Duress under English law

Duress under English law
It is generally accepted that “every contract we make is made under some form of pressure, every contractual offer is made backed by some sort of threat”,20 because “every offeror threatens that unless the offeree accepts the terms offered, he will not get the benefit of the offer.”21 This means that some method must be found in order to distinguish illegitimate pressures from other pressures which are permissible and which will not invalidate a contract because they are common pressures associated with any competitive society.
As will be shown below, the doctrine of duress applies if there is a combination of (a) a specified form of pressure (b) of an unacceptable kind, (c) an absence of a practical choice (d) which causes in some way the assent of one party to enter into a contract.

(a) Forms of pressure

(aa) Duress to the person
Duress to the person is the most obvious form of duress. It “involves a threat by one party to the life, health, liberty, or physical comfort of the other, to persuade him to enter into the contract.”22 This pressure “need not be directed at the claimant.”23
It is sometimes stated that “violence and threats of violence”24 lead to duress under certain circumstances. However, this language is somewhat inaccurate. The use of violence can rarely forces someone to enter into a contract which can be considered as having been concluded under duress. Either the use of violence will prevent the intention to contract (for instance, if one is physically forced to sign a contract with his arm being held and moved) and consequently there will be no contractual relationship, or the mere use of violence in the past will not be sufficient to make a person enter into a contract, in particular if there is no explicit or implicit threat to apply violence again in future. For this reason German contract law expressly mentions in its statutory provision concerning duress25 “threats” as an element within its doctrine of duress.
English courts refer to the Australian case of Barton v Armstrong26 as a leading modern case on duress. In this case, Barton sought to avoid a contract by which he had agreed to buy Armstrong’s shares in a company. The trial judge found that on many occasions Armstrong had threatened Barton with death.27 Thus, duress to a person was established as follows: “Barton wasin genuine fear that Armstrong was planning to have him killed if the agreement was not signed.”28

(bb) Duress to goods

Traditionally, it was held that the mere “fear that goods may be taken or injured does not deprive anyone of his free agency.”29
The doctrine of duress to goods is now, however, well established.30 The statement of Kerr J (as he then was) in the Occidental Worldwide Investment Corp. v Skibs A/S Avanti31 that “a plea of coercion or compulsion would be available in such cases” was confirmed by Lord Goff in Dimskal Shipping Co. SA v International Transport Workers’ Federation.32
A suggested requirement for cases of executed33 contracts, namely that duress can only be relied upon by someone who acted under protest34 was rejected35 several times. However, a more general limitation of the application of this doctrine should be accepted where the agreement is a mere submission to the execution of legal process such as distress or execution.36

(cc) Economic duress

“In modern times, commercial and economic pressures are of enormous importance, and they often reflect major conflicts of political power.”37 Apart from this common use of legitimate pressure there are a number of cases illustrating the abuse of economic power. In a number of recent cases the courts have began to recognise the concept of economic duress.38 Economic duress is defined as a “threat to harm not someone’s person nor even his property, but other interests such as rights someone has under a contract.”39
The application of this particular doctrine highlights the danger of invalidating common contracts, since “it must be remembered that the whole system of private property also rests on recognition of the monopoly right of the property owner. …The same goes for the human labour.”40 It is inevitable that a person who negotiates with another will threaten to harm this other person’s economic interests. Hence the limits which must be placed on how the doctrine of duress in general is to be used have to be considered with exceptional care in relation to economic duress. As it will be shown these limits are mostly derived from cases of economic duress.

(b) Illegitimacy of the pressure

It was established in Universe Tankships Inc. of Monrovia v International Transport Workers’ Federation and Laughton41 that the threat must be “illegitimate”.42 The key difficulty is in identifying the circumstances in which these forms of pressure are illegitimate. The task of drawing the line between pressures which are legitimate and those which are illegitimate is of increasing importance because of the multitude of the pressures which are exerted in any competitive society. The only serious discussion of the issue of legitimacy of pressure is found in the same case which established this new requirement, i.e. Universe Tankships Inc of Monrovia v International Transport Workers’ Federation.43 The case was concerned with economic pressure. The defendant trade union had ‘blacked’ the plaintiff’s ship import, and refused to release her except on payment of a large sum of money. Lord Scarman discussed44 the legitimacy requirement as follows: “In determining what is legitimate two matters may have to be considered. The first is as to the nature of the pressure… And so the second question may have to be considered, namely, the nature of the demand which the pressure is applied to support.” It therefore appears that pressure may be illegitimate either45

