Faculty of Shari'ah & Law: LAW OF CONTRACT II Lecture 3& 4 1

DURESS

ESSENTIAL READING:
Richard Stone, The Modern Law of Contract, 8thed Routledge Cavendish UK 2009, 419-436

THINK POINT
What is the justification for the court intervening if freedom of contract is sacrosanct?

2.1. Definition
Act done by one person to another for the purpose of applying pressure or undue persuasion to do
something, or refrain or desist from doing something. Duress may take the form of constraint by injury,
confinement or threats.
2.2. Duress to the Person
Actual or threatened violence to an individual to obtain a contractual promise, payment,
service or transfer of property.
Any contract obtained by such conduct is voidable at the option of the coerced party.
2.3. Duress to goods
A form of duress involving the unlawful taking, detention, damaging or destruction of a
persons goods.
Any contract obtained by such conduct is voidable at the option of the coerced party.

Barton v Armstrong [1976] AC 104

A former chairman of a Company threatened the current MD with death unless the MD paid ovber a
large sum of money for the former chairmans shares. Armstrong argued, in effect, "Yes I threatened
murder but, in the circumstances, it made no difference because Barton would have signed anyway."
Surprisingly, the trial judge bought this argument. The case went all the way to the Privy Council.. The
main question was about the onus of proof in relation to the causation issue.
Did Barton (the victim) have to prove that he was coerced by the threat?
Or did Armstrong (the threatener) have to prove that the threat had no effect?
The Privy Council decided that the onus was on Armstrong, the party who had made the threat, to show
that it had no effect. This, of course, Armstrong could not do because it involved trying to prove a
negative. Thus, once it is proved that an illegitimate threat was made, there is a presumption that the
threat had some effect unless the party who made the threat can prove otherwise. To rebut this
presumption, as we have seen, is virtually impossible.

The modern view of duress seem to be represented by the approach of the Privy Council in Attorney-
General v R [2003]. A soldier claimed that he had signed a confidentiality agreement, restricting his
ability to publish information about his experiences in the SAS. Such removal would normally have
taken place as a result of disciplinary action. Originated in NZ where the trial judge held in favour of
the soldier. The CA reversed this decision. On further appeal to Privy Council.

The Privy Council dismissed the appeal. In doing so it identified the essential requirement of duress as
being illegitimate pressure amounting to compulsion of the will of the victim. There was no doubt that
the soldier was pressured into signing the agreement. Returning to his unit would have been regarded in
the SAS as a public humiliation and he had no realistic alternative to compliance. The pressure was not,
however, improper, as restricting unauthorized disclosures concerning military operations was a
legitimate objective for the army. The confidentiality agreement was enforceable.

Lord Scarman identified two elements to duress:

Pressure amounting to compulsion of the will of the victim; and
The illegitimacy of the pressure.

The first element was not an issue since it was accepted that for the soldier to be returned to a regular
army would be regarded in the SAS as a public humiliation. He had no practical alternative to
compliance.

Lecturer: Fathimath Waheeda

Faculty of Shari'ah & Law: LAW OF CONTRACT II Lecture 3& 4 2

As regards to the second element, this could be viewed from two aspects:
The nature of the pressure; and
The nature of the demand which the pressure is applied to support.

In relation to the nature of pressure where threat to carry out some unlawful act, this would lead to
pressure regarded as illegitimate. It was not necessarily the case, however a threat of a lawful action
would be legitimate. This is where the second aspect, illegitimacy needs to be considered. Was their
objective a legitimate one?
Applying this approach to the case, the Privy Council took the view that the threat was in
itself lawful. The trial judge thought that it was, in that it was effectively a military order
which purported to control Rs conduct after he had left the service.
The Court of Appeal and the Privy Council disagreed. R had not been issued with a command
which created an obligation under the military law. He was rather faced with a choice which
may have constituted overwhelming pressure, but was not an exercise by the Ministry of
Defence of its legal powers over him. Since the objective of restricting unauthorized
disclosures concerning military operations was in itself a legitimate objective, the plea of
duress failed.

