Should Lawful Acts Constitute Illegitimate Pressure in the Doctrine of Duress?

‘Lawful acts should never constitute illegitimate pressure for the purpose of the doctrine of duress’ Discuss.

Duress is a common-law concept in which illegitimate pressure vitiates the consent of a party to a contract. Illegitimate pressure consists of one main practice being coercion which is going against a person’s rights and which will make the contract voidable as the use of force is used[1]. An example is the act of threatening; this makes the contract involuntary as there is seen to be ‘no real choice’ in the matter at hand. The scope of duress at common law was very narrow and confined to unlawful physical violence to the person or constraint of the other party by being threatened. Particularly the early cases, as they refused to recognise “duress of goods” as invalidating a contract. Whereas, modern cases indicate a more flexible approach: “the Siboen and the Sibotre 1976, it was said that a person coerced into a contract by the threat of having his house burnt down or a picture slashed could plead duress”[2].

ECONOMIC DURESS

Based on Pao On and other cases, the courts have developed a doctrine of ‘economic duress.’ Economic duress must amount to a ‘coercion of will, which vitiates consent[3]. It must be demonstrated that the payment made or the contract entered into was not a voluntary act.’ (Lord Scarman)[4]. A case concerning economic duress is Atlas Express Ltd 1989, whereby the defendants were contracted to supply basketware to branches of Woolworths and entered into a contract with the claimants to deliver the baskets at an agreed price[5]. However, the claimants set the price too low, furthermore, they refused to deliver the goods unless the defendants paid a higher price. Fearing that they would be incapable of finding another carrier, coupled with the damaging effect of breaching a contract, the defendants under protest paid the extra sum. The fundamental concept of lawful acts suggests a legal act performed in accordance with the forms and usages of the law or in a technical manner. Nevertheless, through the defendants fearing that they would be unable to find another carrier, it then forced them to pay the extra sum. This led to the agreement vitiated by duress as the defendants had no real alternative for they had felt that they were ‘over a barrel.’ The threat to break the contract was explicit and direct in this case.

In order to maintain a claim of economic duress, Dyson J set out factors: “the ingredients of actionable duress are that there must be pressure, also whose practical effect is that there is compulsion on, or a lack of practical choice for the victim. Which is then illegitimate and which is a significant cause inducing the claimant to enter into the contract.”[6]. In defining whether there has been illegitimate pressure, the court takes into reason a range of factors: including, whether there has been illegitimate pressure, a definite breach of contract; if the person who is pressurizing has acted in good faith; if the victim had any other course but to yield to the pressure; and whether he wanted to rely on the contract.

UNFAIRNESS

One can avoid a contract if they were seen to be forced into it. Illustrations of unlawful pressure include blackmail or threating one’s life, which causes the person to agree through coercing their will and making them do something involuntary[7]. The law regards such coercion unjust.  An example of unfairness duress would be the case of Billiouris v. Biliourious which does not appear to be a traditional legal doctrine, as one of the parties named Timothy  stated to the defendant Mary, that he would marry her only if she signed a prenuptial agreement.[8] Mary had been crying and told Timothy and his lawyer that she did not want to sign, she stated she was doing so against the counsel of her attorney who was not present at the time. After nine years of marriage, Timothy filed for a divorce and Mary filed an answer and counterclaim seeking a divorce of the alternative grounds of cruel and abusive treatment or irretrievable breakdown of the marriage. This led to Timothy enforcing the agreement of the prenuptial agreement and Mary argued that the agreement should not be enforced because she had signed it under duress. The court of appeals rejected Mary’s claim of duress and affirmed the trail courts conclusion that the prenuptial agreement was fair at the time of its execution and was thus enforceable. Timothy retained in conclusion assets worth over eighteen times more than Mary’s assets. Further showing that the lawful act of a prenuptial agreement can be constituted as illegitimate pressure because although it was a lawful agreement, Mary was pressured into signing the agreement.

TYPES OF UNFAIRNESS

Contract law typically steers clear of investigating into the fairness of contracts, procedural fairness looks at the process of reaching agreement compared to substantive fairness which looks at whether the bargain itself is reasonable. “Substantive fairness was first introduced by the unfair contract terms 1977”[9]. A doctrine which is developed in English contract law is duress and it is related to procedural unfairness of contracts. A party who has entered into a contract by coercion, can rely upon duress to come to the conclusion that the contract is voidable. There are three categories of duress; the first one is duress to a person which comprises of violence to the claimant of his family and it is cited in Barton v. Armstrong. Armstrong was the chairman and had the largest sharing holding in Landmark Corporation Ltd, a public company[10]. Barton was the managing director and moreover had a considerable shareholding. There were two other directors named Bovil and Cottrel. There had been a lengthy history of hostility amongst the parties and a struggle over who should have the most power with Armstrong being the most forceful. The contract could be set aside. Where there is duress to the person there was no obligation to show that he would not have entered the agreement but for the threat, it being adequate that the death threats were a cause.[11] Secondly, it is the duress to goods in which the threat consists of the claimant’s goods cited in The Siboen and The Sibotre. Thirdly, is the economic duress which is the most divisive one. ‘Until recent times economic and commercial duress is ignored by the common law due to major conflicts of political power.’[12] This happens when the one contracting party uses his economic power with an ‘illegitimate’ way to coerce the other party to agree to the terms of the contract and it is cited in R v. Attorney-General for England and Wales.[13]