(aa)
Because the conduct which has been threatened is unlawful, for instance a threat to commit any crime or tort; or

(bb)
Because, even though the conduct which has been threatened is lawful, the way in which the pressure is exerted is illegitimate. This is e.g. the case if the advantage which is sought to be obtained by the threat is illegitimate. This is illustrated by Lord Scarman using the analogy of the crime of blackmail. He stated that “what he (the blackmailer) has to justify is not the threat, but the demand of money.”46 Furthermore, in CTN Cash and Carry Ltd. v Gallaher Ltd,47 a case which was also concerned with economic duress, the Court of Appeal accepted that there could be circumstances in which a threat to do something which one was actually entitled to do was improperly coercive and therefore amounted to duress. Therefore, it is clear that even a threat to commit what would otherwise be a perfectly lawful act may be improper if the threat is connected with unreasonable demands. For this reason a threat to prosecute, even when perfectly proper in itself, in the sense that a prosecution would be justified, may amount to an improper threat of duress.48 Furthermore an agreement obtained by threats to prosecute for a criminal offence may also be invalid on the ground that it involves the stifling of a prosecution for the offence.49 “These are matters of public concern and therefore not legally the subject of a compromise.”50 Thus, duress can overlap with public policy limitations on what parties can agree on in a contract.

And while one needs to be careful not to consider lawful threats in themselves as amounting to duress, it is also worth noting that in CTN Cash and Carry Ltd. v Gallaher Ltd51 Steyn LJ (as he then was) stressed that “it is a mistake for the law to set its sights too highly when the critical inquiry is not whether the conduct is lawful but whether it is morally or socially unacceptable.” It is interesting to note that what Steyn LJ proposed resembles the approach taken in German contract law in considering the question of whether a lawful act amounts to duress.

(cc)
It has been held by English courts that a person who is under no duty to enter into a contract with another is entitled to threaten not to enter into a contract unless the threatener’s terms are met. 52 Conversely, a threat to breach a contract53 might be understood as a threat which satisfies the requirement of an illegitimate act and might therefore amount to duress because an act is threatened which is a breach of another’s rights. This view is, however, surrounded by controversy.

It has been suggested by legal writers54 that exceptions to this general rule that a threat to break a contract amounts to duress should be identified where the other party demanding has a genuine belief in the moral strength of this claim, would suffer considerable hardship if his demand is not met, is willing to correct an acknowledged imbalance in the existing contract or indeed where the party making the threat will be unable to perform. In my view, all of these exceptions are questionable. While acting in good faith might justify the conduct of the person who makes the threat, the same cannot also justify the effect of such conduct.55 As long as there is no frustration of contract, the mere imbalance of an agreement does not justify a variation of a contract without the proper consent of both of the contracting parties.56
The party who states, however, that, without the extra payment which he demands, he will be unable to perform, is not to be regarded as making a threat. A statement of the inevitable has to be treated as a mere warning which does not amount to duress.
In Williams v Roffey Bros Ltd57 the Court of Appeal held that there was no duress in a case where one contracting party was concerned that the other party would not complete the work on time and had taken the initiative for a re-negotiation. In these circumstances, the Court held that for a contracting party it is generally “open … to be in a deliberate breach of the contract in order to cut his losses commercially.”58 The same judgment also indicates that the examination of the motivation of the party in question might be relevant when deciding whether or not certain conduct is permissible.

(c) No other practical choice but to submit

As has been stated above (II) the doctrine of duress is not concerned with the absolute lack of will to enter into the contract, but rather with “the victim’s intentional submission arising from the realisation that there is no other practical choice open to him.”59 Therefore it is relevant whether or not the victim had a reasonable alternative. If there was such an alternative, “whether legal or practical”,60 to submitting to the other party’s demand, the victim will not obtain relief.61
The question as to whether there was a reasonable alternative, such as an adequate legal remedy as discussed by Lord Scarman in Pao On v. Lau Liu Long,62 is just one feature within the main question of whether the pressure was so great as to grant relief. Thus, Lord Scarman held that, in addition to the alternatives test, “it is material to inquire whether the person alleged to have been coerced did or did not protest; whether he was independently advised; and whether he later took steps to avoid the contract.”63
Thus, it must be established that there was pressure which was so great that it effectively gave the victim no choice but to act as he did. A finding of such a high degree of defectiveness of consent may depend on the physical and mental condition of the person threatened.64
It has been argued that a different approach is required in cases where a criminal offence has been threatened. The alternatives test is inappropriate in such a situation, as it is derived from cases where the threats have been of civil wrongs.65 There is no indication of any “no choice approach” in cases such as Barton v Armstrong66 where physical violence was threatened. The same conclusion may also be derived from the rationale for the alternatives test. “The limitation of a claim of duress by the alternative test is a balancing of the competing needs of protection of the original legal position of the person claiming duress and the enforceability of compromises.”67 To consider interests within this balancing act which are based on physical violence would clearly run counter to public policy. It could be said that in these circumstances even quite a low degree of defectiveness of consent is considered to be relevant in law.

