Duress and Undue Influence PDF

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Essay Plan Section A part of exam...

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ESSAY PLAN—Duress and Undue Influence Duress May take the form of violence or illegitimate threats or pressure which coerce a party into a contract or varying a contract. Physical Threats Barton v Armstrong -

Armstrong threatened to kill Barton if he did not buy his shares in a company Barton agreed to do so but not only because of the threat It was held that Barton should not be bound by this agreement

Economic Duress The threat must be an improper or illegitimate threat (breach a contract or tort) Carillion Construction Ltd v Felix Ingredients of actionable duress are there must be pressure: a) Whose practical effect is that there is compulsion on, or lack of practical choice for the victim b) Which is illegitimate c) Which is a significant cause inducing the claimant to enter into the contract Dyson J in determining illegitimate pressure, the court will take into account a range. These include: -

Whether there has been an actual or a 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 Whether he affirmed and sought to rely on the contract

Must be distinguished from the rough and tumble of pressure of normal commercial bargaining Economic Duress to principally commercial context where there is no relationship other than that of the transaction in question. Atlas Express v Kafco -

C agreed to transport goods from D to woolworths and agreed £1.10 per carton In the first load D supplied 200 cartons, C expected 400-600 cartons C refused to make anymore deliveries unless the D agreed to pay £400 per load It would have been difficult for D to find another haulage company to deliver in time putting their relationship with Woolworths in danger Court decided this was Duress—as they did not have a choice but accept Kafco argued Atlas gave no consideration for the completion of an existing contractual duty

There is no consideration. Performance of existing contractual obligation DOES NOT = consideration Stilk v Myrick Which would make the new contract illegitimate. (Atlas)

Performance of existing duty owed to the other party will be consideration, provided the other party receives a practical or commercial benefit- Williams v Roffey Bros Remedies Recission The innocent party must notify the other party that it wants to rescind. If the other party cannot be found the innocent party should notify the police. Can apply to the court for an order of rescission—the innocent may have to do this if the other party refuses to return money or property Neither party need perform any future obligations The bars to rescission are: -

Affirmation Delay Where an innocent purchaser had already acquired an interest in the property Where it is impossible to substantially restore goods or property, eg property has been consumed or destroyed

North Ocean Shipping v Hyundai Construction Co (The Atlantic Baron)

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Shipbuilders demanded more money and threatened to stop work if they were not paid more money C had no choice but to pay as they had a contract hiring the boat out on completion 8 months later C asked for repayment of the extra money on the grounds of duress Affirmation and Delay Affirmation – the court found that when the payment was made, there was no longer any pressure on the C, as market conditions had changed and there was no likelihood that the shipbuilders would refuse delivery 8 months = Delay

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The Standard of Proof is very high Carillion

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Undue Influence The remedy of undue influence is rescission, and the same bars apply as duress. There is no remedy of damages same as duress Definition ish Consists not of threats or violence but of influence that goes beyond what is regarded as acceptable. It is difficult to pinpoint where influence becomes undue The approach adopted by the law is to identify relationships which are unequal and then to consider whether the transaction resulted from the dominant party abusing that relationship

Actual Undue Influence The claimant must prove that the defendant used undue influence. This can be hard to prove as it is usually one word against another. Daniel v Drew -

Mrs Drew an elderly lady who intensely disliked confrontation and was afraid of the prospect of being taken to court Her Nephew told her to sign the contract under the threat of taking court action

The threat may be totally legal, like court action. There needs must be a relationship of trust and confidence and the transaction must be one that calls for an explanation—Royal Bank of Scotland v Etridge Relationship of trust and Confidence Certain categories can be irrebuttably presumed (dr- patient, teacher-student, solicitor-client eg) Where it cannot be presumed, the innocent party will have to prove it. Tate v Williamson -

D became a financial advisor to an Oxford undergraduate who was being pressed by creditors D recommended the sale of the undergraduate’s estate which he offered to buy for £7,000, without disclosing that it was worth double that Offer was accepted and the conveyance executed Sale was later set aside as the D had wrongfully exploited, to his own advantage, the commanding position in which he knew he stood.

O’Sullivan v Management Agency -

Young unknown singer/ songwriter and his manager

CIBC Mortgages plc v Pitt -

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Wife influenced by Husband Lord Browne-Wilkinson thought it would go against practical common sense to say that lenders should be fixed with constructive notice of possible undue influence in every transaction. Distinguished between a wife as a guarantor for her husband’s debt is relevant in deciding whether the bank has constructive notice of the undue influence

Royal Bank of Scotland v Etridge (No 2) -

Wife argued that the bank had constructive notice of her husbands undue influence so should not get possession of the house Argument failed because the solicitor acting for Mrs Etridge had confirmed to the bank, that he had advised her about the content and effect of the charge Lord Nicholls said that if a wife acts as surety for her husbands debt then the bank is put on inquiry. – if the money is advanced for the husband and wife jointly (CIBC Mortgages plc v Pitt) the bank is not put on inquiry

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Lord Nicholls – banks should be put on inquiry in every case where the relationship between the surety and the debtor is non-commercial, unless the money is being advanced to a husband and wife jointly The bank can satisfy the requirement to take reasonable steps if it insists that the wife attend a private meeting with a representative of the bank at which she is: Told of the extent of her liability as surety Warned of the risk she is running Urged to take independent legal advice...