DURESS, UNDUE INFLUENCE & UNCONCIONABLE DEALINGS1

Under what crcumstances should a party be allowed to set aside a contract on the
basis of Duress, Undue Influence & Unconcionable Bargain (DU,UI&UD). Certainly,
not all allegations of DU,UI&UD will be sustained by the court for to do so will do
damage to the well established principle of contract. If indeed a contract was
concluded under duress or undue influence or the terms were considered to be
unconscionable what should the “victim” do? Unless the alleged victim takes
certain steps during and soon after the contract, the allegation of DU,UI&UD may
be viewed as an after thought.

It suffices to say that each of these concepts is different and has its separate rules.
Therefore, the applicable rules for duress should not be conflated with that of UI,
and that of UI with UB. These are part of the emerging themes of the law of
contract developed as independent doctrines or concepts to regulate or gauge
the validity and or fairness or otherwise of a contract.

The discourse entails the interaction between the rule of common law and the
doctrine of equity. Since equity follows the follow, attention should be paid to the
circumstances where the courts have upheld the claim of DU,UI&UD and the basis
of such intervention or lack of it in cases where the claim failed.

DURESS
Snce contract is based on consent, the law frowns at agreement obtained by
force, compulsion or threat2. The principal role of D is to discourage the use of
coercion in contractual relations.

Ordinary meaning of Duress

Threat or force that are used to make somebody do something against his will. It
suffices to say that the meaning of duress is narrower in law of contract than in
the ordinary parlance.

Duress at common law

The scope of duress at common law was very narrow and later became expanded
with time.

Types of duress
There are three types of duress viz:

(i) Duress to the person.

This is the least controversial. It may consist of actual violence to a person
or to the members of his family or threat to his personal freedom. The common

1
Lecture note of Professor Abiola Sanni, SAN, FCArb, FCTI, Professor of Commercial Law,
Faculty of Law, UNILAG, 08033958020, asanni@abiolasanniandco.com
2
Vitus Nnamaka Okpara, “Vitiating Factors 111: Duress & Undue Influence, Contract Law a New
Approach, Fourth Dimension Publishing Company Ltd,, Enugu, 2013, p.397.
 2

law had little or no difficulty in setting aside contracts on the ground of “duress to
the persons”. This was traditionally duress at common law.

In Barton v Armstrong [1976] AC 104 where threats to kill were uttered, the Privy
Council held that the threat need not be the sole reason for entering into the
contract and that it was sufficient that the threat was one of the factors which
influenced the victim to enter into the contract. In other words, the threats did
not have to be ‘the’ reason, the ‘predominant’ reason or the ‘clinching’ reason.
Held that a contract entered into under duress is void and not voidable as an
indication of a near zero tolerance for duress to person.

There are authorities to the effect in the case of economic duress, the illegitimate
pressure must be ‘the significant cause’ of entering the contract. See Dimskal
Shipping Company S.A v. International Workers Federation (The Evia Luck). (No.2)
(1992) 2 A.C. 152, [1991] 3 WLR 875 and Hutson SA v Peter Cremer GmbH & Co.
(1999) I Lloyd’s Rep 620,

In Equity
At common law a threat of lawful imprisonment or a criminal prosecution would
not ordinarily amount to duress, but in equity a threat by one to prosecute the
other for a criminal offence could constitute a ground on which the contract
would be set aside.
See Williams v Bailey (1886) L.R. 1 H.L. 200,
Mutual Finance Co. Ltd. v. John Wetton & sons Ltd [1937] 2 KB 389.

Duress of goods
Initially, duress of goods was not regarded as constituting duress. See
Skeate v Beale (1840) 11 A & E, 983 where it was held that unlawful detention of
another’s goods does not constitute duress.
This case has been severely criticised and departed from in future cases:
- Occidental Worldwide Investment Corpn v. Skibs A/S Avanti, Skibbs A/S
Glarona, Skibs A/S Nvalis (The Sibeoen and The Sibotre) [1776] 1 Lloyd’s Rep
293.
- Maskell v Horner [1915] 3 KB 106.

