durees and undue influence PDF

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Contracts II Group 2

CAT 2 Amanda Pownall – 21ZAD105522 Muthoni Mukono – 21ZAD105526 Amanda Mwatu – Abdi Korio – 21ZAD

DURESS AND UNDUE INFLUENCE The principle of freedom of contract has been a significant feature of the English contract law. When put broadly, the principle of freedom of contract imposes certain restrictions on contracting parties to ensure they act fairly in the negotiation of a contract, as a contract that would have been otherwise valid and binding may be vitiated on account of any unconscionable conduct exercised by one party which, in the end, impaired the freewill of the other contracting party. Typically, where it is established that the consent of one of the parties to a contract was obtained by some conduct in which the law considers unconscionable, such as the use of violence, threat, coercion or undue or forced pressure, such a contact may be set aside by the courts at the instance of the innocent party either on the ground of duress or undue influence. Under the English law of contract, duress involves the use of illegitimate threat or physical violence or threat of violence by one contracting party against the other party with the intention of influencing the victim to entering into a contract. Initially, duress only applies in circumstances where the innocent party is able to successfully prove that he or she was coerced into the contract due to some actual form of violence. However, because it is generally accepted that every contract or contractual offer is made under some form of pressure, in this case the rule is that the threat made by the offending party must be sufficient in nature to constitute duress. In this regard, the test which the courts have always applied is to determine whether the threat is considered to be illegal, although the courts have also recognized that some sort of lawful threats may amount to duress. A practical illustration of this can be found in the famous Australian case of Barton v Armstrong. Here, Barton sought to set aside the contract he entered with Armstrong in which he had agreed to purchase the shares owned by Armstrong in a company. The court ruled that duress to the person of Barton was established as evidence before the court showed that on several occasions Armstrong had issued threats to kill Barton if he did not sign the agreement. Today, the doctrine of duress has gradually developed to include two other forms, that being duress to good and economic duress. With reference to duress to goods, a classic example can be found in Maskell v Horner. It was a case where the defendant demanded tolls from the claimant under a threat that his goods would be seized if the tolls were not paid. The court held that the tolls paid by the claimant were recoverable as the tolls were paid to avoid the seizure of the claimant’s goods. The third form of duress at common law is known as the economic duress. This form of duress arises in circumstances where one party takes advantage of his or her superiors’ economic position to exert some form of pressure on the other contracting party in order to agree to the contract. Although this form of duress was first applied in Occidental Worldwide Corp v Skibs A/S Avanti, it became formally recognized by the Privy Council in Pao On v Lau Liu Long where Lord Scarman set out the two main elements of the doctrine. The first was that the pressure or threat must be illegitimate. Secondly, the pressure or threat must be significant in nature and must influence the victim to enter into the particular contract. It is worth noting that the English Courts have significantly expanded these requirements such that there are, at least, five elements the courts consider today in determining whether economic duress applies in any given case. The other three are whether the victim was independently advised, whether the innocent party protested at the time of the contract; and lastly whether after entering into the contract, the innocent party took steps to avoid it.

Moving on, the doctrine of undue influence is now well established under the English contract law despite the absence of it having a fixed definition, undue influence can perceived as the gaining of an unfair advantage by an unconscientious use of power by a stronger party against a weaker in the form of some unfair and improper conduct, some coercion from outside, some overreaching, some form of cheating, and generally, though not always, some personal advantage obtained by the stronger party. It is instructive to mention here that undue influence, being an equitable doctrine, was developed to complement the rather narrow doctrine of duress, notably, to provide wider protection to contracting parties whose consent or will may have been impaired by some sort of subtle influences or pressure not amounting to duress at common law. Perhaps, in order to clarify the scope of the legal concept of undue influence, the English courts developed a distinction between two classes of the doctrine, known as actual and presumed undue influence. These two forms of undue influence and the sub-divisions that exist within presumed undue influence have been discussed in detail elsewhere. For present purposes, it suffices to say that, in the case of actual undue influence, the victim does not need to prove the existence of any special relationship between he or she and the other contracting party in order to succeed. From the established case-law, the only evidential burden on the victim is to establish that he or she did not enter into the contract voluntarily, or that his or her freewill was overborne by some of undue pressure exerted on him or her by the other party. Moreover, in relation to undue influences it suffices also to say that the influence arises from the relationship between the two persons where one has acquired over another a measure of influence, of which the influenced person then takes advantage. However, the modern approach is that in order for the plea of undue influence to apply the following three elements need to be established. First off, the influenced party must prove that he placed trust and confidence on the influencing party by reason of the relationship between them. Secondly, the influenced party must prove that the transaction is one that calls for explanation and lastly would be where the influenced is able to successfully establish the two elements above, then the blame shifts to the influencing party to provide rebuttal evidence to show that the influenced party was free from his or her influence, and one way to achieve this is for the influencing party to prove that the influenced party received independent advice. Lastly, the jurisprudential basis for the remedies provided by the law of duress and undue influence is that a contract can only be legally binding and enforceable when the contracting parties freely agreed upon the terms of the contract. Where, therefore, the free consent of one of the contracting parties is impaired by any unconscionable conduct amounting duress and undue influence as discussed above, the resulting contract, being an unfair contract, is voidable and can be set aside by the court at the request of the party not at fault.

REFERENCES AND CITATIONS 1. Harrison, Jeffrey Lynch, Duress and Undue Influence in Contract Law as Cognitive Trespass (September 17, 2019). 98 Neb. L. Rev. 970 (2020), University of Florida Levin College of Law Research Paper No. 20-20, 2. https://saylordotorg.github.io/text_law-for-entrepreneurs/s13-01-duress-and-undueinfluence.html 3. https://radcliffechambers.com/wp-content/uploads/2019/11/Undue_Influence_and_DuressDO.pdf 4. Allcard v Skinner [1887] 36 Ch.D 145 (CA) 171 (Cotton LJ) and 181 (Lindley LJ) 5. 2 JG Ross-Martyn, ‘Unconscionable Bargains’ (1971) 121 N.L.J. 1159 6....