Duress

1. A contract is voidable at common law if it was made under duress. At one time the
concept of duress was a very narrow one, it was restricted to actual or threatened
physical violence to the person. It was rejected in The Siboen and the Sibotre, the
question is no longer what was threatened, but whether the threat amounts to a form
of illegitimate pressure. A threat may be illegitimate either because what is threatened
is legally wrong, or because the threat itself is wrongful (as in the case of the
blackmailer’s threat to disclose his victim’s conduct to third parties.), or because it is
contrary to public policy, or because it amounts to unconscionable conduct. It has
been said that it must have brought about a coercion of the will, which vitiates
consent.

Duress of the person

1. Duress of the person involves actual or threatened physical violence, or unlawful
constraint. It will normally be directed at the person of the contracting party, but it
also includes threats directed at employees for whom he is responsible.

Duress to goods
1. It is a threat of damage to the victim’s goods rather than to his person. It was held that
money paid to release goods that had been unlawfully detained can be recovered.
(Astley v Reynolds)

Economic duress
1. This type of duress arises where one party uses his superior economic power in an
illegitimate way so as to coerce the other contracting party to agree to a particular set
of terms.

2. Lord Hoffmann stated that there were two elements to the wrong of duress. The first
element is compulsion of the will of the victim and the second was the illegitimacy of
the pressure. The more tradition formula is that there must have been a coercion of the
will of the victim to vitiate the consent. This theory has difficulties that duress does
not deprive a person of all choice, but merely presents him with a choice between
evil. As a result, even though a man points a gun on the head of another man, the
other man accepts and he does consent it. What is wrong with the contract is not the
absence of consent, but the wrongful nature of the threats which have been used to
bring about the consent. This test has not been abandoned entirely. However, the
gradual move away from the coercion of the will test suggests that greater emphasis
should be placed in future cases upon the nature of the pressure applied by the more
powerful party, so it is important for the court to ascertain what constitutes
illegitimate pressure.

3. There is also uncertainty when the court determine whether or not there is sufficient
causal link between the pressure and the entering into the contract.

1. In the Evia Luck, it is held that it is now accepted that economic pressure may be
sufficient to amount to duress provided that at least the economic pressure may be
characterized as illegitimate and has constituted a significant cause inducing the
claimant to enter into the relevant contract.
 2. The most common type of economic duress is the threat by one party to break a
contract unless the other agrees to its variation, or compromise. Such a variation or
compromise may be unenforceable for want of consideration, but recent
developments mean that is less likely and the question then is whether the varied
contract is voidable for duress.

Illegitimate pressure and causation

1. The aim of the court is to distinguish between agreements which are the result of mere
commercial pressure, and those which are the consequence of unfair exploitation. It is
not easy to distinguish. Thus, some cases in which duress has not been established
may be best explained on the basis that the threat to break the original contract was
not illegitimate in the circumstances, while in others the illegitimate pressure created
by the threat may not have amount to a significant cause of the decision to enter into
the varied contract. this is different compared to duress of the person as the minimum
requirement before it can be said that the threat was a significant cause is to satisfy the
but for test.

2. The broad approach adopted by the judge in DSDN created uncertainty. In DV case,
the court thus appeared to envisage a two-stage approach to illegitimacy. First, if the
threat is unlawful (commit a crime, breach of contract), it will generally amount to
duress. Secondly, where the threat is lawful but is used to support a demand which is
unlawful, it may constitute duress. As for the unlawful act of a threatened breach of
contract, it seems that only bad faith breaches of contract will be deemed as
illegitimate. For the second type, the general rule is that if the defendant is threatened
to do what he is entitled to do, it will not amount to duress.

Legitimacy and lawfulness

1. It is clear from cases in which the courts appear to have ruled out duress because the
threatened breach of an existing contract did not amount to illegitimate pressure that
the lawfulness of the pressure brought to bear on a party is not necessarily
coterminous with its legitimacy. And in CTN Cash & Carry Ltd v Gallaher Ltd, the
judge did not rule out the possibility of lawful act duress. And read the Progress case.

2. A threat to refuse to contract should not constitute duress because, in the absence of
an obligation to enter into a contract, no wrongful threat is made in refusing the
contract. However, the case illustrating this principle is CTN, in which the party is
acting in good faith. It may be that if the party is not acting in good faith, then the
duress can be constituted.

3. Some commentators suggest that not all threatened breaches of contract should count
as the application of illegitimate pressure: some additional element should be
required. Thus Burrows has argued that bad faith should play an important role in
deciding whether or not a threatened breach of contract is illegitimate. As for what is
defined as bad faith, it is said that a threatened breach of contract should be regarded
as illegitimate if concerned to exploit the claimant’s weakness rather than solving
financial or other problems of the defendant.