Both duress and undue influence are factors that may affect mutual assent considering that one of the parties has been pressured or coerced to sign. It is argued that it is difficult to draw the line between coercion and consent as how can we distinguish genuinely free, autonomous agreements from unfree forced ones. An example is torture, if someone gives in under torture and gives up information or confesses, we do not see this as a free or voluntary act: we say they were coerced. This is not because they did not choose, but because they chose in a context that undermined their autonomy. This is evident through an example of a father who is eighty-three and suffered a stroke. His power of attorney was given to his son Michael[14]. Which implies that his son can make decisions for his father such as whether his father’s roof needed to be repaired and whether his father should sell certain properties he owns and other financial matters. This leads to Michael asking his father to invest $10,000 from his savings into Michael’s new tattoo shop. Paul did not want to invest as his son had been unsuccessful at several other businesses.  Michael then tells his dad he will no longer take care of things for him, if he does not care enough to invest in his business. Paul does not have relatives close enough to aid him with these issues and so he transfers money from his savings account to Michael. The contract Michael offers to him labels the transaction as an ‘investment’ instead of a ‘loan’. When the business fails after a brief time, Paul attempts to hold his son accountable for repaying the money by filing a civil suit. Michael presents the contract to the court, asserting the money was an investment in a unsuccessful business rather than a loan. In this case Michael is portraying himself as trustworthy- having counselled his father on various monetary matters, and managing his dealings. Coercing his father by intimidating him to stop doing these things is unwarranted and left Paul feeling that he had to give his son all his savings. The court would view this case as undue influence and give Paul the option of voiding the contract, in which Michael would then have to repay the money.

ESSENCE OF DURESS

ILLEGITIMATE OF PRESSURE

The legitimacy of the pressure must be examined from two qualities: primarily, the nature of the pressure and secondly, the nature of the request which the pressure is applied to support: the danger of any form of unlawful act will be deemed as illegitimate. On the other hand, the threat being lawful does not necessarily make the pressure legitimate.  As Lord Atkin said: “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.”[15]  This is evident in the case of Dimskal Shipping v ITWF (The Evia Luck) [1991][16]. The plaintiff ship-owners had been persuaded by industrial action against a container in Sweden. These actions would be lawful under Swedish law. To assume to enter into written contracts with the ITF under which more substantial agreements were to be entered into for imbursement of the crew; back dated and back pay was to be paid under these. One of the documents signed implied that the task was to be administered by English law. The plaintiffs professed to evade the agreements for duress and to retrieve the dues that they had paid under them. The contract has to be avoided before a claim for restitution could be maintained.  In order to validate avoidance of a contract, the economic pressure must be considered illegitimate. Lord Diplock suggested ‘his apparent consent was inducted by pressure exercised upon him by that other party which the law does not regard as legitimate’[17]

UNLAWFUL THREATS

Lawful threats may also be treated as illegitimate, In Huyton SA, Mance Jsaid that the question of good or bad faith “may be particularly relevant when considering whether a case might represent a rare example of ‘lawful act of duress”[18] This is apparent though the case of CTN contracted with Gallagher[19] for the consumption of cigarettes. Gallagher sent the cigarettes to the wrong address where they were stolen before he could correct the error. The concern was that Gallagher insisted that CTN to pay for the cigarettes despite those not being delivered due to Gallagher’s own mistake. Gallagher argued that the risk had passed to CTN already when the goods were delivered to the incorrect warehouse. Gallagher threatened to discontinue CTN’s credit facilities for future dealings if CTN failed to pay. To prevent the loss of its credit facilities CTN paid. However, CTN sued for repayment on grounds of economic duress – in other words, CTN argued that the contract was voidable owing to duress and inequality of bargaining power. The court found against CTN. There is no doctrine of inequality of negotiating power in the commercial context under common law which means that cases need to be decided on their individual facts. The Court based its decision on three factors here. First, the agreement/dealings in question took place between two commercial bodies, two companies, and not between a supplier and a consumer. Second, Gallagher had the right to refrain from future dealings with CTN for any reason it chose. Thus, because a decision to discontinue dealings with CTN was lawful, it was also lawful for Gallagher to threaten CTN with credit withdrawal in the absence of payment of an invoice that was already due. Thirdly, and most important, Gallagher acted in good faith when it demanded payment from CTN – it genuinely felt entitled to the payment. In the absence of malice or any other form of bad faith, economic duress could not be established.

