Advanced Contract Law Lecture 7 11/11/19
Vitiating Factors: Part 3
Vitiating Factors
Claimant seeking to avoid the contract due to threats/pressure/influence- wasn’t freely
entered into- key point in definition of contract that distinguishes from tort.
Anything that threatens the freedom of the contract is in the courts interest
Simplistically, agreement not freely entered in to
• Duress
• Undue influence
• Unconscionability
Duress
Common Law- courts do not let people get out of contracts easily. Power behind threat,
Improper pressure which sufficiently powerful or influential to vitiate consent
Rookes v Bernard [1964] AC 1129
o Employment relations when unions exist in all contexts e.g. sales
o Claimant was a draftsman, a member of the engineering union, employers entered into an
agreement of no strikes or lock outs or the company would go in arbitration. He refused to
sign up so his colleagues would not work alongside him. Claimant suspended, dismissed with
one weeks’ pay of lieu of notice.
o Pressures are not just physical pressures and these can have a key impact on peoples’
actions- decisions not freely entered into
Lord Devlin:
‘All that matters to the plaintiff is that, metaphorically speaking, a club has been used. It does not
matter to the plaintiff what the club was made of – whether it is a physical club or an economic club
or otherwise an illegal club’
D & C Builders v Rees [1966] 2 QB 617
o Owned a shop that needed some work on it by the Builders. Finished job and sent an
involve. they didn’t get paid so sent a second invoice. The builders needed the money due to
financial difficulties and Rees knew this.
o Rees offers a lump sum, lesser sum, in full payment and said if they did not accept this, they
would get nothing. Sent via cheque.
o Builders accepted cheque in case they got nothing, and they could not afford court action.
Went to courts for difference. Cheque was not different to Cash.
o Pinnel and Foakes v Beer cases
o Argued a cheque was different but the builders were acting under duress and threat due to
their financial pressure
Occidental Worldwide Investment Corporation v Skibs A/S Avanti – The Siboen and the Sibotre
[1976] 1 Lloyd’s Rep 293
Recog. possible to have econ duress as an issue, but not established here as not seen to vitiate
consent
o D had chartered two vessels at a certain price and the D then claimed to approach claimants
to reduce price or they will go bust which was not true.
, Advanced Contract Law Lecture 7 11/11/19
o Claimant concerned because they already owe them money which is then difficult to get
back and would like to continue in business worthwhile.
o Renegotiation reduce the cost of hiring boats. Later claimants sought to have variation set
aside- agreed to it under the pressure of losing the debt they already accrued and future
business.
o It is possible to have economic duress- different sorts of threats- had to coercion of the will
to vitiate the consent- commercial pressure is not enough- always pressure in market-place
with good/bad deals and good deals that go bad.
= Commercial pressure will not be sufficient to be conomic duress
Williams v Roffey [1991] 1 QB 1
o CA – economic duress more significant in the more creative environment re consideration
and the alternatives re variation- more likely the pressure will be exerted at variation then
into negotiation in the original contract
o Failure to provide consideration may have historically been the simplest way of dealing with
these cases – ie by concluding that there was no contract on that basis, but increased
activity in this area (suffic/adeq, Pract. Benefit, Promissory Estoppel)
o Consideration is a necessity- courts have jumped to economic duress without finding
consideration to support variation??
Pao On v Lau Yiu Long [1980] AC 614
Lord Scarman- coercion of will is no true consent-various steps to help us understand what the
parties need to prove. Alternative. Independent advice. Steps to avoid.
To be voidable for Economic Duress….
1. Threat or pressure must be illegitimate- e.g. weight of threat
AND
2. Pressure/threat must equal – not in theory by in practice
‘a coercion of the will that vitiates consent’
Dimskal Shipping Co. SA v International Transport Workers Federation (The Evia Luck No. 2) [1992]
2AC 152 165 as per Lord Goff
‘Economic pressure may be sufficient to amount to duress… provided at least that the economic
pressure may be characterised as illegitimate and has constituted a significant cause inducing the
plaintiff to enter into the relevant contract’
o Key point whether duress was the reason
o Reality of the matter was that English law and Swedish law governed the contact. Vessel
with a crew that were Greek and philppino. Closed shop. Those running the vessel knew that
the approach of the union- any employees on the vessel not a member of the union then the
vessel will be blacklisted.
o Merchant sailors will be paid according to the union pay scale- part of the agreement it
stated that the association between sailors and union was voluntary.
o Requires placing the expectations on the claimants that they will not use staff unless
members of the union.
o Pressure existed was that they did not follow through the ship would be blacklisted which
would cause major problems.
o They signed and there was action in economic duress. Party had no option something they
were forced to do
Vitiating Factors: Part 3
Vitiating Factors
Claimant seeking to avoid the contract due to threats/pressure/influence- wasn’t freely
entered into- key point in definition of contract that distinguishes from tort.
