Coercion (Week 1) 18/9

- The contracting parties must enter into contract with full and free consent.
- Any form of pressure applied on the victim and caused his consent, hence the contract is
voidable.
- Court may rescind or set aside the contract for lack of consent.
- To prove the burden of proving lack of consent lies on the victim.
- Coercion: One of the invalidating factors which affects person consent and the contract’s
validity.
Definition

Coercion

Statutory
General - Section 15 CA 1950
-pressure or physical force used to 1. Commission of any act forbidden in
victim which affect his consent Penal Code
2. Unlawful detention

Scope of Coercion
-Coercion as define according to the Section 15 of Contract Act 1950.

Section 15 of CA 1950
Commission of any act forbidden in Penal Code Unlawful detention of any property
- The act done by the def. must be an act - It need not be forbidden by the Penal
forbidden by the Penal Code. Code.
- The victim must prove that the act of - The property detained may belong to any
defendant is an action which Penal code person.
forbids it. - If the lawful owner refuses to part w his
property, the other party could not claim
coercion.
Case Law;
1. Teck Guan Trading Sdn Bhd v Hydrotek Engineering (s) Sdn Bhd
- Def. agreed to the new price due to P refusal to supply, had committed to produce and
supply concrete and lack of time to look for other sources supply.
- Def. submitted that as undue influence and/or coercion which invalidated the agreement.
- Held:
a. Two ways of committing coercion according to s. 15 of CA 1950.
‐ Commission of an act forbidden by the Penal code.
‐ Unlawful detention with the intention to cause any person to enter into an agreement.
b. Def. faced w problems of not getting supply and to avoid that have to agree w the
new price. This is not amount to coercion as it is subjected to commercial pressure
and the plaintiff act was not forbidden in the penal code.
c. Def argued that P refusal to supply the bars at lower price as an unlawful detention of
property. P is not amount to unlawful detention because P was exercising his legal
rights over its own property.
d. Hence, there is no coercion in the contract.

2. Nuri Asia Sdn Bhd v Fosis Corp Sdn Bhd & Anor
- P supplied goods to 1st def. and 2nd def. as the guarantor via oral guarantee.
- 2nd def. signed a written guarantee under coercion done by P’s chairman.
- Held:
a. The written agreement was executed by 2nd def. not in normal circumstances.
b. The surrounding of the execution falls within the scope of coercion as defined in S.15
of CA 1950.
c. There was no free consent on behalf of 2nd def.
d. The court dismissed the plaintiff’s claim against the 2nd def.
The relationship between S.15 and S.73 of CA 1950

Section 73
- provides the liability of a person to Section 15
whom money is paid or thing
delivered under mistake or coercion - The definition of coercion is limited
to an unlawful act done with the
-A person to whom money is paid intention to cause a person to enter
under coercion, must repay or return into agreement.
it.
- the defintion of coercion in s.15
shall not apply to S.73
Case Law
1. Chin Nam Bee Dev. Sdn Bhd v Tai Kim Choo (app)
- Respondent entered into a S&P agreement to purchase a house and they had to pay
another additional sum to the appellant under a threat to cancel their bookings for their
house.
- The appellant claimed that the respondent paid the sum voluntarily and not under any
coercion.
- Held:
a. The definition of coercion under S.15 should only apply for purpose contained in
S.14. and shall not apply to S.73.
b. The amount paid by the respondent must be refunded to them under S.73 of the CA
1950
Position of Duress in English Law and Malaysian Law

DURESS
English Law
- A common law concept under which a
contract may be voided
- Scope of duress is narrow and confined
to unlawful physical violence to the
other party.
- Court did not recognize the ‘duress of
goods’ as invalidating contract
Malaysian Law
- English CL on ‘Economic Duress’ does
not apply in Malaysia.
- CA 1950 does not provide for any form
of coercion other than S.15
- Under S.15, commercial pressure is
insufficient to constitute coercion.
- Perlis Plantations Bhd v Muhammad
Abdullah Ang:
- Held: CA does not provide for any
form of coercion other than S.15

Economic Duress in EL
- Doubt on whether the EL recognizes ‘economic duress’
- Commercial pressure alone is not sufficient to constitute economic duress.
- Presence of some factors which the law could regard as a coercion of the victim’s will to
vitiate consent.
- It must be shown that the contract entered into was not voluntary act.
- The factors are:
a. Whether victim did or did not protest.
b. Whether he did or did not have alternative course open to him
c. Whether he was independently advised.
d. Whether after entering the contract, he took steps to avoid it.
Case illustrate economic duress under EL
Atlas Express Ltd v Kafco
- Duress requires coercion of the will to vitiate consent and mere commercial pressure is
not sufficient.
- D entered into a contract w P which P as a national road carrier and agreed to delivered
goods of D for specific price.
- However, the load was not as stated in the agreement and D still have to pay such
amount.
- D agreed with the new terms made by P and later refused to pay at the new rate.
Effect of Coercion and it remedies.
- The effect is that the agreement is a contract voidable at the option of party coerced.
- The contract between the party remains valid until and unless it is set aside by the
coerced party.
a. Section 19 of CA 1950
- When consent to an agreement is caused by coercion, the agreement is a contract
voidable at the option of the party whose consent was caused.
- The victim has two choice:

Remedies

2. He may ask the court to rescind

1. He may affirm the contract
the contract.
- in such case, both parties must
- Once rescinded, the contracting
fulfill their obligations under the
parties do not have to perform
contract
their obligations under contract

b. Section 65 of CA 1950 (restitution)

- When a contract is set aside, the court will restore the parties to the initial position before
the contract.
- This section provide that when a person at whose option a contract is voidable rescinds it,
the other party need to perform his part of the bargain.
- The rescinding party shall restore any benefits to the person who gave it if he have
received any.