DURESS
• The essence of an agreement and therefore a legally binding
contract is that the parties have freely consented to be bound by
the terms of the agreement.
If a party is therefore forced into a contract by threats, this stifles
the principle of consent.
The common law doctrine of duress
Duress relates to contracts entered into by violence or a threat of
violence
The act threatened must be illegal and one which may amount to a
tort or a crime
Duress renders a contract voidable
Barton v Armstrong (1976):
• The claimant, a director of a public company, authorized a payment
of $140,000 to the defendant who was a former chairman of the
company. He also promised to purchase the defendant’s shares in
the company for $180,000. The claimant later claimed that this was
done because the defendant was threatening him and he genuinely
believed that he had actually hired somebody to kill him.
Held: the claimant had established duress and the transactions
could be avoided.
• It used to be though that to amount to duress, the threat had to be
directed at a person and not towards goods (Skeate v Beale) but
this position was re – examined in Maskell v Horner, however,
where money paid for the return of unlawfully detained goods could
be returned.
• In recent years, the notion of economic duress has arisen and its
seeds were planted as far back as the 1960s by Lord Denning in his
decision of D & C Builders v Rees (1966)
Economic duress
D &C Builders v Rees (1966)
, • The claimants had done some construction work for the claimant,
Mrs. Rees. Once their work was completed, she told them she was
not happy with it and would therefore not be paying them the full
price they had agreed. She knew that they had no choice but to
accept this as their firm was facing severe financial difficulties. She
made them sign that the sum she gave them would be in full and
final settlement.
• They sued her successfully as their promise was not freely given but
was the result of (economic) duress. Mrs. Rees claim of promissory
estoppel failed.
• Economic duress exists whenever one of the contracting parties is
trying to force the other one to accept unreasonable demands or
presents them with a “take or leave it” attitude.
• In most cases, the party under pressure may try to find an
alternative source of supply (if it’s a contract for the supply of
goods) or may sue the other contracting party for breach of contract
and get damages.
• There may be instances, however, where the party put under
pressure finds themselves in a weaker bargaining position and has
no practical option but to accept the unreasonable demands placed
upon him.
• Where illegitimate pressure has been put upon the weaker party to
accept such terms, then a claim of economic duress will arise.
• Economic duress in contracts occurs, for example, where a party to
a contract (A) threatens to cancel the contract unless the other
party (B) agrees to their demands and B has no other practical
option but to agree to the new terms of the contract.
• However, the pressure brought to bear by A has to be more than the
usual rough and tumble of commercial negotiating and bargaining.
Occidental Worldwide Investment Corporation v Skibs (The
Sibeon and the Sibotre) (1976) Kerr J, accepted that duress was
not simply based on a threat of physical violence alone but could,
for example, involve being forced to enter into a contract under the
threat of our property being destroyed if we did not comply.
• The essence of an agreement and therefore a legally binding
contract is that the parties have freely consented to be bound by
the terms of the agreement.
If a party is therefore forced into a contract by threats, this stifles
the principle of consent.
The common law doctrine of duress
Duress relates to contracts entered into by violence or a threat of
violence
The act threatened must be illegal and one which may amount to a
tort or a crime
Duress renders a contract voidable
Barton v Armstrong (1976):
• The claimant, a director of a public company, authorized a payment
of $140,000 to the defendant who was a former chairman of the
company. He also promised to purchase the defendant’s shares in
the company for $180,000. The claimant later claimed that this was
done because the defendant was threatening him and he genuinely
believed that he had actually hired somebody to kill him.
Held: the claimant had established duress and the transactions
could be avoided.
• It used to be though that to amount to duress, the threat had to be
directed at a person and not towards goods (Skeate v Beale) but
this position was re – examined in Maskell v Horner, however,
where money paid for the return of unlawfully detained goods could
be returned.
• In recent years, the notion of economic duress has arisen and its
seeds were planted as far back as the 1960s by Lord Denning in his
decision of D & C Builders v Rees (1966)
Economic duress
D &C Builders v Rees (1966)
, • The claimants had done some construction work for the claimant,
Mrs. Rees. Once their work was completed, she told them she was
not happy with it and would therefore not be paying them the full
price they had agreed. She knew that they had no choice but to
accept this as their firm was facing severe financial difficulties. She
made them sign that the sum she gave them would be in full and
final settlement.
• They sued her successfully as their promise was not freely given but
was the result of (economic) duress. Mrs. Rees claim of promissory
estoppel failed.
• Economic duress exists whenever one of the contracting parties is
trying to force the other one to accept unreasonable demands or
presents them with a “take or leave it” attitude.
• In most cases, the party under pressure may try to find an
alternative source of supply (if it’s a contract for the supply of
goods) or may sue the other contracting party for breach of contract
and get damages.
• There may be instances, however, where the party put under
pressure finds themselves in a weaker bargaining position and has
no practical option but to accept the unreasonable demands placed
upon him.
• Where illegitimate pressure has been put upon the weaker party to
accept such terms, then a claim of economic duress will arise.
• Economic duress in contracts occurs, for example, where a party to
a contract (A) threatens to cancel the contract unless the other
party (B) agrees to their demands and B has no other practical
option but to agree to the new terms of the contract.
• However, the pressure brought to bear by A has to be more than the
usual rough and tumble of commercial negotiating and bargaining.
Occidental Worldwide Investment Corporation v Skibs (The
Sibeon and the Sibotre) (1976) Kerr J, accepted that duress was
not simply based on a threat of physical violence alone but could,
for example, involve being forced to enter into a contract under the
threat of our property being destroyed if we did not comply.