Due to the initial stultifying narrowness of the doctrine of duress at common law,
plaintiffs were constrained to resort to the law of restitution e.g to recover
money paid under protest (for the release of goods from unlawful detention)
through an action for money had and received. However, this ingenuous
“Israelites route” is no longer necessary with the recognition of the doctrine of
duress to goods at common law.

Duress at common law, otherwise known as legal duress is limited to actual

violence or threats of violence. These types of duress hardly come up in the
moden time. In contractual settings.
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Economic duress
The third type of duress and the most difficult to establish, is economic
duress. Here, the “duress” is in more subtle form compared to the first two types.
Economic duress arises where one party uses his superior economic power in an
‘illegitimate’ way so as to coerce the other contracting party to agree to a
particular set of terms. The existence of this doctrine was first recognised in
England by Ker J in Sibeoen and The Sibotre (supra).

Juridical basis
One question which must be asked is: on what basis did the court
intervene to set aside a contract on the ground of duress?

The traditional answer is that duress had “vitiated the consent”. According to
Atiyah, in reality, it is wrong to say that duress deprives a claimant of all choices,
but merely present him with a choice between evils”. Thus, what is wrong with
the contract is not lack of will but the wrongful nature of type of threats which
have been used to bring about the consent. The rationale is, therefore, not lack of
will to contract but intentional submission arising from the realisation that there is
no other practical choice open to him. Since the plaintiff’s consent was procured
through illegitimate pressure, the consent is treated as voidable (revocable),
unless approbated expressly or by implication after the pressure has ceased to
operate on the victim’s mind.

In North Ocean Shipping Co Ltd v Hyundai Co. Ltd [1979] Q.B 705, Hyundai
Construction (Hyundai) had a contract to build a tanker for the Plaintiff for a fixed
price, which was to be paid in five instalments, in US dollars. After the payment of
the first instalment, the US dollar’s became devalued by 10%. Hyundai demanded
for a price adjustment by 10% which the plaintiff rejected and went ahead to pay
the next two instalments based on the original price. Hyundai returned the
payments, rejected the idea of arbitration and gave an ultimatum to the Plaintiff
that they either accept their demand for a 10% price increase or they will terminate
their contract. At the time of the dispute, the plaintiff was close to reaching a
lucrative agreement regarding the tanker’s chartering with a third party. In order
to avoid losing this deal, the Plaintiff agreed to the increase the price “without
prejudice” to their rights. The Plaintiff paid and commenced an action to recover
the extra 10% increase almost a year after the tanker’s delivery on grounds of
economic duress.
Held that while Hyundai’s demand for a 10% price increase did amount to
economic pressure and made the contract voidable. However, the plaintiff had
lost their right to set the contract aside by affirmation having waited for a period
of 8 months before seeking to set the contract aside and claiming over payment.

Question:
Is this a good or bad law? If a case of economic duress fails in the above
circumstances, one then worders on what basis ot will succeed?
 4

A contract was set aside for economic duress in Universe Tankships of Monrovia v
International Transport Workers Federation (The Universe Sentinel) [1983] 1 AC
366 the defendant trade union black listed the claimant’s ship in port and refused
to released it until certain monies were paid, including a payment of paid $6,480
into the Welfare Fund of the union. The House of Lords held that the payment
was recoverable because “the will of the owner had been coerced” into making
the payment and the pressure applied by the union had been illegitimate. c/f
payment by resident associations?

One party may threaten to breach an existing contract unless the contract is
renegotiated in its favour, and the other party accedes to this demand in order to
avoid the adverse financial consequences which would result from the threatened
breach.

