Solicitors Qualifying Examination

Duress | Contract Law – Study For SQE1 Exam – solicitorsqualifyingexamination.net

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Duress – Contract Law
• Two types of duress:
1. Duress to the person – threat or act of violence
2. Economic duress – duress to goods; threats to economic or
business interests
Duress to the person
• Actual or threatened violence (Barton v Armstrong)
• Threats / violence must be one of the reasons for contracting (i.e.
contribute to decision to contract)
• Burden of proof on party exerting threat/force to show did not contribute
Duress to goods & economic duress
Duress to goods
• Contract voidable where threat to seize or damage property (Occidental
Worldwide Investments v Skibs (The Sibeon & The Sibotre))
Economic duress
• DSND Subsea Ltd v Petroleum Geo Services ASA – Dyson J
• Pressure:
o (a) whose practical effect is compulsion or a lack of practical
choice for the victim,
o (b) which is illegitimate, and
o (c) which is a significant cause inducing the claimant to enter into
the contract
© Liam Porritt 2020 2
Lack of practical choice
Carillion Construction Ltd v Felix
• Carillion subcontracted supply of cladding to Felix
• Felix was delayed in completing
• Felix knew Carillion could not find another supplier in time + that trades
were dependent on completing this work on time
• Carillion agreed to pay more in return for Felix delivering by original date
• Carillion sent letter expressing dissatisfaction to Felix – this was
material in claim succeeding
• They had no practical choice but to pay Felix more if they were to avoid
late fees
o Delay of injunction = injunction not possible
B & S Contracts and Design Ltd v Victor Green Publications Ltd
• Contract to erect stands, with strike by workmen – plaintiff (B & S) asked
for £4,500 extra to complete work
• Cancellation of event would have been economically damaging for D
• Given no choice but to pay, this was paid under duress, so D did not have
to pay £4,500 it had deducted from final payment
Atlas Express v Kafco Ltd
• D basket producer supplying Woolworths had agreed price with Atlas
Express for delivery of them
• Atlas demanded minimum contract price of £440 after had agreed price of
£1.10 per carton
• D was reliant on Woolworths + could not find another carrier, so had to
agree
• = economic duress where a party has no alternative but to accept revised
terms detrimental to its interest
Kolmar Group AG v Traxpo Enterprises PVT Ltd
• Agreement to sell methanol
• Knew P needed it for important client
• “Take it or leave it” proposal for lesser quantity for more money
• C had no alternative but to accept – demands backed by coercive and
unlawful threats they would not perform their obligations
© Liam Porritt 2020 3
Illegitimate Pressure
DSND Subsea Ltd v Petroleum Geo Services ASA – Dyson J
1. Actual or threatened breach of contract?
2. Exertion of pressure in good or bad faith?
3. Victim protested at the time?
4. Victim affirmed and sought to rely on contract? – could be delay in claim
implies affirmation of contract
These factors accumulate – it is not the case that if one is satisfied = illegitimate
pressure.
E.g. North Ocean Shipping Co Ltd v Hyundai Construction Co Ltd (The Atlantic
Baron) – asked for 10% to build ships without legitimate reason (so in bad faith),
but failure to protest + delay in making the claim (8 months) ≠ duress.
#1 Threatened breach of contract
• BoC = In general, unlawful threat = duress (see above cases)
#2 Good or bad faith to threat of breach of contract
• Is there a legitimate basis for threat of breach of contract?
Bad Faith
• See Atlantic Baron above = bad faith, as no legitimate reason to breach
contract
• Universe Tankships Inc of Monrovia v ITWF – P paid $6,480 to worker
welfare fund after ship ‘blacked’ by trade union
o No practical alternative
o Workers threatened breach of contract was in bad faith as had no
legal basis for payment into union welfare fund
Not bad faith
• CTN Cash and Carry Ltd v Gallaher Ltd – bulk cigarettes bought from
Gallaher, with a batch (£17,000 worth) stolen from a warehouse
o Unclear who bore this risk
o Gallaher said would end CTN’s credit with them (permitted by the
contract) if did not pay £17,000 – they paid
o Gallaher, it was later decided, bore risk for lost consignment
o Threat to remove credit was not made in bad faith – it was
coercive on the basis of money Gallaher believed they were
owed +, importantly, threat was lawful (no BoC threatened)
© Liam Porritt 2020 4
• DSND Subsea Ltd v Petroleum Geo Services ASA – DSND threatened breach
of contract (suspension of work) until Petroleum Geo’s provision of
insurance covering deep sea divers was clarified = bona fide action in
difficult situation to protect employees
• R v Attorney General of England and Wales – SAS soldier told he would be
returned to unit (RTU) if he did not sign a confidentiality contract
o Signed, and later claimed that this was duress
o HELD: threat of RTU was lawful and justifiable as anyone who was
unwilling to accept obligation of confidentiality was unsuitable for
the SAS
• Alec Lobb v Total Oil – ‘hard bargain’
o Garage under considerable financial strain of its own making
o May (although may not) have had no other practical choice but to
accept Total’s lease and leaseback arrangement
o However, pressure was exerted by creditors and not by Total
o They drove a hard bargain as the prospect did not appear
particularly attractive = not bad faith
#3 Victim protests
• Atlantic Baron (see above) – no protest = no duress
• Carillion Construction Ltd v Felix – Carillion wrote letter protesting against
demand = material in claim’s success
#4 Victim affirmation
• Atlantic Baron (see above) – 8 month delay in claim, as also concerned
about delivery of another ship, The Atlantic Baroness
• However, this concern was deemed groundless + by waiting so long, they
implicitly affirmed the payment increase
• B & S v Victor Green – £4,500 deducted from subsequent payment =
victim avoided affirmation by avoiding new agreement immediately
after duress lifted
Significant cause
• Contract would not have been made on these terms but for the pressure;
the pressure must be ‘decisive’ or ‘clinching’ (Huyton SA v Peter Cremer
GmbH & Co)
Result of finding duress
• Contract w/duress is voidable (can be set aside) but not void (Pao On v
Lau Yiu Long)
o Remedy: rescission – if contract affirmed, may act as bar to
rescission, as an equitable remedy

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