Contract: Duress

Duress

Classic Duress

Duress to the Person

Where a cause of the contract was the threat of physical violence to the innocent party or another, the contract is void ab initio. There is no need to prove that but for the threat, they would not have entered into the contract: Barton v Armstrong [1976] AC 104.

A contract which is void ab initio is treated as never existing. This means that neither party is entitled to rely on the contract’s terms.

Duress to Property

The historical rule was that a contract is not void if the threat was merely to damage or destroy the claimant’s goods: Skeate v Beale [1840] 11 Ad & El 983. There has not been a modern case on the issue. However, it is likely that this is no longer good law since the development of the defence of economic duress. Duress to property therefore probably follows the same rules as economic duress.


Economic Duress

Establishing Economic Duress

To establish the defence of economic duress, the innocent party must show that:

  1. The other party subjected him to illegitimate pressure;
  2. The innocent party submitted to this pressure because he realised that there was no other practical choice available to him: The Universe Sentinel [1983] 1 AC 366; and
  3. The pressure was a ‘significant cause’ of the innocent party agreeing to the contract: DSND Subsea Ltd v Petroleum Geo Services ASA [2000] BLR 530.
Illegitimate Pressure
threats, shouting

Illegal threats are always illegitimate: R v HM Attorney-General for England and Wales [2003] UKPC 22. Lawful behaviour may also be illegitimate, however, if it was unreasonable and the other party is acting in bad faith: DSND Subsea Ltd v Petroleum Geo Services ASA [2000] BLR 530. For example, threatening to breach a contract to take advantage of the innocent party’s weak position will normally be illegitimate: Kolmar v Traxpo Enterprises [2010] EWHC 113 (Comm).

Practical Choice
choice, refusal, options

The innocent party has no practical choice if there are no other reasonable alternatives to him but to submit to the breach: B & S Contracts & Design v Victor Green Publications [1984] ICR 419. Relevant factors include the harm that any alternatives would cause to the innocent party, and anything hampering the innocent party’s perception of or ability to engage with the alternatives which the other party caused or should have foreseen: Huyton v Peter Cremer [1999] 1 Lloyd’s Rep 620.

‘Significant Cause’

The pressure was a significant cause of the contract if but for the pressure, the innocent party would not have entered into the contract: Huyton v Peter Cremer [1999] 1 Lloyd’s Rep 620.

Impact of Economic Duress

Unlike the classic defence of duress, the defence of economic duress makes the contract voidable at the election of the innocent party: IFR Ltd v Federal Trade Spa [2001] EWHC 519.

A contract which is voidable is not treated as never existing. Rather, it is treated as existing until the innocent party communicates that they are terminating the contract or take reasonable steps to do so. Reasonable steps include reporting the goods stolen if the other party has vanished.


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Contract Defences Quiz

Test yourself on the principles governing when a party to a contract has a defence.

1 / 52

ABC Bank is advancing money to a debtor. An individual tells the bank that they wish to act as a guarantor or surety for that debt. The debtor has unduly influenced this individual. When is the bank taken to have constructive notice of the presence of undue influence in the transaction?

2 / 52

Complete this sentence: The defence of illegality renders the contract...

3 / 52

Maisy enters into a contract with a man falsely claiming to be her long-lost cousin, John, while they are catching up at a restaurant. Maisy later seeks to argue that she should not be bound by the contract, because she would not have entered into the contract had she known the man was not John. Is the man's identity a vital term of the contract?

4 / 52

Joanie has established that a neighbour of hers, Richard, pressured her into selling her house to him. To establish undue influence, what does she need to do to show that the influence was undue?

5 / 52

Marcus has shown that he reposed a large amount of trust in his partner, Adrian, when it comes to financial affairs. He also shows that his decision to transfer his inheritance to Adrian is a transaction which calls for explanation. To avoid the transfer being affected by the defence of undue influence, what must Adrian do to show that the influence was not undue?

6 / 52

What are the two requirements of the defence of misrepresentation?

7 / 52

For the purposes of unilateral mistake, when is a term 'vital' to the contract?

8 / 52

In which two scenarios can a person rely on the defence of undue influence against a third-party?

9 / 52

When are damages in deceit available for a misrepresentation?

10 / 52

In which of the three following circumstances would the defence of common mistake apply?

11 / 52

Maisy enters into a contract with a man falsely claiming to be her long-lost cousin, John, while they are catching up at a restaurant. The contract is in writing and signed, and the man signed his name as 'John'. Maisy later seeks to argue that she should not be bound by the contract, because she would not have entered into the contract had she known the man was not John. Can Maisy rely on the defence of mistake in relation to the man's identity?

12 / 52

Can the innocent party prove that a misrepresentation caused them to enter the contract if they had the opportunity to verify the statement, but did not?

 

13 / 52

Complete this sentence: The defence of economic duress renders the contract...

14 / 52

When are damages available for innocent misrepresentation?

15 / 52

Can silence be an actionable misrepresentation?

16 / 52

In what two scenarios are the courts likely to refuse to rescind a contract which has been rendered voidable by misrepresentation?

17 / 52

Katie and Andrew enter into a contract which states that Andrew will deliver Thompson apples to Katie. The parties are not aware that there are actually two kinds of Thompson apples - Virginia Thompson apples and Alabama Thompson apples. The two types of apple taste very different and have very different uses. Andrew intends to ship Virginia Thompson apples, while Katie is expecting to receive Alabama Thompson apples. Is the contract void for mutual mistake?

