Economic Duress PDF

Preview

Summary

These lecture notes contain all material regarding economic duress....

Description

What is economic duress:  Illegitimate pressure or threats to a person’s business or financial interests in order to persuade them to contract.  Example: threat not to perform (and hence to breach) a contract unless paid more money.

When will a contract be voidable for economic duress: 

(i) Coercion of the will that vitiates consent o No realistic choice but to agree o When will there be no realistic choice other than to agree?  B & S Contracts & Design Ltd v Victor Green o Ps were to erect exhibition stands for the Ds who let these stands to 3rd parties (exhibitors). o A week before the exhibition Ps refused to complete their work until Ds paid sum of money. o Ds paid because otherwise serious losses would have resulted from 3rd party claims for breach of contract. o HELD: no choice but to pay o Suing Ps for breach of contract was not a realistic option in the circumstances.  (ii) The pressure or threat must be illegitimate o No duress in commercial dealings if lawful act (legitimate threats) – CTN Cash & Carry o Leaves open the possibility that lawful threats could be “illegitimate” (and duress) in the consumer context  The Universe Sentinel o Threats by a trade union to withhold tugs which were needed to assist ships to leave harbour unless ship-owner made a payment to the trade union. o Majority HL held: There was economic duress. o Threat was illegitimate because not acting in furtherance of a trade dispute.

o Therefore no statutory protection. o Minority considered that the trade union was acting in furtherance of trade dispute. Therefore the threat was lawful (but used for illegitimate purpose: blackmail)  (iii) The illegitimate pressure must be a significant cause of inducement o The illegitimate pressure must be a significant cause inducing the other party to make the promise/enter into the agreement. o This means the pressure must be ‘decisive or clinching’  Huyton v Peter Cremer o Consideration could be found in the parties’ compromise.  (iv) Need to protest at the time or shortly thereafter o Duress – renders the contract voidable so need to take action to set contract (promise) aside o This action to set aside needs to be taken without delay or may be taken to have affirmed.  The Atlantic Baron o Ds threatened to stop building a tanker for the Ps unless Ps agreed to pay an extra 10%. Ps paid to avoid losing a valuable charter. Ps attempted to recover this extra payment 8 months after the tanker was delivered to them. o HELD: they had affirmed and therefore could not avoid the promise despite the fact that the key ingredients of economic duress were established.

Summary of approach: alteration promise to pay more:  Was the promise obtained as a result of duress? o If yes, then it is voidable.

o If not, is there independent consideration to support it?  The promise to pay more will be supported by consideration if the promisee went beyond existing contractual duty (Atlantic Baron) OR there is a factual benefit (or practical benefit) to promisor in making the promise (Roffey).  No need to rely on promissory estoppel since alteration promise to pay more will be supported by consideration.

Summary of approach: alteration promise to accept less:  Is there consideration to support the promise? Any duress?  Traditionally, thought factual benefit will not suffice – Foakes v Beer, Selectmove; but MWB v Rock suggests there can be consideration via factual/practical benefit.  There are also other less controversial ways of supplying consideration to support a promise to accept less.  If there is no consideration (and only if there is no consideration), can promissory estoppel be relied upon to prevent promisor from going back on its promise?  Was the promise freely given? [Duress issue]  Has the promissory estoppel come to an end?...