough and tumble of the pressures of normal commercial bargaining.”. So, there are some contrary authorities but they represent the weaker view.

In PQs, note uncertainty about whether all threats to breach of contract amount to illegitimate pressure? Two views.

• No

  • Burrows: breach of contract is relevant but not decisive. Also, good faith/bad faith is relevant. If contract is breached out of good faith, such as where the contractual terms are very unfavourable, that is not illegitimate pressure.

  • Atlas Express Ltd v Kafko: In allowing A’s economic duress claim, the court seemed to emphasise B’s bad faith.

  • Huyton SA v Peter Cremer & Co: “Even in cases where the pressure relied on is an actual or threatened breach, it seems to me better not to exclude the possibility that the state of mind of the person applying such pressure may in some circumstances be significant, whether or not the other innocent party correctly appreciated such state of mind. ‘Never’ in this context also seems too strong a word.”

  • DSND Subsea v Petroleum Geo-services (above)

• Yes

  • McKendrick: Burrows’ analysis allows parties to escape bad bargains. Moreover, when looking at whether a contract is breached, good/bad faith is irrelevant. Contractual liability is strict – if it didn’t matter before, why does it matter now?

  • R v AG for England and Wales: “Generally speaking the threat of any form of unlawful action will be regarded as illegitimate.”

  • The Universe Sentinel

What about lawful threats, i.e. threats to do something which exerts pressure, but which is lawful?

The courts were initially hesitant to say yes. CTN Cash and Carry v Gallagher: “an extension capable of covering the present case, involving “lawful-act duress” in a commercial context in pursuit of a bona fide claim, would be a radical one with far-reaching implications. It would introduce a substantial and undesirable element of uncertainty in the commercial bargaining process… [but] in this complex and changing branch of the law I deliberately refrain from saying “never”.”

Now, see Universal Tankships v International Transport Workers Federation (“The Universe Sentinel”): “Duress can, of course, exist even if the threat is one of lawful action: whether it does so depends upon the nature of the demand.”

The test is in Nehaya v Kent: “A demand coupled with a threat to commit a lawful act would be illegitimate if: (a) there were no reasonable grounds for the demand and (b) reasonable people would not consider the threat to be a proper means of reinforcing the demand.”

But court appears to take a very contextual approach. For example, Progress Bulk Carriers v Tube City: shipowners P previously breached charter contract. Under no obligation to do so, P offered to find T a substitute vessel. P then coerced T into accepting the substitute vessel provided it waived damages claims. Held: “each case will be fact sensitive… Their refusal to supply the substitute vessel to meet the Charterers' needs, in circumstances which they had created by their breach and their subsequent misleading activity, unless the Charterers waived their rights, could readily be found by the Arbitrators to amount to ‘illegitimate pressure’.”

The language used by courts in this respect has been that the will of the victim must be “overcome”: see Pao On v Lau Yiu Long [1980] AC 614, Dawson v Bell [2016] EWCA Civ 96, et cetera.

However, this language is misleading. Now, see The Universe Sentinel at 400: "Compulsion is variously described in the authorities as coercion or the vitiation of consent. The classic case of duress is, however, not 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."

The presence of choice is not fatal to finding duress. Nehaya v Kent: “The fact, therefore, that the decision to enter into a contract involved an exercise of rational and independent judgment or was taken with the benefit of legal advice does not preclude a finding of duress. What is necessary is that the illegitimate pressure caused the claimant to enter into the contract.”

Huyton SA v Peter Cremer & Co: “The illegitimate pressure must have been such as actually caused the making of the agreement, in the sense that it would not otherwise have been made either at all or, at least, in the terms in which it was made. In that sense, the pressure must have been decisive or clinching.”

There is doubt as to whether this is a...