2.4. Economic Duress

The idea behind economic duress is to recognize that very great pressure can be brought to
bear without actually holding a gun at someones head.
In certain circumstances, the courts are prepared to say that some forms of commercial
pressure are unacceptable with the consequence that any advantage secured by the use of such
pressure can be set aside.
This advantage may be an agreement which has been secured by the unacceptable
pressure or it may be just payment of money that has been secured by the pressure.

Occidental World Investment Corporation v Skibs A/S Avanti, The Siboen and The Sibotre
[1976]
The charterers of 2 ships, the Siboen and the Sibotre renegotiated the contracts of hire,
after falsely threatening that they would become bankrupt if the rates were not reduced. Kerr J
held that mere commercial pressure was inadequate to prove economic duress. There has to be
such a degree of coercion that the other party was deprived of his ability to consent freely to
the agreement. To establish this test Kerr J identified two questions that were essential to the
establishment of economic duress.
First, did the victim protest at the time of the demand?
Second, did the victim regard the transaction as closed or did he intend to repudiate
the new agreement?

North Ocean Shipping Co Ltd v Hyundai Construction Co Ltd [1979]

The defendants threatened to be in breach of contract in the construction of a ship unless the
claimants agreed to pay an extra 10 percent on the contract, largely because of the devaluation
of the US dollar. The owners did pay the increased amount, though they protested that there
was no legal basis for demand. In fact, the owner had no option but to pay since they were
involved in negotiations for a lucrative charter for the ship being built. Mocatta J considered
this to be an incident of economic duress which results in the contract being voidable. The
claimants however had delayed their claim of the return of the extra payment, for 8 months. It
was held that delay defeated the claimants claim for the rescission.

Pao On v Lau Yiu Long [1980] AC 614 (PC)

The plaintiff had threatened not to proceed with a contract of sale of shares, unless other side
agreed to a renegotiation of certain subsidiary arrangements. The defendant agreed, but when
the plaintiff later tried to enforce these arrangements, claimed that they had been extracted by

Lecturer: Fathimath Waheeda

Faculty of Shari'ah & Law: LAW OF CONTRACT II Lecture 3& 4 3

duress and were therefore voidable. It was held that mere commercial pressure was in
adequate. He stated that the essence of the rule is that there must be a coercion of will such
that there was no true consent..it must be shown that the contract entered into was not a
voluntary act.
Lord Scarman identified instances of material factors that would be taken into account in
distinguishing the two (ie, commercial pressure and coercion of will) that is:
*Did the victim protest? *Was there an alternative course open to the victim? *Was
the victim independently advised? *After having entered the agreement, did the
victim take steps to avoid it?

On the facts of this case, the claim for duress failed, because the defendant had an alternative
course open: that is he had an adequate remedy in action in specific performance in relation to
the original agreement.

Universe Tankships Inc of Monrovia v International Transport Workers Federation, The

Universe Sentinel [1983]
This is a case which involved industrial action by the ITWF. They black banned a ship in
order to induce the owners to accede to various demands being made by the union. One of the
demands was for the employer to pay some money into the unions welfare fund. The
employer did pay the money to get the ban lifted but then brought an action later to recover
the money, arguing that the payment was procured by duress. It was held by the HSL that the
payments could be recovered. Lord Diplock stated that economic duress could be relied upon
a victim where:
His apparent consent was induced by pressure on him by that other party which the
law does not regard as legitimate, with the consequence that the consent is treated in
law as revocable unless approbated either expressly or by implication after the
illegitimate pressure has ceased to operate on his mind.

Lord Scarman dealt with the two elements of economic duress, ie consent induced by coercion
of the will of the victim, and the fact that the pressure was illegitimate. In his discussion of
'compulsion', Lord Scarman modified the approach previously taken.
His Lordship stated:
Compulsion is variously described in the authorities as coercion or the vitiation of
consent. The classic case of duress is, however, not the lack of will to submit but the
victim's intentional submission arising from the realization that there is no other
practical choice open to him The absence of choice can be proved in various
ways, for example by protest, by the absence of independent advice, or by a
declaration of intention to go to law to recover the money paid or the property
transferred But non of these evidential matters goes to the essence of duress. The
victim's silence will not assist the bully, if the lack of any practicable choice but to
submit is proved.

In the present case there was no protest at the time, but only a determination to do
whatever was needed as rapidly as possible to release the ship.

