In law, duress is a concept that can have different contextual meanings. Duress in contract law refers to circumstances in which a person or party is forced into a contractual agreement through the use of illegitimate pressure. This may be by way of a threat of physical violence, a threat to property or through economic pressure.
Duress in contract law is often considered alongside the doctrine of undue influence. Undue influence refers to circumstances in which a party has entered into a contract as a result of undue pressure but this pressure is not sufficient to establish duress.
Duress and undue influence are both grounds on which a contract may be cancelled because the consent of one of the parties was obtained as a result of pressure that the law regards as unacceptable or illegitimate. As such, duress and undue influence are used to redress circumstances where a contractual relationship has been created and exploited by one party to gain an unfair advantage over the other.
Below we consider in more detail the doctrine of duress, the different types of duress and related case law, together with the effects of duress where proven.
Duress in contract law: various types
Duress is a common law doctrine. It has evolved to extend to any form of unlawful threat or coercion that is used to induce a party to enter into a contract. Historically, the doctrine of duress was confined within very narrow limits, ie; to actual or threatened violence to the person. However, through the development of case law, there are now several different types of duress, including but not limited to threats against the person.
The main categories of duress include:
a. Duress to the person
b. Duress to goods
c. Economic duress
Duress to the person
Duress to the person commonly refers to violence, either actual or threatened, against the person or party who has been induced to enter into a contractual agreement by reason thereof.
In the case of Antonio v Antonio (2008), where a wife who owned a lucrative business entered into a shareholders’ agreement with her husband following a campaign of threats of violence culminating in an assault, the court found that the agreement had been induced by duress. The contract was set aside.
Further, where there is duress to the person, this need not be the main reason, it must merely be one of the reasons for entering into an agreement. There is no obligation to show that the party would not have entered the agreement but for any violence or threat of violence, it simply being sufficient that the illegitimate means of persuasion was ‘a’ cause.
In the Privy Council case of Barton v Armstrong (1976) threats to kill made by the chairman of a company to a managing director to coerce him into entering into an agreement to buy his interest in the company, rendered the contract voidable. In this case the contract was signed predominantly out of commercial necessity. The fact that duress was not the only, or even the main, reason for entering into the contractual agreement did not matter.
Duress to goods
A contractual agreement entered into in consideration of the release of goods from unlawful destruction or detention, or to avoid the threat of the same, may in limited circumstances amount to duress.
Whilst this area of law is not clearly defined, the higher courts have, at the very least, recognised that this type of illegitimate pressure may leave the person or party with no alternative but to submit to the threat.
As the law currently stands, a party who has been coerced into paying money for the return or protection of their goods would be entitled to recover those sums under the law of restitution. In Maskell v Horner (1915) the Claimant was able to recover sums paid to the Defendant following threats to seize the Claimant’s stock if he did not pay a toll fee for his market stall.
However, in the case of Occidental Worldwide Investment Corporation v Skibs (1976) – commonly referred to as The Siboen and The Sibotre – the court recognised that where a person is compelled to sign a contract, for example, under the imminent threat of having their house burnt down, that the law should not uphold the agreement. It is likely, therefore, that the courts may intervene in circumstances where a threat to property is serious.
Economic duress
Economic duress is the threat to damage a person or party’s financial interests, most commonly an actual or threatened breach of contract unless the other party agrees to a variation in contractual terms.
The doctrine of economic duress is a relatively modern concept in English common law, first recognised in the case of The Sibeon and The Sibotre. Here there was a threat by charterers of two ships to break their charterparties by not paying the agreed charter rate unless that rate was lowered. Whilst the Court found for the owners on the basis of misrepresentation, it accepted the principle that economic duress could apply.
More recently, in DSND Subsea Ltd v Petroleum Geo Services ASA (2000), the necessary ingredients for economic duress were defined as follows:
“The ingredients of actionable duress are that there must be pressure, (a) whose practical effect is that there is compulsion on, or a 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.”
The court distinguished illegitimate pressure from the “rough and tumble of the pressures of normal commercial bargaining”. Rather, in determining whether there has been illegitimate pressure, account will be taken of the following factors:
a. whether there has been an actual threatened breach of contract
b. whether the person allegedly exerting the pressure has acted in good or bad faith
c. whether the victim had any realistic practical alternative but to submit to the pressure
d. whether the victim protested at the time, and
e. whether he affirmed and sought to rely on the contract.
It should also be noted that the relaxed view on causation in the special context of duress to the person does not prevail in the less serious context of economic duress. Here the duress must, at the very least, be a significant cause of why a party entered into a contract.
Duress in contract law: the effects
The effect of an allegation of duress, where proven, is to render a contract voidable. As such, this allows a party to ask the court to set the contract aside and seek restitution of any monies paid under it.
A contract that is voidable simply means that the contract is still legally binding until rescinded by the party, although arguments may still arise as to whether the contract in question has, as a matter of fact, been affirmed. Any entitlement to set aside a contract will be lost if the party either expressly, or by its conduct, affirms the contract.
The challenges of alleging duress
Duress in contract law is by no means clear. It operates entirely on common law principles and in many areas is likely to undergo further development, not least in relation to the doctrine of economic duress. In the main, however, the courts are reluctant to interfere with the freedom of contract and will often summarily dismiss these types of allegations or, at the very least, adopt a restrictive approach.
In appropriate cases the duress in contract law can still be an effective way for a party to avoid contractual obligations, particularly if those obligations were entered into under protest. However, litigants should be extremely cautious about relying on duress – either as a defence where the other party seeks to enforce a contract, or to otherwise set aside a contract – and are often better served by looking to other contractual, tortious or equitable remedies.
Legal advice should always be sought on specific matters.
Author
Gill Laing is a qualified Legal Researcher & Analyst with niche specialisms in Law, Tax, Human Resources, Immigration & Employment Law.
Gill is a Multiple Business Owner and the Managing Director of Prof Services - a Marketing Agency for the Professional Services Sector.
