Duress overview

(- duress renders K void (Barton v Armstrong)?)

- but more recently renders it voidable (Halpern v Halpern)
 voidable so long as act to set aside the contract as soon as duress ceases (North Ocean Shipping v
Hyundai Construction)
TYPES
- To the person
o Threats to person or relative need not be the only reason which induced the contract (Barton v
Armstrong)
o How serious of a threat it has to be to vitiate K will depend on victim’s ability to resist the
pressure (Scott v Sebright)
- To goods
o Threatened damage or illegal seizure of goods or other property
o Skeate v Beal was overridden English law does recognize duress to goods (The Siboen and The
Sibotre)
- Economic
o Distinguished from commercial pressure
 ordinary commercial pressure does not constitute duress - Alec Lobb Ltd v Total Oil – if
economic pressures occur because of the victims own doings then not economic duress
 economic duress must have affected the animus contrahendi (for it to not be pressure)–
the motive to contract (The Siboen and The Sibotre)
 ec. duress is threat of such serious financial consequences that it gives the threatened party
no practical choice but to submit (Occidental Worldwide Investment v Skibs)
o distinguished from legitimate renegotiation
 if party bona fide tries to renegotiate because it believes it cannot fulfil terms of promise,
promissory estoppel may apply and it will not be duress
 if threat – particularly if supported by not a bona fide renegotiation (B&S Contracts and
Design Ltd v Victor Green Publications Ltd)
 but threat is not pointing out the impossibility of performance without the
renegotiated terms (if indeed true) (Williams v Roffey)
o actionable duress is where:
 Pao On v Lau Yiu Long:
1. Did not enter the contract voluntarily, entered against his will
2. Had no other alternative such as an adequate legal remedy available
3. Was confronted with coercive acts, coerced, coercion of will
4. Was not independently advised
5. After the contract took steps to avoid it
o DSND Subsea v Petroleum Geo-Services:
1. Pressurepractical effect is compulsion or a lack of practical choice for V
2. Pressure which is illegitimate:-- and
o there has been an actual or threatened breach of contract;
o the victim had no realistic practical alternatives but to submit to P
o person allegedly exerting pressure acted in bad faith;
o victim protested at time;
o victim did not affirm and did not seek to rely on contract
3. which is a significant cause inducing the claimant to enter into the contract
(applies even if person may have entered into K without this duress – Barton v
Armstrong
 + in absence of evidence courts are likely to infer that duress was a cause
(Barton v Armstrong)
  + in cases of economic duress the burden of proof lies on the victim, and it is
done using the but for test (Hyuton SA v Peter Cremer GmBH Co)
- Lawful act duress – existence? – lawful act duress may be illegitimate, law is not clear
o Lawful act duress may exist (R v A-G for England and Wales)
o lawful act duress may exist where the parties had a special relationship (CTN Cash and Carry
Ltd v Gallaher Ltd)
o only if negotiated in bad faith, then it is lawful act duress (Times Travel (UK) Ltd v Pakistan
International Airlines Corporation)
- third party rights (Royal Bank of Scotland v Etridge)
o if party to contract is subjected to duress by third party, it can rescind the contract only if the
second party knew about the duress or ought to have known about it
- remedy: rescission restore both parties to original positions (Halpern v Halpern)
o rescission barred by affirmation – (as in m/r): if you become aware of duress and say/do to
affirm it (Long v Lloyd), but you must be aware of the right of rescission (Peyman v Lanjani)

Undue Influence overview

-Undue influence is an equitable relief, as opposed to duress which is common law

-UI in equity considers not if the influence caused the person to enter into the transaction, not whether a
person knew what they were doing but rather how the intention to enter into the contract was obtained
(Royal Bank of Scotland v Etridge)
-Types of UI - Barclays Bank plc v O'Brien – divided into actual and presumed UI (criticised in RBS v Etridge
No. 2)