4. The problem of this preposition is that English law does not generally invoke notions
of bad faith in the context of a breach of contract. AS a threat to breach contract is
 itself illegitimate.The emphasis placed on bad faith in CTN (discussed above) can be
distinguished on the ground that a refusal to contract is not in itself wrongful so that
bad faith might there be used to tip the scales in favour of a finding of illegitimacy,
but a threatened breach of contract is already wrongful, there is no need to rely on bad
faith.
5. An intermediate approach, adopted in Kolmar Group AG v Traxpo Enterprises Pty
Ltd is that a threat to break a contract will generally be regarded as illegitimate,
particularly where the defendant must know that it would be in breach of contract if
the threat were implemented. On this basis, a breach threatened in bad faith is more
likely to constitutes duress than a breach which is threatened in good faith, but the
latter can still amount to an illegitimate threat.

6. It is thought that a breach of contract would constitute illegitimate pressure but there
is some authority that it is not necessarily always true. There may be good faith.
However, it is suggested that the test of bad faith introduces an unnecessary
complication and that all threats to breach a contract should be regarded as affording
grounds for economic duress.

The availability of an alternative course of action

1. In assessing whether causation is established, the court will take into account what
courses of action other than submission to the threat were reasonably available to that
person, whether it would have been reasonable for him to have resisted the threatened
wrong by taking legal proceedings.

Cases where duress has been established

1. Cases such as D & C Builders v Rees have been explained on the ground that the
creditor’s promise to accept part payment in full settlement had been obtained by
duress.

2. In B & S Contracts and Design Ltd v Victor Green Publication Ltd, a contractor who
had undertaken to erect stands for an exhibition told his client, less than a week before
the exhibition was due to open, that the contract would be cancelled unless the client
paid an additional sum to meet claims which were being made against the contractor
by his workforce. The consequences of not having the stands available in time would
have been disastrous for the client in that it would have gravely damaged his
reputation and might have exposed him to heavy claims for damages from exhibitors
to whom space on the stands had been let.

Cases where duress has not been established

1. In Pao On v Lau Yiu Long, where the claimants threatened to break a contract with a
company unless the defendant, who were shareholders in the company gave them a
guarantee in order to avoid the adverse publicity which the company might suffer if
the contract were not performed. In these circumstances, it was held that there was no
coercion of the will so that the guarantee was not voidable for duress. It cannot be
said that, but for the claimant’s threat, the defendants would not have given the
guarantee. It may be better to regard this case as a case where the threat did not
amount to illegitimate pressure.

Unlawful demands for payment

 1. The rule that money extorted by duress can be recovered also applies where an
unlawful charge is levied by unlawful threats. Where a carrier refuses to carry goods
unless he is paid more than he is legally entitled to charge. Money paid by a citizen
under an ultra vires demand for a tax or similar levy is also recoverable by the payor,
irrespective of whether the demand amounts to duress.

2. This rule can be explained on the general principles of unjust enrichment, or on

common justice, or on the ground that a payment made in response to such an invalid
demand is analogous to one made for a consideration which has failed, or on a
mistake of law. But where the demand is not these kind, the only ground recovery is
duress, the claim for the return of money would fail if the demand for the payment
was not backed by any threat, or where it is backed only by a threat to take legal
proceedings, if such a payment could not be recovered back, no compromise would be
secure.

Remedies
1. The right to rescind is subject to the usual bars against relief: affirmation, lapse of
time, intervention of third party rights, and it seems the impossibility of making
counter-restitution. In many cases, the contract obtained by duress is a variation of an
earlier contract. it is only the varied contract which may be rescinded. Lord Scarman
considered that if the sort of threatened conduct amount to duress, it will also amount
to the tort of intimidation.

2. The reason why the contract is voidable, instead of void, is that the party should take
steps to set aside the agreement. A failure to do so within a reasonable time after the
duress has ceased to be operative may lead to the conclusion that the agreement has
been affirmed and can no longer be set aside. (North Ocean Shipping Co Ltd v
Hyundai Construction Co Ltd).

3. The victim of duress must seek rescission as soon as possible after the original
contract has ceased to operate. (The Atlantic Baron), otherwise it will be treated to be
affirmation.

Flow of answer suggested by law teacher:

1. Pressure
2. The practical effect of the pressure is that there is compulsion, or lack of practical
choice for the victim.
3. The pressure is illegitimate: nature of the pressure nature of the demand.
4. The pressure is a significant cause in inducing the claimant to enter the contract: the
requirement of protest
On duress of the person
Barton v Armstrong
1. The privy council drew an analogy with fraudulent misrepresentation and held that it
is not necessary to show that the threat was the sole inducement of the contract, or
that it would not have been entered but for the threat. It is enough that it was a factor
and it seems that, once the threat has been established, the burden is on the defendant
to prove that it contributed nothing to the decision to enter the contract.
2. A and B are major company shareholders. B promised A to buy his share. But B later
brought an action that A had threatened to have him murdered if he did not buy it.