In Atlas Express Ltd v Kafco (Importers & Distributors) Ltd. (1989)Q.B. 833, the
defendant had agreed to supply basket wares to a chain of retail shops and made
a contract for its delivery with the plaintiff, a carrier. The plaintiff had erroneously
estimated that each load would contain a over four hundred cartons and, on this
basis, had underquoted. The plaintiff believing that carrying such a load at the
agreed rate was not financially viable, said that he would not perform unless the
defendant agreed to pay an increased price per load. The Defendant sent an
empty truck to the Plaintiff with a messade that unless the Defendant agreed the
truck will be driven away. Because the defendant’s economic survival depended
on the contract with the retail chain and it would not find an alternative carrier, it
agreed to the plaintiff’s demand but refused to pay. It was held that the terms
were agreed under economic duress and therefore voidable.

In The Universe Sentinel [1992] 2All ER 67. , trade union officials threathened to
induce the crew of a ship to breach their contract of emplyement and this prevent
the ship from leaving the port. Such threat if carried into effect, would place the
ship owners in tremendous financial catatrosphe, and so they were compelled to
agree to make certain payments to the unions. Held tha the shipweoners consent
to make the payment was obtained under economic duress.
In B&S Cpntract & Designs Ltd v Victor green Publications Ltd, [1984] 1 CR419. the
contract was for the erection of stands for an exhibition. Less than a week to the
opening of the Exhibition, the ontractors told his clients that he required
additional payments to meet certain claims that were being made against him by
his workforce. He threthened that the contract will be cancelled if rhe demand
was not met. Being mindful of possible third party claims, the reputation risks and
third party claims , the Cleint paid. Held, that the money paid was paid under
duress and recoverable.

Duress distinguished from legitimate renegotiation

Most of the cases on duress relate to attempt to vary a contract e.g for reasons of
certain unexpected economic realities which the party seeking to very the terms
did not envisage.
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It may be in the interest of both parties to vary a contract in order to realise their
respective expectation. In Williams v Roffey Bros & Nicholls (Contractors) Ltd
[1991] 1 QB 1, the Defendants, a building construction firm, had a contract to
refurbish a building comprising of 27 flats for a housing corporation. The contract
had a penalty clause for late completion. The firm subcontracted the carpentry
aspect of the work to Williams, a carpenter for £20,000. It turned out that
Williams had actually underestimated his real cost, had problems with poor
handling of the work by his workmen. When it became obvious to the Defendant
that Williams would not be able to deliver within schedule due to certain
challenges to them, they had a meeting with him and offered to pay him an extra
sum of £10,300. They also agreed to change the pattern of work that would allow
Williams and other contractors to simultaneously work on the project in a manner
that will hasten the completion. The Defendant refused to honour their promise
when Williams completed his work. The appellants argued that the agreement to
pay extra was unenforceable as Williams had provided no consideration; the
appellants only received the practical benefit of avoiding the penalty clause. They
did not receive any benefit in law. Williams was only agreeing to do what he was
already bound to do. The appellants relied on Stilk v Myrick (1809) 2 Camp 317
where it was held that performance of an existing duty was not good
consideration. The trial Court held that the Defendant received extra benefit
which constituted sufficient consideration for the extra payment. The Court of
appeal distinguished the case from Stilk v Myrick and other cases on the basis of
absence of lack of duress, undue influence and unconscionable dealing.

Therefore, economic duress must be distinguished from legitimate renegotiation

of a contract.

Duress distinguished from Commercial Pressure

The court refused to uphold the claim of economic duress in Pau on v Lau Yiu Long
(1979) by making a distinction between economic duress and commercial
pressure. In that case the Defendants were majority shareholders in a public
company which was interested in a building owned by the Plaintiff, a private
company. The Plaintiff agreed to sell their shares in the private company to
Defendant so that Defendant could acquire the building in return for a number of
shares in the public company. In order to guard against a drop in share value of
the public company, the parties agreed that Plaintiff would not sell their shares
for a period of one year. When the Plaintiff realized that Defendant might profit
from this agreement they demanded for a contract review which would indemnify
them against loss for any fall in share value but will also make them benefit from
any rise in share value. Fearing that not agreeing to this would delay the main
contract and result in serious economic loss, Defendant agreed to indemnify them
against any drop in value below 2 pounds and 50 shillings before the
implementation date. The share value did drop, and Plaintiff sought to rely on the
indemnity contract. Defendant refused on the ground that the consideration for
the indemnity agreement was past and that they had agreed to it under duress.
 6

