Duress:
Illegitimate Pressure + Causation = Duress
Forms of Illegitimate Pressure:
Threats:
Overt threats to a person or to their property.
Economic Duress:
Threats to make you poorer / suffer economic harm without physical damage.
Exceptions:
Not all economic pressure is duress. Pressure can be unlawful, but not illegitimate. Pressure can also be illegitimate, but not unlawful. Both are not necessarily duress.
Factors to Determine whether there is Economic Duress:
Party’s Good / Bad Faith:
This is related to the motives of the threatener.
If a threatener is acting in good faith, their threats are likely to not be duress. If they are acting in bad faith, their threats are likely to be duress. EG: the threat is reasonably justified.
Reasonable Alternatives:
Whether the threatened party had reasonable alternatives to avoid the threat can also be used to determine whether the innocent party was under duress.
It is illegitimate to threaten something and leave the other party without other options. In this case, there may be duress.
Protest:
How the other party responded to the threat. If the innocent party seems unfazed by the threat, they are likely not under duress.
Causation:
Threats:
Where an overt threat is made, the threat only needs to be a cause of the contract, but not necessarily the main cause. This means there is a weak causal link between threat and action.
In Barton v Armstrong, it was determined that the claimant did not even have to show that he wouldn’t have agreed to the contract but for the threat.
Economic Duress:
The illegitimate pressure must have caused the innocent party to enter the contract in cases of economic duress.
‘But for’ Causation Requirement:
‘But for’ the threat made, if the claimant wouldn’t have entered into the contract, there would be duress. If they would have still entered, it cannot be.
There are varying views as to the extent that the pressure must have caused the innocent party to enter into the contract. In a Problem Question, argue both sides and decide what you think is best.
Undue Influence:
Undue influence is seen in cases where less overt forms of pressure are used. This is often in relation to manipulation within established relationships. The doctrines objective is to prevent someone from abusing their coercive power.
The burden of proof is on the allegator.
Types / Forms of Undue Influence:
Actual Undue Influence:
The claimant provides direct evidence of the defendants specific pressure.
In BCCI v Aboody, A’s husband wanted BCCI to lend him more money. BCCI wanted A to co-sign on the loan. A claims that she was unduly influenced by her husband, so the contract with the bank is void. Evidence was given of how A’s husband essentially forced her to sign. The defence was allowed.
Presumed Undue Influence:
Relationship of ‘Trust and Confidence’ + ‘Calls for Explanation’ = Presumed Undue Influence
The courts prove undue influence by inference. Courts read between the lines of background facts that can be given as evidence. 2 facts are needed to support inference: If you prove X and Y, the court will infer Z.
In Allcard v Skinner, A was introduced to a religious order. A made a will that bequeathed all property to S and transferred possessions to her. When she left, A claimed the money back. Court held that A was unduly influenced, but could not claim restitution because of the significant lapse of time (barred by laches).
‘Trust and Confidence’:
There needs to be a relationship of ‘trust and confidence’. This is not a relation of mutual trust / equality, but one where one party trusts in another. Control of decision making is taken from one of the parties.
Proof of the Relationship:
Professional relations where it is assumed there is a pre-established hierarchy are automatically seen as proof of the relationship. EG: solicitor-client, doctor-patient, religious adviser-believer/follower, or parent-(non-adult) child.
Other types of relationships will have to be proved based on facts. EG: inequality between martial partners.
In Natwest v Morgan, M (married couple) was unable to pay meet payments for their mortgage to Abbey National. N offered a rescue package to M, preventing repossession. The manager of N spoke privately with M (wife) but did not advise her to get independent legal advice. M claimed that N’s manager unduly influenced her to enter the contract. Since there was no presumed relationship of trust and confidence between a bank manager and their client, undue influence could not be inferred.
‘Calls for Explanation’:
There also needs to be ‘calls for explanation’ to prove presumed undue influence. This means that the contract is, on face value, wrong, leading people to question why the claimant would ever reasonably agree to the contract.
The Presumption:
By proving the two facts, an inference can be drawn that the defendant unduly influenced the claimant to enter into the contract. The court makes this inference that, most likely, D had power over the claimant.
Rebuttal:
It is the defendant's responsibility to rebut the claim using further facts. The defendant will need evidence to show that the claimant made a free and informed decision.
In some circumstances, independent legal advice, or other evidence to the same effect, can be used to rebut the claim of presumed undue influence.
In Credit Lyonnais v Burch, B sought independent legal advice about co-signing a loan. D attempted to rebut the presumption that there was undue influence with this fact. Since the advice given would’ve stated that she should not go into contract, it actually proves that she was very strongly unduly influenced by D.
In Re Brocklehurst, B leaves shooting rights to a groundsman in will. The family contest B's will. They argued that there was undue influence from the groundsman as B relied on him in his old age. Evidence produced that B was mentally capable and could make a free and informed choice. Court ruled that B was not unduly influenced.
Unconscionable Bargains:
This occurs when one party is stronger than the other and the stronger party takes advantage.
Where a contract is unconscionable, it will be set aside.
The doctrine seems rather far reaching as it essentially protects people from themselves. The limits are unconscionable bargains seems rather vague.
Requirements:
C suffered from some bargaining impairment.
In Fry v Lane, it was established that ‘poor and ignorant’ people could not be expected to have independent advice.
D acted unconscionably, meaning they took advantage of C’s impairment.
The contract is ‘manifestly improvident’ to C. Essentially, it was a really bad deal for them.
In Cresswell v Potter, C had divorced P. They contracted to give her interest in the house if he released her from mortgage payments. 2 years later, P sold the property for a profit. C successfully argued that she was exploited and should be entitled to half of the sale price.
Rebuttal:
In some circumstances, independent legal advice may render the bargain conscionable, rebutting the idea of an unconscionable bargain.
The 3 Doctrines:
The three doctrines of duress, undue influence and unconscionability overlap one another. This is because of the historical development of these doctrines in the common law. In court, a party may argue one of these as their main point and then back it up with another doctrine in case that first argument fails.
A Single Doctrine Approach:
Denning MR proposed the introduction of a unified doctrine to cover duress, undue influence and unconscionability. [1] This proposal was rejected by the House of Lords. [2]
A single doctrine would potentially be simpler and easier to understand than the current system for both courts and layperson. However, the current system is well established, so change would change the predictable nature of the doctrines. Furthermore, intervention of the courts may risk freedom of contract.
Resources:
References:
[1] Lloyds Bank Ltd. v Bundy [1974] EWCA 8 [2] National Westminster Bank plc v Morgan [1985] UKHL 2
Cases Mentioned:
Barton v Armstrong [1973] UKPC 27, [1976] AC 104
Allcard v Skinner (1887) LR 36 Ch D 145 (CA)
Bank of Credit and Commerce International S.A. v. Aboody [1992] 4 All ER 955
National Westminster Bank Plc v Morgan [1985] AC 696 (HL)
Credit Lyonnais Bank Nederland NV v Burch [1997] 1 All ER 144
Re Brocklehurst (deceased) [1978] Ch 14
Fry v Lane (1888) 40 ChD 312
Cresswell v Potter [1968] 1 WLR 906 (Ch D)
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