Essay: Contract law and duress

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  • Subject area(s): Law essays
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  • Published on: August 1, 2017
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Introduction:

Many contracts occur each day, ranging from minor shop transactions to more substantial commercial contracts, they are a normal element of daily life. When entering a contract, there is a basic principle voluntariness of both parties, however issues can arise when one party is pressured to enter into the contract. Denying one party from their right to voluntarily enter the contract gives rise to the defence of duress, which makes the contract voidable . One definition of duress was set out in R v Attorney general [2003] as “physical threat or other illegitimate pressure being used for an improper objective which is sufficiently serious to impair the consent of the other party.” This essay will address the issues associated with duress and discuss whether there is rational justification for the doctrine of duress and if without reason disrupts the principle of freedom of contract.

Reasons for:

(a) Lawful pressure

One question about duress is whether a threat of a lawful act would still be considered illegitimate pressure. This is problematic because essentially the contract is voidable even though all actions were lawful. This was seen in the case CTN Cash and Carry v Gallaher [1994] where the plaintiff ordered cigarettes from the defendant but through their own fault mistakenly ordered them to be sent to the wrong warehouse. The cigarettes were stolen. The defendant mistakenly believed the risk of theft was the plaintiff’s responsibility and as a result insisted the plaintiff pay for the cigarettes and if they were to refuse they threatened to withdraw credit facilities on future contracts. The claim failed in the court of appeal and was found there to be no economic duress because the threat was made in good faith and genuinely believed their claim for payment was legitimate. Steyn LJ went on to say the defendants were in law entitled to refuse to enter into any future contracts with the plaintiffs for any reason and therefore it was lawful for the defendants, for any reason to insist that they would no longer grant credit to the plaintiffs or have the right to reject any party for any reason .

Professor Birks explains, “lawful pressures can give rise to the doctrine of duress, the only viable basis for discriminating between acceptable and unacceptable pressures is not positive law but social morality.” This is significant because it shows lawful act cases complicate the doctrine because it is based on social morality rather than law, which means it may interfere with the freedom of contract and normal commercial businesses as parties are constantly having to be wary of their actions even if they are lawful due to fear of the contract being challenged or one party not liking the terms of the contract at a later date and raising a claim of duress.

This would interrupt commercial contracts since businesses threatening others to get a better deal is considered a norm, if lawful acts are included in duress it gives the opportunity for the majority commercial contracts to be voidable and therefore widens this area of law to allow for too many claims to be made which in turn may create uncertainty within the law and limit the freedom to create contracts.

(b) Voluntary

One possible line of thought is for a claim in duress to occur; a contract must have been made. A issue with duress is majority of claims are not from parties that have been physically forced to sign the contract where the other party physically forces their hand to sign it; usually the claims are made by parties that voluntarily entered into the contract. As the party entered voluntarily, it can be argued that duress violate the principle of freedom of contract if the party is able to go back on their agreement at a later date after they voluntarily entered the contract . “A contract is a promise” both parties have made this promise so going back on it is violating the contract (promise) made.

More importantly, another point of interest is in the situation where one party is threatened to enter a contract, which they would have entered into anyway. Lord Cross suggested that duress is available even if the contract would have been made without the threats. This can be seen as violating the basic principle of freedom of contract because it is effectively allowing parties to claim in duress and make the contract voidable for no reason, as they would have entered into the contract regardless to the threat made. Issues have been found with this approach, therefore Lord Scarman’s approach in Pao on v Lau Yiu Long [1980] is more adequate approach, which is part of the test of whether duress was operative is whether the claimant had any real alternative but to submit. This is more readily accepted because it implies the contract would not have been made but for the threat which keeps the doctrine of duress narrow and doesn’t allow claims to be made against contracts they would have entered anyway and avoids unjustifiable duress claims to keep the principle of freedom of contract intact.

In addition, in the case Barton v Armstrong [1976] the Privy Council seems to share a similar opinion with Lord Cross. It was held that it was sufficient to form duress if the threat was ‘a’ reason for the claimant entering into the contract and not the sole reason. They stated “their lordship think that the same rule should apply in cases of duress and that if Armstrong’s threats were ‘a’ reason for Barton’s executing the deed he is entitled to relief even though he might well have entered into the contract if Armstrong had uttered no threats to influence him to do so…” Here they are reiterating that the defendant’s threat only needs to be one reason among other reasons for the claimant’s entering the contract for a claim in duress to be raised. This evaluation indicates the doctrine of duress focuses on the defendant’s morally wrong behaviour rather than its effect on the claimant. This suggests a lack of rational foundations in the doctrine because as this case was not considered binding precedent, not all judges will share the same opinion as lord cross and the privy council, this means if another case similar to this case comes to court, the decision and reasoning could be different which creates uncertainty in the law.

 

 

(c) Illegitimate pressure

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