On economic duress
Progress Bulk Carriers Ltd v Tube City IMS LLC (bad faith compared with CTN) 2012
1. The appellant shippowners had been guilty of past unlawful conduct when they
committed a repudiatory breach of a charter with the respondents by fixing the vessel
in question to another charterer. They offered a substitute vessel at a reduced freight
rate but only if the respondents entered into a settlement agreement under which they
waived any claims under the original charter.
2. The majority held that the shipowners had been guilty of illegitimate pressure
amounting to duress. Their repudiatory breach was the root cause of the problem and
their subsequent conduct was designed to take advantage of the position created by
that unlawfulness by putting the respondents in a position where they had no option
but to accept the settlement agreement in order to avoid further huge losses on a sale
contract.
3. The judge said that illegitimate pressure can be constituted by conduct which is not
itself unlawful, although it will be an unusual case where that is so, particularly in
commercial context.

On causation available to the claimant

Huyton SA v Peter Cremer GmbH 1999 (NO.1)
1. The judge said while it was not necessary to go so far as to say that it is an inflexible
third essential ingredient of economic duress that there should be no or no practical
alternative course open to the innocent party, it seemed that self-evident that relief
may not be appropriate, if an innocent party decides not to pursue an alternative
remedy which some other reasonable person may have pursued under this situation.
2. The correct test is the but for test.

On illegitimate pressure
DSDN Subsea Ltd v Petroleum Geo Services ASA 2000
 1. The judge stated that in determining whether there has been illegitimate pressure, the
court takes into account a range of factors. These include whether there has been an
actual or threatened breach of contract. whether the person allegedly exerting the
pressure has acted in good faith or bad faith. Whether the victim had any realistic
practical alternative but to submit to the pressure. Whether the victim protested at the
time. And whether he affirmed and sought to rely on the contract. It is noted that
illegitimate pressure must be distinguished from the rough and tumble of the pressures
of normal commercial bargaining.
2. It was said that the above approach creates much uncertainty. A preferable approach
which identify the meaning of illegitimacy with greater. This is illustrated in the
following case.

Since the above approach created much uncertainty, the following case is to be considered,
which identify distinct types of illegitimacy.

Rv A-G for England and Wales 2003

1. The judge said the threat of any form of unlawful action will be regarded as
illegitimate. On the other hand, the fact that the threat is lawful does not necessarily
make the pressure legitimate. For example, the ordinary blackmailer normally
threatens to do what he has a perfect right to do: 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.
2. From the judgement of the case, the coercion of will test has not been entirely
abandoned.
3. Legitimacy of pressure must be examined from two aspects, namely the nature of the
pressure and the nature of the demand which the pressure is applied to support.
4. The privy court stated that if the threat is unlawful, it will generally amount to duress.
Secondly, where the threat is lawful but is used to support a demand which is
unlawful, it may constitute duress.
5. This case involves an SAS member who was party to a specific patrol who were
considered infamous due to an amount of controversy surrounding their actions. In
light of this, the ministry of defence forced all members of the patrol to sign
confidentiality agreements. If the member refused to sign, the ministry of defence will
demote him. The court explained that some demand may be lawful, but would
constitute duress. In this case, the threat of a demotion amounted to legitimate
pressure in light of the importance of the confidentiality agreement. On the other
hand, the demand to sign is also justifiable. The member in question still had a choice,
the court described the pressure as overwhelming, but not illegitimate.
6. if the threat is unlawful, then can duress. If the threat is lawful, but the demand is not
justifiable, and he has no other choice, then also can duress.
7. There is a need for both 1 pressure amounting to compulsion of the will. 2
illegitimacy of the pressure.

CTN Cash and Carry Ltd v Gallaher Ltd 1994

1. It was held that a threat to refuse to contract( on the fact of this case, a threat to refuse
to provide urgently needed credit in future transactions) did not constitute duress. And
the party applying the pressure is not acting in bad faith.
2. A contracted with B for the purchase of cigarettes. B delivered the cigarettes to the
wrong address where they were stolen before B could rectify the mistake.
 3. B demanded A to pay for the cigarettes despite not being delivered due to his own
mistake. A disagreed. B threatened to stop A’s credit facilities for future dealings if A
failed to pay.
4. The judge said that B had the right to refrain from future dealings with A for any
reason it chose. Thus , because a decision to discontinue dealings with A was lawful,
it was also lawful for B to threaten A with credit withdrawal in the absence of
payment. Also B acted in good faith where it demanded payment from A as B
genuinely believed that they were entitled to pay.
5. Good faith on the part of the party pressuring the other party seems to be relevant for
proving a lawful threat falls under the ambit of lawful duress.

