Contract Law: Duress

Elements

(1) Pressure
(a) threat, and
(b) demand

(2) Which the law regards as "illegitimate"

(3) Which compels V to enter into the contract

  • what is the degree of duress?
  • what is the strength of causality?

Clear threat, problem of causation:

  • threats of physical violence/death being made
  • but also good commercial benefits of entering contract
    HELD: threats were sufficient inducement (maj); threats were not significant role (min)
    (Barton v Armstrong [1976])

Physical threats

Other forms of duress involving persons

  • to arrange for criminal prosecution/ imprisonment/ continued detention
  • to disclose embarrassing/ incriminating information (Tam Tak Chuen v Khairul bin Abdul Rahman)
  • redeployment from elite army squad to regular unit unless confidentiality agreement was signed: loss of prestige and social life, embarrassment, lower pay (R v A-G of England and Wales)

Duress of goods

  • seizure of V's goods (Maskell v Horner)
  • refuse to release V's goods
  • threat to damage V's goods (The Siboen and The Sibotre, obiter)

Economic duress (not physical harm of property)

  • formation or performance of contracts: negotiation of new contract/ renegotiation of contract/ negotiation of settlement contract for disputes
  • threats to refuse to deal with V or to procure others to act in the same way
    (The Universe Sentinel, "blacking" (blacklisting) by industrial action; Dimskal Shipping (The Evia Luck))
    (The Port Caledonia and the Anna (threat to refuse to assist V's vessel in distress unless exorbitant rescue fee agreed))
    (CTN Cash and Carry Ltd v Gallaher Ltd (threat to refuse to deal with V on credit terms in future, no duress)

Threatening to terminate a contract, or to refuse to perform (in whole or in part) a legal obligation:
North Ocean Shipping Co Ltd v Hyundai Construction Co Ltd (The Atlantic Baron) [1979] QB 705 (threat to refuse to complete construction and deliver ship to V)
The Siboen and The Sibotre (refusal by T to pay full charter rate of hire to V: no duress on facts).
D&C Builders Ltd v Rees [1966] 2 QB 617 at 625 per Lord Denning MR (T insisting on paying lesser sum in discharge of debt owed to V)
Pao On v Lau Yiu Long [[1980] AC 614 (threat by T to refuse to complete transaction with a public company, in which V were major shareholders; no duress on facts).
B & S Contracts and Design Ltd v Victor Green Publications Ltd [1984] ICR 419 (T refusing to perform unless V shared cost of meeting demands by T’s striking workers) but cf Sharon Global and Williams v Roffey Bros

Duress and consideration

  • can argue on either ground
  • practical benefit subject to duress (Williams Roffrey though on the facts it was not duress since it was honest statement of fact)

(1) look at threat and demand itself

  • any threat of unlawful conduct (criminal/tortious/statute) is prima facie illegitimate (The Universe Sentinel; R v A-G for England and Wales; Barton v Armstrong)
  • considerations of statutory policy (The Universe Sentinel and cf The Evia Luck)
    (2) good faith/ bad faith? (only suggested, no case successful)

Threat to breach contract

  • consider several factors, public policy
    (1) Characterisation
  • threat or genuine, factual statement?
  • did T initiate demand/alternative suggested by V/developed jointly? (Sharon Global)
    (2) Good faith or bad faith conduct by T (Sharon Global)
    (3) Existence/absence of a reasonable commercial basis for demand by T
  • not customer's responsibility to pick up half the bill demanded by striking employees (case?)

Lawful threats
The performance of the threat is, in itself, lawful but in the circumstances its attachment to the demand is regarded as illegitimate.

  • a refusal to contract with party/only on terms favourable to T (Smith v Charlick)
  • exercise of legal right or discretion, contractual rights (R v A-G for England and Wales)
  • disclosure of discreditable information (Tam Tak Chuen)
  • commencing civil proceedings (Lee Kuan Yew v Chee Soon Juan)
  • prosecution (criminal proceedings)

Some factors

  • “whether [the conduct] is morally or socially unacceptable” (CTN Cash & Carry at 719)
  • whether the threat involves some collateral, improper motive or abuse of process, as contrasted with a genuine attempt to enforce legal rights (compare Tam Tak Chuen at [52], [57] and Lee Kuan Yew at [42]-[44] (bona fide and not vexatious)).
  • good faith/bad faith? (CTN Cash and Carry)
  • justified/reasonable demand (R v A-G for England and Wales)
  • unconscionability? (controversial: Tan Tak Chuen cf E C Investment; concerns of vagueness)

Onus of proof

  • for physical threats, on T
  • for economic duress and probably duress of goods, on V

Weird cases:
Tam Tak Chuen -> used standard for threat to duress of person
EC Investment -> accepting onus on T for economic duress too

Degree of causal influence

  • physical duress: a factor sufficient, need not be predominant or decisive/"but for" factor (Barton v Armstrong)
  • economic duress and probably duress of goods: "but for" test, necessary cause

Proving the pressure led to compliance with the demand
Factors:
(1) protest? but not fatal (Tam Tak Chuen)
(2) alternative course open to V?
(3) gravity of consequences of threat?
(4) did V have access to independent legal advice?
(5) actions of V after threat, what steps did V take to avoid the contract once the pressure had abated; length of time? (overlaps with issue of affirmation)

Remedies

Rescission

  • voidable for duress
  • bars to rescission apply (affirmation; estoppel; intervention of third party rights; impossibility of restitutio in integrum)

Restitution

  • especially where money was paid in response to demand

Damages

Suing in tort of intimidation, some overlaps

  • tort limited to unlawful threats only