B & S Contracts Design v Victor Green [1984]

There was a contract for the erection of exhibition stands. An industrial dispute arose a week
before the exhibition between the constructor of the stands and its employees. The constructor
sought a contribution of 4,500 from the defendants, who had let out the stands to exhibitors,
to assist in settling the dispute with the employees. This was paid and the contract was
performed. The defendants then deducted the 4,500 when paying the contract price. The
constructor sued to recover this sum.

Lecturer: Fathimath Waheeda

Faculty of Shari'ah & Law: LAW OF CONTRACT II Lecture 3& 4 4

It was held by the Court of Appeal that the payment of 4,500 was made under duress and was
not enforceable. The defendants had no other way out of what would have been a disastrous
situation, because of its effect on the exhibition, and they were entitled to treat the payment as
being forced out of them by economic duress. Legal action against the constructor in this
situation would not have been adequate, because of the time pressure. The failure of the
exhibition would have had consequences for the defendants going beyond anything that would
have been recoverable in damages from the constructor. A major test for the illegitimacy of
the threat of economic pressure, which turns it into duress, thus seems to be that the action
threatened leaves the person threatened with no realistic alternative to compliance.

Atlas Express Ltd v Kafco (Importers & Distributors) [1989]

Here a small basketware company had secured a valuable contract to supply its products to
Woolworths. They then contracted with a national firm of carriers to transport their products.
After the contract with the carriers was made, the carriers insisted on raising their charges,
threatening to stop deliveries unless the higher price was paid. This happened at a vulnerable
time for Kafco, when the shops were beginning to require deliveries for the Christmas period,
so they had no time to find an alternative carrier. They reluctantly agreed to the new terms, but
later refused to pay the extra.

The court held that Kafcos agreement to pay extra had been obtained by duress, and was
therefore not binding. The pressure applied was illegitimate, and Kafco had no realistic
alternative but to agree. Had they had more time, they might have been expected to find an
alternative carrier and then sue Atlas for breach, but in the circumstances this was completely
impractical.

CTN Cash and Carry v Gallagher [1994]

The threat in this case was to withdraw credit from the other party, and to insist on cash for
goods supplied. The circumstances in which this occurred were that the plaintiffs had ordered
from the defendants cigarettes to the value of 17,000. These had, as a result of the
defendants mistake, been delivered to the wrong warehouse, in a different town. It was
arranged that the defendants would collect them and transport them to the right warehouse.
Before this could be done, however, there was a burglary at the warehouse to which the
cigarettes had been wrongly delivered, and they were stolen. The defendants believed,
mistakenly as a matter of law, that the cigarettes were at the plaintiffs risk when they were
stolen. They therefore insisted that the plaintiffs should pay for them, backing this up with the
threat to withdraw credit. The plaintiffs reluctantly paid, but then brought an action to recover
the 17,000 on the basis that it had been paid under duress.

The Court of Appeal found that, on the facts, there was no economic duress, partly because
the threat was issued in good faith. Although the defendants might have been regarded as
abusing their position as the monopoly supplier of certain very popular brands of cigarettes,
they were in this case genuinely under the impression that their claim for payment was
legitimate.
Moreover, as Steyn LJ commented:
an extension [of the categories of duress] capable of covering the present case,
involving lawful act duress in a commercial context in pursuit of a bona fide claim,
would be a radical one with far-reaching implications. It would introduce a
substantial and undesirable element of uncertainty in the commercial bargaining
process.

The court did not accept, however, that the fact that what was threatened was perfectly lawful,
and would not have involved the supplier in any breach of contract, was in itself fatal to a
claim. It thought that it was possible, in appropriate circumstances, for a threat to commit an
entirely lawful act to amount to duress.

Lecturer: Fathimath Waheeda

Faculty of Shari'ah & Law: LAW OF CONTRACT II Lecture 3& 4 5

A further re-statement of the principles of economic duress can be found in DSDN Subsea Ltd v
Petroleum Geo-Services ASA [2000] where Dyson J stated:
The ingredients of actionable duress are that there must be pressure, (a) whose practical effect
is that there is compulsion on, or a lack of practical choice for, the victim, (b) which is
illegitimate, and (c) which is a significant cause inducing the claimant to enter into the
contract 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 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. These are all relevant factors. Illegitimate pressure must be distinguished from the
rough and tumble of the pressures of normal commercial bargaining.

