Duress

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Duress is when a party threatened another party in order to induce it into entering the contract.

The approach to determining whether duress has influenced a contract is as follows:

  1. Whether any applied pressure induced the victim to enter into the contract (doesn't need to be the only or main reason)[1]; then
  2. Whether the pressure went beyond what the law is prepared to class as legitimate.[2]
    • Pressure is illegitimate if it:
      1. Consists of unlawful threats, or
      2. Amounts to unconscionable conduct.[3]
      • These are not closed categories. Overwhelming pressure not constituting unlawful threats or unconscionable conduct can still amount to duress.[4]

A party who has entered a contract as a result of duress will be entitled to rescind the contract.

This article is a topic within the subject Contracts.

Contents

Required Reading

Paterson, Robertson & Duke, Contract: Cases and Materials (Lawbook Co, 11th ed, 2009), pp. 905-910 [34.05-34.40].

Introduction

[5] When a party is being threatened, the will of the party is said to have been inhibited or deflected, so that it must choose between two evils (enter the contract against his will or suffer the threats). A contract which has been entered into due to such duress will be considered voidable.

However, not every form of pressure or threat can be considered duress. In the business world, a lot of economic threats are legitimate commercial methods. There are legitimate pressures, and illegitimate pressures. The nature of threats which give rise to duress are considered in Universe Tankships of Monrovia v Int’l Transport Workers Federation:

  • In determining what is legitimate, consider two matters:
    1. The nature of the pressure; and if required,
    2. The nature of the demand which the pressure is applied to support.
  • Threat of unlawful action is illegitimate.
  • Duress can still exist for lawful action – this depends on the nature of the demand.

In a another case, Crescendo management Pty Ltd v Westpac Banking Corp[6], the court said the categories are not limited, and they also include unconscionable dealing.

Overall, the preferred approach to duress is to inquire:

  1. Whether any applied pressure induced the victim to enter into the contract; then
  2. Whether the pressure went beyond what the law is prepared to class as legitimate.
    • Pressure is illegitimate if it:
      1. Consists of unlawful threats, or
      2. Amounts to unconscionable conduct.
      • These are not closed categories. Overwhelming pressure not constituting unlawful threats or unconscionable conduct can still amount to duress.

Duress and coercion of a person

[7] This involves actual or threatened violence. At common law, the doctrine was extremely narrow, which meant that subtle ways of manipulation were not remedied. Equity intervened to recognise such pressures as coercion and as duress. This included cases not only of violence but also where a promise was induced by a threat of lawful prosecution of a person or his family.

A classic example of coercion is Barton v Armstrong:

  • Duress parallels fraud in the way that a contract which was entered into under duress is treated the same as one which was entered into as a result of a misrepresentation or fraud.
  • This means, inter alia, that the duress needs to be only one of the reasons why the contract was entered into, and not the sole or main reason.
  • It is up to the defendant (or threatener) to prove that the threats played no role. A finding that the threatened party would have still entered the contract without the threats will not automatically rule that there is no duress, since they may have contributed to the decision.

These statements were also reaffirmed in Crescendo management Pty Ltd v Westpac Banking Corp[8]:

  • It is unnecessary for the victim to prove the duress was the sole reason for him entering the contract.
  • It only needs to be a reason.
  • Then, the onus lies on the threatener to prove it made no contribution to the victim’s entering the agreement.

References

Casebook refers to Paterson, Robertson & Duke, Contract: Cases and Materials (Lawbook Co, 11th ed, 2009).

Textbook refers to Paterson, Robertson & Duke, Principles of Contract Law (Lawbook Co, 3rd ed, 2009).

ACL refers to the Australian Consumer Law.

  1. Barton v Armstrong [1976] AC 104
  2. Universe Tankships of Monrovia v Int’l Transport Workers Federation[1983] 1 AC 366, 400-1
  3. Crescendo management Pty Ltd v Westpac Banking Corp(1988) 19 NSWLR 40
  4. Crescendo management Pty Ltd v Westpac Banking Corp(1988) 19 NSWLR 40
  5. Casebook, 34.10]
  6. (1988) 19 NSWLR 40
  7. Casebook, pp. 907-8 [34.25]
  8. (1988) 19 NSWLR 40
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