⇒ Duress and undue influence are about pressure , one party on another, in the contracting process and negotiation which "disturbs the balance of the negotiations"
⇒ Pressure is not necessarily a bad thing in negotiation – to an extent, it is an important part of negotiation
⇒ Some pressure is acceptable and some is not – if you have unacceptable pressure by one party on another party then there is a defence
⇒ Origin of duress and undue influence: duress is the common law response to pressure in the contractual process and undue influence is the equity court response to pressure in the contractual process
⇒ Previously the common law court took quite a narrow view about what was unacceptable, but the court of equity took a more expansive approach on the meaning of unacceptable pressure
⇒ Today all courts are courts of common law and equity so the sensible thing would have been to merge the 2 doctrines, but for historical reasons they did not do this and they are dealt with separately
⇒ Duress is a defence in contract and IF duress is present in the contractual process the contract is voidable , allowing the innocent party to set aside the contract
⇒ What is duress? Traditionally there were 2 main requirements:
⇒ What is the meaning of illegitimate / unacceptable / improper pressure?
⇒ Economic duress is the unlawful use of economic pressure and/or threats intended to overcome the free will of a person, in order to force him or her to an involuntary agreement or to do something that he or she would not otherwise do
⇒ There was an early attempt to create economic duress in Stilk v Myrick in 1809, but this did not happen
⇒ In Skearte v Beale (1840) it was held that threats to goods can be economic duress, but the court was still unwilling to create a doctrine of economic duress
⇒ Initially there were two requirements needed for a finding of economic duress:
⇒ Lord Scarman in Pao On v Lau Yiu Long said that “duress, whatever form it takes, is a coercion of the will as to vitiate consent”
⇒ Coercion of the will began to be criticised by academics who stated that it didn’t really represent what was happening in cases because it sounds like they have NO will, when actually they do have a choice but the innocent party chooses the lesser of the two evils
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⇒ DSND v. Petroleum Geo Services ASA [2000] BLR 530 per Dyson J. defined it as: " Pressure , (a) whose practical effect is that there is compulsion on, or 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 The Universal Sentinel [1983] Lord Scarman discussed what was illegitimate in economic duress:
⇒ Economic pressure does not have to be illegal (criminal offence) nor does it have to be unlawful (not a crime) (e.g. threatening to breach a contract unless you get more money – B&S Contract Case)
⇒ A threat to not perform the contract might NOT be illegitimate e.g. Williams v Roffey
⇒ An example of a lawful threat amounting to economic duress can be seen in CTN Cash & Carry Ltd v Gallagher Ltd [1994] . Also see is Progress Bulk Carriers v Tube City [2012]
⇒ Dyson argued a 3rd requirement (as mentioned above) that pressure needs to be the "significant cause" of signing the contract
⇒ It is also argued there could be a fourth requirement: you need to show there was a protest when entering the contract or shortly after (although, note, the existence of this requirement is debateable)
⇒ Arguably, economic duress is still developing e.g. see the case of "R" v HM Attorney General [2003] , where it was found there was no economic duress due to the importance of maintaining national security
⇒ Undue influence is a defence to potential contractual liability
⇒ If you can show there has been undue influence the contract is voidable (same as Duress)
⇒ The scope of the doctrine of undue influence is unclear/uncertain
⇒ Undue influence involves some form of influence
⇒ Influence is not necessarily improper/unacceptable
⇒ There is a big debate as to what is meant by ‘undue’ in undue influence
⇒ Niersmans v. Pesticcio [2004] EWCA Civ 372 at [2] per Mummery L.J: “Fundamental misconceptions persist” about this “200 years old” doctrine. There is “a need for a wider understanding, both in and outside the legal profession” about what is meant by undue influence
⇒ On a general level there are 3 meanings of undue :
⇒ There is a huge debate about which of the three meanings is correct
⇒ Professor Birks and Professor Chin sparked the debate in their seminal paper ‘On the Nature of Undue Influence’:
⇒ However, the view of Birks and Chin on the meaning of undue was not supported in all Court of Appeal cases:
⇒ Royal Bank of Scotland v Etridge (no.2) [2001] UKHL 44 is the leading case on undue influence from the House of Lords
⇒ “It is impossible to define, and difficult even to describe, at what point influence becomes, in the eye of the law, undue.” (Bank of Scotland v. Bennett [1997] 3 F.C.R. 193 at 216, James Munby QC)
⇒ Excessive influence depends on context (Bank of Scotland v. Bennett [1997] 3 FCR 193) and public policy (Mutual Finance v. John Wetton [1937] 2 KB 389)
⇒ Lord Nicholls in Royal Bank of Scotland v Etridge (no.2) [2001] gave a good starting point as to its meaning. He identified two categories of cases with excessive influence:
⇒ The courts of equity, through doctrine of undue influence, were prepared to regulate pressure in relational contracts
⇒ Issue for the court was deciding what pressure was acceptable and what was not – the judges have disagreed on this:
⇒ In relational undue influence the court has often distinguished between actual undue influence and presumed undue influence (Barclays Bank plc v. O’Brien [1994])
⇒ These are cases where you can prove undue influence
⇒ The difficulty of actual undue influence is that a lot of this type of pressure takes place in private so it is often difficult to prove it
⇒ Not many cases have proven ACTUAL undue influence
⇒ Its meaning is seen in CIBC v. Pitt [1994]
⇒ The courts of equity recognised the difficulty of actually proving undue influence quite early on, so they developed the concept of presumed undue influence.
⇒ There are situations where the court would presume there had been undue influence
⇒ In presumed undue influence cases, the other party has to prove that there WASN’T undue influence (so there is a reversal of the burden of proof)
⇒ This concept of presumed undue influence was innovative for the protection of people subject to influence
⇒ Traditionally there are two requirements for when the court will presume undue influence:
⇒ 1) How do we know the relationship is of trust and confidence?
⇒ 2a Relationships:
⇒ 2b Relationships:
⇒ 2) How do we know what is a manifest disadvantage?
⇒ Rebutting the presumption
⇒ Causation
⇒ Unconscionable bargains very RARELY used in England and Wales. In Australia and New Zealand it is frequently used
⇒ Three requirements:
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