DSND (2000) construction company suspended work on oil rig until renegotiation of price agreed, which they then sought to enforce. PGS Offshore Technology AS signed an agreement with DSND Subsea Limited to deliver subsea work required to connect the vessel to an underwater wellhead[20]. The agreement was formalized in various of documents. The first of these was the heads of agreement. There was no dispute about the terms of this contract. Successively, the participants entered into a further document, the memorandum of understanding. PGS later asserted that this agreement was entered into as a result of economic duress. DSND had refused to continue work on the vessel until PGS had agreed to provide assurances as to its insurance cover and security, and a refundable source of payment. PGS was under extreme economic pressure from its owner and was at risk of significant damages for deferral. PGS consequently agreed to these terms. It stated later that it had done so under duress. No duress was uncovered, the judge reviewed the law of economic duress in the following test:[21] There must be a threat or pressure;
The practical result of the threat must be that there is force on, or an absence of choice for, the victim; it must be unlawful; and there must be a significant cause prompting the claimant to enter into the contract. This upholds the extensive contextual approach conveyed in Huyton.

In the final analysis, lawful acts should never constitute illegitimate pressure for the purpose of duress. All the cases listed above are real life examples of people being coerced into taking an action they did not genuinely agree to. Therefore, if someone takes an action because they were threatened or coerced, that action be it lawful should be regarded as illegitimate.

References

• ANSON, W. and Guest, A. (1969). [Principles of the English law of contract.] Anson’s law of contract. 23rd ed., by A.G. Guest. Oxford: Clarendon Press.
• COURT, N. (2016). NEW SOUTH WALES LAW REPORTS, 1886,. [S.l.]: FORGOTTEN BOOKS, p.623.
• Duxbury, R. (2006). Contract in a nutshell. London: Sweet & Maxwell, p.128.
• Duxbury, R. (2015). Nutshells Contract Law. London: Sweet & Maxwell Ltd, p.127
• E-lawresources.co.uk. (2018). Barton v Armstrong. [Accessed 12 Apr. 2018].
• E-lawresources.co.uk. (2018). Duress. [online] [Accessed 12 Apr. 2018].
• E-lawresources.co.uk. (2018). Duress. [online] [Accessed 16 Apr. 2018].
• Gillies, P. (1988). Concise contract law. Sydney: Federation Press, p.178.
• Harvardjlg.com. (2018).  [Accessed 9 Apr. 2018].
• International Law Office. (2002). Judge Elaborates on Economic Duress [Accessed 12 Apr. 2018].
• Koffman, L. and Macdonald, E. (2010). The law of contract. Oxford: Oxford University Press, p.360.
• Lawjournal.mcgill.ca. (2018). [online] [Accessed 8 Apr. 2018].
• Lawteacher.net. (2018). CTN Cash & Carry Ltd v Gallagher Ltd [1994]. [online] [Accessed 12 Apr. 2018].
• Lawteacher.net. (2018). Role in contract law of fairness. [online] [Accessed 9 Apr. 2018].
• Lawteacher.net. (2018). Role in contract law of fairness. [online] Available at: [Accessed 12 Apr. 2018].
• Lawteacher.net. (2018). Role in contract law of fairness. [online] [Accessed 4 Apr. 2018].
• Legal Dictionary. (2018). Duress – Definition, Examples, Cases, Processes. [online] [Accessed 12 Apr. 2018].
• medico-legal journal. (2018). A doctor’s duty of disclosure and the decline of ‘The Bolam Test’: A dramatic change in the law on patient consent. [online] [Accessed 3 Apr. 2018].
• Poole, J. (2008). Textbook on contract law. 13th ed. Oxford: Oxford University Press.
• Radcliffechambers.com. (2018). KEY DEVELOPMENTS IN CONTRACT LAW: ECONOMIC DURESS. [online] [Accessed 12 Apr. 2018].
• swarb.co.uk. (2018). Dimskal Shipping Co SA v International Transport Workers Federation (‘The Evia Luck’): HL 1991 – swarb.co.uk. [Accessed 6 Apr. 2018].

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[1] (E-lawresources.co.uk, 2018)

[2] (Duxbury, 2015)

[3] (Poole, 2008)

[4] (Gillies, 1988)

[5] (Koffman and Macdonald, 2010)

[6] (Duxbury, 2006)

[7] (Lawjournal.mcgill.ca, 2018)

[8] (Harvardjlg.com, 2018)

[9]  (Lawteacher.net, 2018)

[10] (COURT, 2016)

[11] (E-lawresources.co.uk, 2018)

[12] (Lawteacher.net, 2018)

[13] (Lawteacher.net, 2018)

[14] (Legal Dictionary, 2018)

[15] (E-lawresources.co.uk, 2018)

[16] (swarb.co.uk, 2018)

[17] (medico-legal journal, 2018)

[18] (Radcliffechambers.com, 2018)

[19] (Lawteacher.net, 2018)

[20] (International Law Office, 2002)

[21] (ANSON and Guest, 1969)