Undue Influence, Duress, Unconscionable Bargain Contract Law
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Course
Contract Law (LL104)
Institution
London School Of Economics (LSE)
Book
Contract Law
This word document consists of 7 pages of lecture/class notes, summary of the McKendrick textbook chapters as well as summary of important cases & judgements. These notes were written in preparation of my exam at the LSE to which I was awarded a first class
Duress, Undue Influence and Unconscionable Bargains
The doctrine of consideration was never well equipped enough to deal with duress and
this is largely because of the rule that consideration must be sufficient but need not be
adequate.
This need not be the sole reason for entry into the contract; it was sufficient that the
threats were a factor influencing the victim to enter into the contract
There are three types of duress
o Duress to the person
May consist of actual violence to the claimant, to members of his family or
threats of such violence.
The threat must be one that relates to physical wellbeing and not economic
wellbeing
o Duress to goods
A threat of damage to the victim’s goods rather than to his person
o Economic duress
Threat to inflict financial ruin on a party
Arises where one party uses his superior economic power in an ‘illegitimate’
way so as to coerce the other contracting party to agree to a particular set of
terms
There are two elements to the ‘wrong of duress’
o Illegitimacy of pressure
The courts are likely to take account a range of factors like
whether there has been an actual or threatened breach of contract;
whether the person exerting the pressure acted in good or bad faith;
whether the victim had any practical alternatives but to submit to the
pressure;
whether the victim protested at the time;
and whether the affirmed and sought to rely on the contract
Though it is normally be the case, what might be unlawful might not be
illegitimate but just because the threat is lawful does not necessarily make the
pressure legitimate
The Privy council said that if the threat is unlawful, it will generally amount to
duress. Eg, threat to commit a crime, a tort or a breach of contract.
However, in respect to a breach of contract, it will only be illegitimate if it
was breached in bad faith
The general rule is that a defendant who threatens to do what he is entitled
to do will not be held to have applied illegitimate pressure upon the
claimant. Thus, a refusal to waive existing contractual obligations should not
amount to duress but a threat to break a contract can constitute duress.
Bad faith should play an important role in deciding whether or not a
threatened breach of contract is illegitimate. It is bad faith if it intends to
exploit the claimant’s weakness rather than solving financial or other
problems of the defendant.
Eg. Williams v Roffey Bros. Duress was not in the issue because the main
contractors were the ones who called the meeting and who made the offer to
pay more. Also because the claimant was obviously incompetent: not only
, was he unable to supervise his workforce but he could not cost the job
properly. But how would we feel about the subcontractor who deliberately
priced the job very low so that he was awarded the contract and who then,
without making any explicit threats, made it clear to the main contractor that
he was unlikely to complete on time unless offered more money
Where the threat is lawful but is used to support a demand which is unlawful, it
may constitute duress
o Sufficient causal link between pressure applied by the defendant and the entry into
the contract
For duress to the person and goods, the threat need only be one of the causes of
the claimant acting as he did and it was even suggested in Barton v Armstrong
that the onus proof switched to the defendant to show that the illegitimate
pressure would not have influenced the claimant in any event.
But for economic duress, the application of the ‘but for’ test must be applied.
The claimant must prove that the pressure applied was a ‘significant cause’
inducing him to enter into the contract. The courts are also likely to consider
whether or not there was an alternative open to the claimant
o R v Attorney General [2003] UKPC 22, [2003] EMLR 24
Facts of the case:
The defendant was a New Zealander and former SAS member. In 1992, one of
his commanding officers wrote a book and included a chapter on the personal
experiences of SAS members involved in the war in Iraq, including the account
of the defendant. After this, the military brought in non-disclosure agreements
for military persons to sign to keep SAS operations confidential. In 1997 the
defendant was told to sign a non-disclosure agreement which prevented him
from publicly disclosing any accounts of his military experiences in the SAS. He
was told he was unable to seek legal advice before signing the agreement. If he
refused to sign then he would return to the RTU, which was a unit usually
imposed for punishment and offered lower pay rates. The A-G brought
proceedings against the defendant for breaching the confidentiality agreement.
The defendant claimed duress and undue influence.
Issue of the case:
R argued inter alia that (1) duress had been applied in that he had been told that
if he refused to sign the contract, he would be returned to the regiment from
which he had come; (2) the military hierarchy, his regimental pride and his
admiration for his commanding officer had created a relationship in which the
army or his commanding officer had been able to exercise undue influence over
him, and (3) the contract lacked consideration.
Judgement of the case:
The defendant’s appeal was dismissed. (1) R had not been subject to duress. The
threat of returning him to his old regiment had been lawful since the Crown had
been entitled to transfer a member of the SAS to another unit. Furthermore, the
MoD had acted legitimately in introducing confidentiality contracts. The MoD
had been entitled to regard anyone unwilling to accept the obligation of
confidentiality as unsuitable for the SAS, and the demand to sign the contract
supported by the threat of a return to the individual's old regiment could be
justified; (2) the nature of the contract was not such as to give rise to an
inference that it had been secured by an unfair exploitation of the relationship
relied on by R. Anyone wishing to serve or continue serving in the SAS could
reasonably have been required to sign the contract. That conclusion was
unaffected by the fact that R had been unable to obtain legal advice before
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