(d) Causation

In all cases of duress, it is necessary that the threat caused the affected person to enter into the agreement. On the other hand, it now appears settled that the requirements for causation depend on the type of duress involved.

(aa) Duress to the person

In Barton v Armstrong 68 the Privy Council held that the doctrine of duress will apply provided that the pressure was at least “a reason” for the victim to enter into the contract. In this case, it was held that the threatener generally “must take the risk that the impact of his threats may be accentuated by extraneous circumstances for which he is not in fact responsible.”69 Therefore, it would be inadequate to consider whether the other party would have entered the contract but for the existence of pressure. Although Barton (the person threatened) “thought that the agreement with Armstrong was a satisfactory business arrangement”,70 Armstrong’s threats could not be understood as contributing nothing to Barton’s decision to sign the contract. A similar approach is taken under German law in the context of causation (V, d).
Once it is shown that a party committed a wrong in applying unlawful pressure, the presumption will arise that this pressure caused the defendant to enter into the contract.71 Consequently, the law favours the innocent party over the wrongdoer. The latter carries the burden of disproving the causal relationship between the pressure and the contract.

(bb) Duress to goods

In cases72 concerned with duress to goods it is generally considered that the pressure must have been a “significant cause”. This means that the pressure applied by the wrongdoer must have been a reason which influenced the decision to contract to a high degree. The extent of influence required increases according to the type of duress applied. Thus, the requirement of causation will offset the broad application of the doctrine of duress brought about by the development of new categories, such as duress to goods and in particular economic duress. Hence, in relation to economic duress it has been said that “economic interests are now protected, but with considerably more caution.”73

(cc) Economic Duress

It may be seen that the courts are now taking a more restrictive approach towards economic duress. More particularly, the pressure must be more than simply a reason to enter into the contract. In Dimskal Shipping Co. SA v I.T.W.I.74 Lord Goff said that there may be duress where “the economic pressure … has constituted a significant cause.” Further in contrast to duress to person and duress to goods the courts have reasoned that, “it seems unlikely that the victim will have the benefit of the reversed burden of proof.”75 Thus, the causal test will be satisfied if the victim can show that he was significantly influenced by the threat. It must be stressed, however, that these causal requirements are still not entirely clear and that their future development by the courts remains open.

(e) Legal effect of duress

(aa) Void or voidable
In North Ocean Shipping Co. Ltd. v. Hyundai Construction Ltd.76 Mocatta J stated that a contract made under duress is undoubtedly “voidable and not void.” Consequently, a person who has entered into a contract under duress may either affirm this agreement, or render it void. On account of the delay between the date of submission and the date of the first protest,77 it was held that the claimants must be taken to have affirmed the contract so that the claim failed.78 In addition to this aspect of lapse of time, an action aimed at avoiding a contract may fail on the ground that it is impossible to put the parties back into the position in which they had been prior to the formation of contract, or because it is necessary to protect the interests of innocent third parties.

(bb) Effect of duress exercised by a third party

The pressure exerted on one party, however, will have consequences only if the other party to the contract “ knows (actually or constructively) that the plaintiff’s consent has been wrongly induced”.79 Since this requirement will always be fulfilled if a contractual party himself is the threatener, it is relevant only where duress is exercised by a third party.

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Title: Principle of Duress under English Contract Law
Introduction:
The principle of duress is a significant aspect of contract law in England. It refers to a situation where one party, through illegitimate means, exerts pressure on the other party to enter into a contract against their free will. Under English contract law, a contract entered into under duress is considered voidable, giving the coerced party the right to rescind the contract. This article explores the principle of duress, its elements, and the legal consequences it entails.