Pao On v Lau Yiu Long 1980

1. The claimant threatened to break a contract with a company unless the defendant, who
were the shareholders in the company, gave them a guarantee against loss resulting
from the performance of that contract. The defendant, thinking that the risk of such
loss is small, gave the defendant guarantee in order to avoid the adverse publicity
which the company might suffer if the contract were not performed.
2. The court said that duress is a coercion of the will so as to vitiate consent. To
determine whether there is a coercion of the will, it is important to inquire whether the
person alleged to have been coerced did or did not protest. Whether at the time he was
allegedly coerced did or did not have an alternative course open to him. Whether he
was independently advised.
3. In this case, the judge think that there is no coercion of will, it is commercial pressure
instead of duress. However, in recent year, the court seldom uses this doctrine to
determine whether there is a duress.
4. The court confirmed the view in North Ocean that economic duress can render a
contract voidable.

Universe Tankships of Monrovia v International Transport Workers 1983

1. A’s ship was blacked by B’s trade union. A agreed to pay money to have its ship
lifted. Soon later, A sought to recover the money, saying that it was paid under
economic duress. It was held that the money was recoverable for economic duress.
2. The judge said commercial pressure exists where one party has a stronger bargaining
position than the other party, however, it does not mean it is illegitimate. In
determining what is illegitimate, the first issue is the nature of the pressure. The
second issue is the nature of the demand which the pressure is applied to support.
Duress can exist if the threat is a lawful action, but the demand not. For example,
blackmail is often a demand supported by a threat to do a lawful act.
3. In the present case, the first issue is whether the blacking was lawful or not. if it was
unlawful, then it amounts to duress.
4. Pao On is rejected and the court focus on whether there is illegitimate pressure
exercised by the other party.

Dimskal Shipping Co SA 1992 (the evia luck)

1. A is the owner of a ship. B’s trade union told A that his ship will be blacked unless
money is paid. Then A paid money and brought a claim of duress.
2. Since English law recognize blacking as unlawful, the contract is voidable on the
ground of economic duress.
3. He suggested two requirements and did not agreed with the requirement used by Pao
On.
Esquire Ltd v HSBC 2007
1. A provided a loan and banking facilities to B up to 300 million secured by a mortgage
over a property that is worth 180 million. B fell into financial difficulties. A
demanded B to agree to sale of property within 24 hours otherwise demand on all
outstanding loans.
2. The key to proving economic duress is proof of the illegitimacy of the suggested
pressure. Much commercial activity necessarily involves pressure, often considerable
and sometimes overwhelming, exercised by parties who find themselves in powerful
bargaining positions. But that of itself is not illegitimate. It is suggested that pressure
will be illegitimate if it consists of unlawful threats or amounts to unconscionable
conduct. By unconscionable conduct means that the weaker party suffered from
special disadvantages by the stronger party.

Development of the doctrine

North Ocean Shipping Co Ltd v Hyundai Construction Co Ltd 1979
1. A agreed to build a ship for B for a given price. Subsequently the USD was devalued
by 10% and A threatened to end the contract unless they were paid an extra 10%. B
then agreed as there was another contract related. One year later, B argued that the
extra sum was not supported by consideration and invalid for duress. It was held that
it was supported by consideration and B lost his right to rescind the contract by
affirming it.
2. It was held that the situation in this case is called economic duress and this can make
the contract voidable. However, a person who has entered into a contract under
duress, may either affirm or avoid such a contract after the duress has ceased. And if
he has so voluntarily acted under it with a full knowledge of all the circumstances he
may be held bound on the ground of ratification, or after escaping from duress, he
takes no step to set aside the transaction, he may be found to have affirmed it.

Lack of practical choice

B & S Contracts & Design Ltd 1984
1. There was a contract to erect some exhibition stands. A week before the due date of
the contract, the builders refused to work unless they were paid more money. If the
claimant had not paid the extra money, they would have suffered serious loss as a
result of the contract they had involving the completed exhibition stands. In this case,
they had no realistic option but to pay the extra money to avoid the serious losses.

Atlas Express Ltd v Kafco

1. the withholding of shipping of goods was held to result in a lack of practical choice
where there was no alternative for delivery.

Hennessy v Craigmyle & Co 1986

1. the court thought that it would have been reasonable for the victim to take legal
proceedings to prevent the contract, thus duress is not constituted.