Anything that threatens the freedom of the contract is in the courts interest
Simplistically, agreement not freely entered in to
• Duress
• Undue influence
• Unconscionability
Duress
Common Law- courts do not let people get out of contracts easily. Power behind threat,
Improper pressure which sufficiently powerful or influential to vitiate consent
Rookes v Bernard [1964] AC 1129
o Employment relations when unions exist in all contexts e.g. sales
o Claimant was a draftsman, a member of the engineering union, employers entered into an
agreement of no strikes or lock outs or the company would go in arbitration. He refused to
sign up so his colleagues would not work alongside him. Claimant suspended, dismissed with
one weeks’ pay of lieu of notice.
o Pressures are not just physical pressures and these can have a key impact on peoples’
actions- decisions not freely entered into
Lord Devlin:
‘All that matters to the plaintiff is that, metaphorically speaking, a club has been used. It does not
matter to the plaintiff what the club was made of – whether it is a physical club or an economic club
or otherwise an illegal club’
D & C Builders v Rees [1966] 2 QB 617
o Owned a shop that needed some work on it by the Builders. Finished job and sent an
involve. they didn’t get paid so sent a second invoice. The builders needed the money due to
financial difficulties and Rees knew this.
o Rees offers a lump sum, lesser sum, in full payment and said if they did not accept this, they
would get nothing. Sent via cheque.
o Builders accepted cheque in case they got nothing, and they could not afford court action.
Went to courts for difference. Cheque was not different to Cash.
o Pinnel and Foakes v Beer cases
o Argued a cheque was different but the builders were acting under duress and threat due to
their financial pressure
Occidental Worldwide Investment Corporation v Skibs A/S Avanti – The Siboen and the Sibotre
[1976] 1 Lloyd’s Rep 293
Recog. possible to have econ duress as an issue, but not established here as not seen to vitiate
consent
o D had chartered two vessels at a certain price and the D then claimed to approach claimants
to reduce price or they will go bust which was not true.
, Advanced Contract Law Lecture 7 11/11/19
o Claimant concerned because they already owe them money which is then difficult to get
back and would like to continue in business worthwhile.
o Renegotiation reduce the cost of hiring boats. Later claimants sought to have variation set
aside- agreed to it under the pressure of losing the debt they already accrued and future
business.
o It is possible to have economic duress- different sorts of threats- had to coercion of the will
to vitiate the consent- commercial pressure is not enough- always pressure in market-place
with good/bad deals and good deals that go bad.
= Commercial pressure will not be sufficient to be conomic duress
Williams v Roffey [1991] 1 QB 1
o CA – economic duress more significant in the more creative environment re consideration
and the alternatives re variation- more likely the pressure will be exerted at variation then
into negotiation in the original contract
o Failure to provide consideration may have historically been the simplest way of dealing with
these cases – ie by concluding that there was no contract on that basis, but increased
activity in this area (suffic/adeq, Pract. Benefit, Promissory Estoppel)
o Consideration is a necessity- courts have jumped to economic duress without finding
consideration to support variation??
Pao On v Lau Yiu Long [1980] AC 614
Lord Scarman- coercion of will is no true consent-various steps to help us understand what the
parties need to prove. Alternative. Independent advice. Steps to avoid.
To be voidable for Economic Duress….
1. Threat or pressure must be illegitimate- e.g. weight of threat
AND
2. Pressure/threat must equal – not in theory by in practice
‘a coercion of the will that vitiates consent’
Dimskal Shipping Co. SA v International Transport Workers Federation (The Evia Luck No. 2) [1992]
2AC 152 165 as per Lord Goff
‘Economic pressure may be sufficient to amount to duress… provided at least that the economic
pressure may be characterised as illegitimate and has constituted a significant cause inducing the
plaintiff to enter into the relevant contract’
o Key point whether duress was the reason
o Reality of the matter was that English law and Swedish law governed the contact. Vessel
with a crew that were Greek and philppino. Closed shop. Those running the vessel knew that
the approach of the union- any employees on the vessel not a member of the union then the
vessel will be blacklisted.
o Merchant sailors will be paid according to the union pay scale- part of the agreement it
stated that the association between sailors and union was voluntary.
o Requires placing the expectations on the claimants that they will not use staff unless
members of the union.
o Pressure existed was that they did not follow through the ship would be blacklisted which
would cause major problems.
o They signed and there was action in economic duress. Party had no option something they
were forced to do