18 / 52

Can the innocent party prove that a misrepresentation caused them to enter the contract if they used their own resources to verify whether the statement was true?

 

19 / 52

Complete this sentence: The defence of mistake renders the contract...

20 / 52

Xavier is a busy taxi driver who purchases a new car from Dodgy Dealers Inc. He signs their standard term car-purchase contract without reading it, not realising that it contains an onerous clause requiring him to pay a penalty fee if he gets the car serviced by anyone else within the first year. Can Xavier rely on the defence of non es factum to get out of the contract?

 

21 / 52

Does a defence of duress to property exist?

 

22 / 52

Joanie has established a presumption that her lawyer, Richard, influenced her when she sold her house to him. To establish undue influence, what does she need to do to show that the influence was undue?

23 / 52

David offers to sell Mary a house, representing that it has a conservatory. Mary relies on this representation when deciding to buy the house. Prior to the sale, there is a fire, and the conservatory burns down. David does not tell Mary. Can Mary rely on the defence of misrepresentation?

 

24 / 52

Richard offers to sell Michael a book. Richard knows that Michael believes that the book is signed by the author. Richard did nothing to make him believe this, but nor does he correct Michael. Michael relies on his belief that the book is signed when deciding to buy it. Can Michael rely on the defence of misrepresentation?

 

25 / 52

For the purposes of the defence of economic duress, can a lawful threat be illegitimate?

 

26 / 52

What must a third-party bank do to rid themselves of constructive notice of undue influence?

27 / 52

When will the defence of illegality bar a claim?

28 / 52

Does the claimant need to establish that but for the threat, they would not have entered into the contract if they are trying to prove duress to the person?

 

29 / 52

For the purposes of the defence of duress, what factors are relevant to whether the innocent party has a practical choice? (Three answers)

30 / 52

When establishing that the defendant's influence was undue for the purposes of the defence of undue influence, the claimant must show that the transaction was manifestly to their disadvantage. True or false?

 

31 / 52

Can a person rely on any of the three categories of presumed influence when trying to establish undue influence to challenge the will of a deceased person?

 

32 / 52

When dealing with the defence of undue influence in a case where a presumption of influence has been raised, can the defendant rebut the presumption?

 

33 / 52

David induces Mary to enter into a contract to buy a car by promising that he will service the car before he gives it to her. He has no intention of doing so. Is this an actionable misrepresentation?

 

34 / 52

If a contract is void ab initio, can either party rely on its terms?

35 / 52

Complete this sentence: The defence of misrepresentation renders the contract...

36 / 52

Celestine is an elderly woman whose eye-sight is failing. Her niece, Laura, persuades her to sign a document claiming that it will authorise Laura to remove £50 for Celestine's bank account to enable her to pay Celestine's bills. In reality, it is a contract transferring Celestine's house to Laura. Celestine did not bother to read it as she trusts Laura (who has helped her out with bills before) and her eyesight makes reading very difficult. Can Celestine rely on the defence of non es factum?

 

37 / 52

Hannah is applying for a loan for the family business. Her girlfriend Celestine tells the bank that she will act as surety for the loan. The money is to be advanced to a company which Hannah and Celestine hold joint shares in. The bank is aware that Celestine is Hannah's girlfriend and that she has shares in the company, but they are not aware that Hannah has unduly influenced Celestine. They grant the loan. Can Celestine rely on the defence of undue influence against the bank?

38 / 52

Complete this sentence: The defence of duress to the person renders the contract...

39 / 52

When establishing the defence of undue influence, how does the claimant demonstrate the category of presumed influence established in Malik (Deceased) v Shiekh?

40 / 52

If a contract is voidable, can either party rely on its terms?

41 / 52

For the purposes of the defence of unilateral mistake, when can a term as to the quality of the goods be considered 'vital'?

42 / 52

When determining if the defence of misrepresentation applies, the courts will presume, in the absence of contrary evidence, that the claimant relied on the statement if a reasonable person would have relied on it. True or false?

 

43 / 52

What three elements must an innocent party show to establish the defence of economic duress?

44 / 52

When establishing the defence of undue influence, how does the claimant demonstrate 'Type 2B' presumed influence?

45 / 52

When establishing the defence of undue influence, how does the claimant demonstrate actual influence?

46 / 52

Can undue influence be demonstrated in cases where the parties had no relationship prior to the transaction?

47 / 52

Maisy enters into a contract over the phone with a man falsely claiming to be her estranged cousin, John. Maisy later seeks to argue that she should not be bound by the contract, because she would not have entered into the contract had she known the man was not John. Is the man's identity a vital term of the contract?

48 / 52

What two conditions must be met before a transaction is void for unilateral mistake?

49 / 52

Julie is applying for an overdraft on a joint account controlled by herself and her husband Johan at ABC Bank. Her husband Johan offers to act as surety. The bank is unaware of the fact that Johan has been unduly influenced by Julie, but knows that the two are married. The overdraft is granted. Does the bank have constructive notice of the undue influence?

 

50 / 52

Complete this sentence: The defence of undue influence renders the contract...

51 / 52

When establishing the defence of undue influence, how does the claimant demonstrate 'Type 2A' presumed influence?

52 / 52

Maisy enters into a contract over the phone with a man falsely claiming to be her long-lost cousin, John. In reality, Maisy does not have a long-lost cousin named John. Maisy later seeks to argue that she should not be bound by the contract, because she would not have entered into the contract had she known the man was not her cousin. Is the man's identity a vital term of the contract?

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