- ACTUAL UI (claimant provides evidence to prove UI (Allcard v Skinner))

o where one party exercises such domination over the mind and will of the other that the
latter's independence of decision was substantially undermined and this domination brought
about K = UI (Royal Bank of Scotland v Etridge)
o no need for any special relationship, though there may be one (Royal Bank of Scotland v
Etridge)
o undue influence is very real pressure and renders contract voidable + in actual UI the
transaction need not be manifestly disadvantageous to be rendered voidable (CIBC
Mortgages plc v Pitt)

- PRESUMED UI (UI is presumed in the absence of evidence to the contrary (Allcard v Skinner))
o If Actual not proven, relief may be given in cases of special relationships which D abused
(Tate v Williamson)
o divided into: (Barclays Bank plc v O’Brien)
 Relationship presumed by law - no need to prove actual influence, the existence of this
relationship is sufficient to establish UI (Barclays Bank plc v O’Brien)
1. parent and child (Bainbrigge v Browne)
2. religious adviser and disciple (Huguenin v Baseley)
3. doctor and patient (Mitchell v Homfray)
4. solicitor and client (Wright v Carter)
5. trustee and beneficiary (Beningfield v Baxter)
6. not spouses (Barclays Bank plc v O'Brien)
7. likely not fiancees (Zamet v Hyman)
 De facto relationship - Burden of proof shifts onto the claimant who must prove he
placed trust and confidence (Barclays Bank plc v O’Brien)
 -to establish de facto relationship of presumed UI - Lloyds Bank v Bundy
 reliance on guidance
 awareness of reliance by person influencing
 a benefit obtained by influencer
 confidentiality
(but it may be beyond what Lloyds bank establishes, each case shall be decided
on its own facts - RBS v Etridge (No 2))
o When presumed?
 transaction needs to be manifestly disadvantageous to strengthen the
presumption (CIBC Mortgages plc v Pitt)
 x or transaction will be declared to be UI only if it is not readily explicable by
the relationship, cannot be reasonably accounted for by the friendship,
relationship, charity or other ordinary motives as well as whether it is
improvident (Goldsworthy v Brickell, then affirmed in National Westminster
Bank plc v Morgan)
o Rebutting UI
o Can be rebutted if the party benefitting from the transaction proves that it was the
exercise of free and unfettered judgement, independent altogether from any sort of
control (Archer v Hudson) e.g. receiving independent legal advice and acting on it
o Remedies
o Rescission – as in m/r, including bars to rescission
 but impossibility to restore to precisely the same position does not bar
rescission in equity (Cheese v Thomas)
 affirmation bars rescission – as soon as UI withdrawn(fully – Moxon v Payne),
the action or inaction of the party influenced may affirm K and bar rescission
(Mitchell v Homfray)
 lapse of time (since moment of no longer being under UI) bars rescission
(Humphreys v Humphreys)
 third party rights
 if UI from second party
o bar rescission if third party did not have notice about UI and
was bona fide (Bainbrigge v Browne)
o do not bar rescission if third party had notice of UI
(Bridgeman v Green)
o third party UI
- rescission barred if second party had notice of the UI by third party (Royal Bank of Scotland plc v
Etridge) – actual notice
+ further
- rescission barred even if second party ought to have known of the influence (Barclays Bank plc v
O’Brien) – constructive notice

surety cases: all Barclays Bank plc v O’Brien (+this applies to duress + m/r)
in the Obrien case (a bank guarantee where the relationship between the guarantor and the debtor is non-
commercial) constructive notice of the third party’s influence is assumed

Lender will have constructive notice where it knows of facts which put it on inquiry that there is a risk of UI
– indicated by:
1) relationship between third party debtor and the surety is non-commercial
2) transaction is not to the financial advantage of the surety (does not include cases where its for their
joint benefit)

Steps to take when put on inquiry to minimise risk of contract rescinded:

(burden of proof on lender(i.e. bank) to show they took all steps to prevent UI)
o Warn the surety at a meeting where the debtor is not present of the risks, the amount of debt, the
potential liability and advise her to see independent legal advice
o Lender must obtain a written confirmation from the solicitor that the solicitor has explained fully to
the wife the nature of the transaction and the practical implications the transactions will have for
her (more details about content of legal advice can be found in big notes on UI)