What is duress and undue influence in contract law?

Duress and undue influence

Duress and undue influence essentially means that a person or party has been forced into a contract. The contract cannot be considered to be a valid agreement under these circumstances. Under common law, there are two doctrines to consider: duress and undue influence.

Duress

This is where someone enters into a contract as a result of undue pressure. Duress can take many different forms.

Threats of violence

In Barton v Armstrong (1976) the plaintiff threatened to kill the defendant if he did not sell his interest in the company they were both major shareholders in. The trial judge ruled that duress could not be pleaded since it was not established that the agreement would not have been entered into without the threats being made. The Privy Council, however, later ruled that a plea of duress should stand even if the death threat was not the only reason for entering into a contract.

Threats of unlawful restraint

In Cummings v Ince (1847), an elderly lady was told to sign over all her property or face not ever having a committal order to a mental asylum lifted. The contract was found to be void.

Threats to property

In Skeate v Beale (1840), the court decided that since the threat had been directed towards property, this did not constitute duress. However, in The Siboen and the Sibotre (1976), the court decided that serious threats that constituted burning a house or damaging expensive paintings should be considered as duress. Therefore, duress also covered property in the most serious circumstances.

Economic duress

In Atlas Express v Kafco (1989), the court decided that because there was a threat made to a small business for them to breach the rules of a contract it had entered into, this would be considered economic duress. In Universe Tankships of Monravia v ITWF (1982), the threat made by the union in the matter of a ship, because workers demanded a change in circumstances, was found to be economic duress.

In Pao On v Lau Yiu Long (1980), the Privy Council identified four matters to consider in determining whether economic duress was present:

  • Did the person claiming to be coerced protest?
  • Did the person have another viable course of action?
  • Were they independently advised?
  • After entering into the contract, did they take steps to avoid it?

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For more information on:

  • Undue influence
  • Class 1 – actual undue influence
  • Class 2a – presumed undue influence
  • Class 2b – presumed undue influence
  • Rebutting presumed undue influence