2.5 Remedies
The remedy that the victim of duress will be seeking is to escape from the agreement that has resulted
from the duress in other words, rescission. However, rescission may be lost through affirmation of
the contract, lapse of time, or the intervention of third party rights. It might also be that, as in relation to
misrepresentation, the person claiming duress should be in a position to make restitution of any
property transferred for rescission to be available.

SELF-ASSESMENT QUESTIONS
1) What is the main limitation on a claim to duress?
2) Why has the doctrine of economic duress developed? In what circumstances will a claim of
economic duress fail and in what circumstances will it succeed?

SUMMARY
Where one party is forced to consent by threats or undue pressure by the other, that consent should be
invalid. The law has developed two doctrines to deal with this issue: the common law of duress, and
the equitable one of undue influence. Both render a contract voidable.

Five conditions need to be satisfied in order for there to be a finding of duress:

1) Pressure was exerted on the contracting party.
2) This pressure was illegitimate.
3) The pressure induced the claimant to enter the contract.
4) The claimant had no real choice but to enter the contract.
5) The claimant protested at the time or shortly after the contract was made.

Each of these conditions will be considered in turn:

Pressure exerted on the contracting party
Pressure must have been exerted on the innocent contracting party, which amounted to a compulsion of
the will. To constitute economic duress, economic pressure must go a great deal further than the
ordinary pressure of the market.

Pressure exerted was illegitimate

Illegitimate pressure must have been exerted on the other contracting party. A threat to do an unlawful
act (which includes breaking a contract) will always be illegitimate, but a threat to do a lawful act will
only be illegitimate if the threat is unreasonable, which will depend on the circumstances: Atlas
Express Ltd v Kafco (Importers and Distributors) Ltd (1989).

Pressure induced the claimant to enter the contract

Duress must be one of the reasons for entering (or modifying) a contract, but it does not have to be the
only or even the main reason.

Claimant had no real choice but to enter the contract

Economic duress will be present where there is compulsion of the will to the extent that the party under
threat has no practical alternative but to comply.

Lecturer: Fathimath Waheeda

Faculty of Shari'ah & Law: LAW OF CONTRACT II Lecture 3& 4 6

Claimant protested at the time or shortly after the contract was made
In The Atlantic Baron (1979) it was because the claimant waited eight months after the ship was
delivered that the claim for duress was unsuccessful.

TUTORIAL QUESTION 2.1

Ron is a retired lorry driver who has just set up his own distribution service. His first customer
Cottonvalue PLC, a company with a nationwide network of retail outlets. Cottonvalue wants
to use Ron to deliver the stationary to all outlets in the North England. A contract is signed
whereby Ron will deliver a minimum 1,000 boxes of stationary for Cottonvalue over the
next twelve months, beginning on 1 January. No maximum figure for deliveries is specified.
The stationary will be packed in specially selected boxes of one side only, incurring a delivery
charge of 0.50p per box irrespective of the distance travelled within the designated area.
Both in parties expect Ron to be called on to deliver far more than the minimum specified in
the contract. Ron relies on the projected profits to take out a bank loan to update his existing
fleet of lorries. Unfortunately, midway through the contract, Cottonvalue expresses its wish to
renegotiate the delivery charge, threatening immediate withdrawal unless the delivery charge
is reduced to 0.40p. Ron agrees as the prospect of losing Cottonvalues custom unthinkable.
At the end of the year, Ron asks you for advise as to whether he can reclaim the lost 10p on
every delivery he made on the ground that the contractual modification was voidable for
improper pressure. (15 marks)

TUTORIAL QUESTION 2.2

The fact that one party is arguably (always) in a more superior bargaining position suggests
that the concept of economic duress is built on shaky foundations. Discuss. (15 marks)

FURTHER READING
Stone, Law of Contract, 2007 Ilex Tutorial College UK, Chapter 10
Smith, SA, Atiyahs Introduction to the Law of Contract, 6th edn, 2006, Oxford: Clarendon Press, Chapter
11

Lecturer: Fathimath Waheeda