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Contracts Entered Under Duress
 
 
 
 
 
Duress in contract law relates to where a person enters an agreement as a result of threats. Where a party enters a contract because of duress they may have the contract set aside. Originally, the common law only recognised threats of unlawful physical violence, however, in more recent times the courts have recognised economic duress as giving rise to a valid claim. Where the threat is to goods, the courts have been less willing to intervene, although analogous claims in restitution suggest that this position of the law may change. The basis of the duress as a vitiating factor in contract law is that there is an absence of free consent. Duress operates at common law. Pressure not amounting to duress may give rise to an action for undue influence in equity. The effect of a finding of duress and undue influence is that the contract is voidable. The innocent party may rescind the contract and claim damages. The normal bars to rescission operate (see misrep lecture).
 
 
 
 
 
Duress to the person
 
Where a person enters a contract as a result of threats of physical violence, the contract may be set aside providing the threat was a cause of entering the contract. There is no need to establish that they would not have entered the contract but for the threat:
 
 
 
 
Duress to goods
 
 
Duress to goods is not recognised as giving rise to grounds for having the contract set aside:
 
 
 
Skeate v Beale [1840] 11 Ad & El 983      Case summary
 
 
 
However, this decision has received widespread criticism and is out of line with restitutionary claims:
 
 
Maskell v Horner [1915] 3 KB 106            Case summary 
 
 
 
It is thought that the position in relation to duress to goods is unlikely to survive if it is tested in the higher courts, particularly given the more liberal position that has taken hold in response to claims for economic duress.
 
 
 
Economic duress
 
 
The doctrine of economic duress was first canvassed by Kerr J in The Sibeon and the Sibotre. Whilst the contract was not held to be voidable for duress, Kerr J did state that where there exists coercion of the will so as to vitiate consent, it should be possible to set the contract aside. However, commercial pressure was not enough.
 
 
 
Occidental Worldwide Investment Corporation v Skibs (The Sibeon & The Sibotre) [1976] 1 Lloyds Rep 293  Case summary
 
 
Following Kerr J's line of reasoning, economic duress was found to exist in The Atlantic Baron, however, the claimant lost their right to rescind:
 
 
North Ocean Shipping v Hyundai Construction (The Atlantic Baron) [1979] QB 705 Case summary
 
 

 Pao on v Lau yiu Long [1979] 3 All ER 65     Case summary
 
The Privy Council identified 4 factors to consider in assessing whether economic duress was present:
 
  1. Did the person claiming to be coerced protest?
  2. Did that person have any other available course of action?
  3. Were they independently advised?
  4. After entering into the contract, did they take steps to avoid it?
 
 
 
The requirement of vitiation of consent was replaced in The Universe Sentinel with the absence of choice:
 
 
 
The Universe Sentinel [1983] 1AC 366       Case summary
 
Lord Scarman
 
"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."
 
Accordingly two elements of duress were identified:
 
1. Compulsion of the will - absence of choice
2. Illegitimacy of the pressure
 
 
 
Illegitimacy of the pressure
 
 
Initially it was thought that the threat must be unlawful:
 
 
Dimskal Shipping v International Transport Workers Federation (The Evia Luck) [1991]4 All ER 871                                   Case summary

 

CTN Cash & Carry v Gallagher [1994] 4 All ER 714                      Case summary
 
 
 
However, dicta form Lord Hoffman in the Privy Council case of R v Attorney General for England and Wales [2003] UKPC 22 suggests a different approach:
 

"The legitimacy of the pressure must be examined from two aspects: first, the nature of the pressure and secondly, the nature of the demand which the pressure is applied to support: see Lord Scarman in the Universe Tankships case, at p 401. Generally speaking, the threat of any form of unlawful action will be regarded as illegitimate. On the other hand, that fact that the threat is lawful does not necessarily make the pressure legitimate. As Lord Atkin said in Thorne v Motor Trade Association [1937] AC 797, 806:

"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.""

                                                                                                                  Case summary
 
 
 
Effect of a finding of duress
 
 
Since duress operates to deflect the will of the party rather than vitiate consent, the effect of a finding of duress is always to make the contract voidable not void:
 
 
IFR Ltd v Federal Trade Spa [2001] EWHC 519                                       Case summary
 
 
Duress in contract law