Coercion Case Study PDF

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UNL1622 – Contract Law II Tutorial 2- CoercionIn group of 3-5 students (Depending on the class’s capacity), discuss the cases listed below:a) CIMB Bank Bhd v Tan Hua Peng @ Tan Kwah Peng (2012) 8 MLJ 442The plaintiff had offered the offer letter dated on 23th February 1991 and the defendant hadaccep...

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UNL1622 – Contract Law II Tutorial 2- Coercion

In group of 3-5 students (Depending on the class’s capacity), discuss the cases listed below: a) CIMB Bank Bhd v Tan Hua Peng @ Tan Kwah Peng (2012) 8 MLJ 442 The plaintiff had offered the offer letter dated on 23th February 1991 and the defendant had accepted the term loan and an overdraft facilities secured by two charges over the defendant’s property. Due to the non-payment of the outstanding sums of the facilities by the defendant. Plaintiff issued a letter of demand dated 4 th June 2009 and demanded the defendant to settle the debt within 14 days from the date that the letter had issued. However, the defendant failed to settle the sums and hence the plaintiff terminated the facilities and filed the civil suit against the defendant. Issue: whether the plaintiff’s employees had coaxed the defendant to enter the contract. Held: HC stated that coaxing is not coercion and persuasion is not prohibited in the way banks may want to market their financial products.

b) Occidental Worldwide- Investment Corp v Skibs a/l Avanti & Ors The defendants chartered two vessels from the claimant. The defendants told the claimants that they would go bankrupt if they did not lower the cost of charter. This was completely untrue. The claimants feared that they would lose valuable customers and they were also owed substantial amounts of money by the defendant which they feared they would lose if the defendants did become insolvent. The claimants therefore agreed to renegotiate the contract to lower the cost of charter. They later sought to have the renegotiated contract set aside. Held: Whilst recognising that it would be possible to render a contract voidable for economic duress, it was not established in this case. To amount to economic duress there had to be a coercion of the will so as to vitiate consent. Commercial pressure was not sufficient. c) Pao On & Ors v Lau Yin Long & Anor [1980] AC 614; [1979] 3 All ER 65, PC When past consideration is good consideration. The plaintiffs (P) owned the shares of a private company which owned a building that the defendants (D) wanted to buy. The defendants were majority shareholders in a public company. P agreed to sell their shares in the private company to D so that D could acquire the

building. In return P would get shares in the public company. Fearing a drop in share value of the public company would result, P and D made another agreement that P would not sell their shares for a while. However, P realized that D might profit from this agreement and demanded that this second agreement be replaced with one in which P was indemnified for any fall in share value but might also benefit from any rise in share value. Fearing that not agreeing to this would delay the main contract, D agreed. The share value did drop, and P sought to rely on the indemnity contract. D refused to comply with this, and the case reached the Privy Council. Issues: The defendants claimed that the consideration for the indemnity agreement was past consideration and had only been agreed to under duress. Held: The court found for the plaintiffs. Applying the exception to the doctrine of past consideration in Lampleigh v Braithwaite (1615) Hob 105 Lord Scarman said that an act done before a promise was made was good consideration for that promise if it was done at the promisor’s request and the parties understood the act was to be paid for at a later date, and the payment or benefit would have been enforceable had it been promised in advance. d) Perlis Plantations Berhad v Mohammad Abdullah Ang[1988] 1 CQ 670

Held: HC, Contract Act x not provide for any form of coercion other than as defined by S.15. for duress to amount to a defence the D should be able to show that his consent to the agreement was not free in that such consent was caused by coercion as defined by S.15.in this case, D x not even attempt to do so.

e) Teck Guan Trading Sdn Bhd v Hydrotek Engineering (S) Sdn Bhd & Ors [1996] 4MLJ 331 Plaintiff agreed to sell round bars (construction materials) to the first defendant, the price of such round bars would be RM 1,180.00 The first defendant finally agreed to such price RM 1,244 because otherwise the plaintiff would refuse to supply them and that there was no other supplier that could do so. The plaintiff delivered the rounds bar and requested the first defendant to pay at price of RM 1,244.00. The defendants refused to pay the full amount. The defendants contended that the contract involved ‘coercion’ with reference to ‘economic blackmail’. The defendant argued that the plaintiff’s refusal to supply the bars at the price of RM 1,180.00 amounted to an unlawful detention of property in order to get the first defendant to agree to the price of RM 1,244.00. Held: the plaintiff’s refusal did not amount to unlawful detention of property as the plaintiff was exercising its legal right over its own property. Thus, there was no question of the plaintiff committing coercion on the first defendant....