Duress and Undue Influence Lecture - Hands on Example
Congratulations for reaching the end of this chapter! The following section will be a test of your knowledge in relation to duress and undue influence, how well you can spot relevant issues, and how you apply the legal principles and case law. You should now have a full understanding of the topic and be able to identify different types of duress, assess whether these may be actionable claims, identify different types of undue influence and also assess the merits of these claims.
You should be able to identify a problem question relating to duress and undue influence by looking for a party that enters a contract unwillingly. Whether it is duress or undue influence will be dependent on how they are coerced into the contract, but the starting point should be an unwillingly entered contract.
Here is a suggested approach which will ensure you do not miss any issues and answer the question correctly
- Is the pressure to enter the contract by means of duress, or undue influence?
- If it is duress, which category of duress?
- Is the pressure illegitimate, and did it induce the contract?
- If undue influence, which category of undue influence?
- Dependent on the category, was the contract of ‘manifest disadvantage’, or was the contract of a suspicious, unexplainable nature?
The following problem scenario will prompt you with questions which should help you recognise the issues and aid your understanding. If you are struggling remember to refer back to the detailed version in order to refresh your memory!
Scenario
Evan is a successful business man. Owing to his success and large wealth, he is often subject to pressure when negotiating his business deals, as other parties are aware that he can often afford to pay large sums. Evan accepts that this is part of business, but is particularly concerned in relation to a few contracts.
Contract one is for the sale of some of his goods. Jeff has sent Evan a personal email which states “You must sell me five of your tractors for £1 each or there will be blood spilt, I know who your daughter is”. Evan went ahead and did what Jeff asked, because he felt like he had no other alternative but to do so in order to protect his daughter.
- Does Evan have any remedy in relation to duress or undue influence?
Contract two is between Evan and his Lawyer. Evan’s lawyer has been persuading Evan to enter into a contract which he feels isn’t very advantageous to him. Evan’s lawyer has pestered Evan over a sustained period of time and Evan has felt pressure to take the contract in order to keep a good working relationship with his lawyer.
- Does Evan have any remedy in relation to duress or undue influence?
Contract three is between Evan and one of his suppliers. Evan desperately needs the goods from the contract in order to use them in another contract. The suppliers are refusing to give Evan the goods unless he pays them double the price. There are no other suppliers of these goods, therefore Evan pays the price.
- Does Evan have any remedy under the economic duress principles?
Answer one: This is clearly an issue of duress, specifically, duress by threat of violence. The requirement for an actionable claim of duress in this context is that the nature of the threat must be sufficient to amount to duress, and the threat must have forced the claimant into the contract.
The nature of the threat being sufficient has been established under case law as meaning it is an illegal threat under the criminal law (Barton v Armstrong). In this case, there is clearly either a threat of harm, serious harm, or murder to his daughter will would all be illegal and therefore sufficient in nature. To force the claimant into the contract, the threat must result in the claimant not having any other realistic option (Northern Ireland v Lynch). In this case, Evan expressly said he felt like he had no other option, and it is clear choosing his business over his daughter’s wellbeing would not be a realistic option, therefore, it will amount to an actionable claim for duress and the contract would be voidable.
Answer two: This is a classic case of undue influence. There has been no threat that would amount to duress, but the pressure Evan’s lawyer has exerted on him has made him enter into a contract. The relationship between Evan and his lawyer falls under a protected relationship for the purposes of undue influence, meaning there is an irrebuttable presumption that Evan’s lawyer had influence over Evan. Evan must prove this influence was undue in order to have an actionable claim.
In order to prove that the influence was undue, as per Goodchild v Bradbury [2006] EWCA Civ 1868, the contract must be suspicious and unexplainable. Therefore an examination of the actual contract would be required. The fact the contract may held the courts rule in Evan’s favour, and especially as he recognises that the only reason he entered into the contract was the fact he wanted to maintain a good working relationship with his Lawyer.
Answer three: The requirements for economic duress were outlines in DSND Subsea ltd v Petroleum Geo Services ASA. The first requirement is that there must be pressure. In this case, there is clearly pressure, as the suppliers are pressuring Evan into paying double the price for the goods.
The second requirement is there must be a lack of practical choice for the victim. In this case, there is no alternative way in which Evan can get these goods. This is similar to Atlas Express Ltd v Kafco (Importers & Distributors) Ltd, where the withholding of shipping of goods was held to result in a lack of practical choice where there was no alternative for delivery. Furthermore, Evan needs the goods for another contract, therefore he cannot choose to wait and find a remedy under a breach of contract, as he needs the goods as soon as possible. In conclusion, there was no practical choice for Evan but to pay the price demanded.
The next requirement is that the threat must be illegitimate. In order for to establish this, the courts will examine the nature of the pressure and the nature of the demand. In this case, the pressure was overwhelming as Evan had no choice, and the nature of the demand was sufficient as it was a threat to break a contract (non-delivery if he did not pay the price), this rule has been seen in Kolmar Group AG v Traxpo Enterprises Pvt Ltd.
Finally, the pressure must be a significant cause in inducing the claimant to enter the contract. The test for this is that the pressure must be ‘decisive or clinching’, as per Huyton SA v Peter Cremer GmbH & Co. This requires an application of the ‘but for’ test. It is clear here that ‘but for’ the pressure, Evan would not have paid double price for the goods. Evan must also have protested with regards to the duress at the time of the contract or soon after it. This is unclear from this facts, therefore whether or not an actionable claim for duress will be possible is dependent on whether Evan protested (North Ocean Shipping Co Ltd v Hyundai Construction Co Ltd, The Atlantic Baron).
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