Delivering the judgement of the Privy Council, Lord Scammer held that there was
no coercion but mere commercial pressure which does not constitute duress.
According to him:
It is material to inquire whether the person alleged to have been coerced
into making the contract did or did not protest; whether at the time he
was allegedly coerced into making the contract, he did or di not have an
alternative course open to him such as adequate legal remedy; whether he
was independently advised; and whether after entering the contract he
took steps to avoid it.

Question
Compare and contrast the two cases - Pau on v Lau Yiu Long & North Ocean
Shipping Co Ltd v Hyundai Co. Ltd.

Threats of lawful action

What is the effect where the threat is lawful, for example of litigation,
prosecution or other forms of legal action? It is a question of facts. It is typical of
lawyers to threathen to “bring the full weight of the law against a defendant”, is
it arguable that contract reached following such a letter can be voided on ground
of duress?)

It is not ordinarily duress to threaten to do that which one has a right to do, for
instance to refuse to enter a contract or to terminate a contract lawfully. In CTN
Cash and Carry Ltd v Gallagher Ltd [1994] 4 All ER 714 a wholesale buyer of
cigarettes who, following an honest but mistaken demand by the seller, paid a
sum not due because the seller had threatened, as it was entitled to do, to
withdraw credit facilities from the buyer, could not recover it on the ground of
duress. The Court of Appeal held that although the threat was highly coercive, it
was not improper. See p. 343 of Chesire & Fofoot, 14th edn.
See also Leyland Daf Ltd v Automotive Product Plc [1994] 1 BCLR 244.

Exceptionally, however, a threat of lawful action may constitute duress and

render a contract voidable. At common law, a threat of lawful imprisonment, e.g
criminal prosecution, would not ordinarily amount to duress, but in equity, a
threat by one party to prosecute the other for a criminal offence could constitute
a ground on which the contract will be set aside for duress. See Mutual Finance Co
Ltd v John Wetton & Sons Ltd [1937] 2 KB 389. In The Ports Caledonia [1903] p.184.
a refusal to rescue a vessel in distress or those on board except on extortionate
terms has led to the resulting contract being set aside.

One of the factors which the court usually takes into consideration in considering
whether the victim was indeed coerced is the existence of an adequate
alternative remedy or remedies. In the case of duress by threatened breach of
contract, although the victim might sue for breach of contract, there will be
situations in which such remedies may not adequately protect him. See Atlas
Express Ltd v Kafco (Importers & Distributors) Ltd.
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Where an adequate alternative exists the court may hold that there is no
economic duress. See Vantage Navigation Cpn v Suhail & Saud Bahwan Building
Materials Llc (The Alev)[1989] Lloyd’s Rep 138. Hennessy v Craigmyle [1986] 1 CR
461.

From the foregoing, it will be observed that while the courts have expanded the
scope of duress at common law to include economic duress, it is relatively difficult
for a party alleging that he has been induced by economic duress to successfully
discharge the onus of proof. it is is noteworthy that the factors which weigh in
favour of either granting or refusing a finding of duress in each case.

UNDUE INFLUENCE
Duress is essentially a common law concept 3 although there are features of
equitable intervention in the concept of economic duress. Due to the narrow
scope of the traditional doctrine of duress, equity developed its own doctrine of
undue influence4 through its comprehensive doctrine of constructive fraud. In
constructive fraud, there is no requirement of dolus malus. The court exercises its
power to prevent a man from acting against the dictates of his conscience as
defined by the court. See Nocton v Lord Ashburton [1914] AC 932 at 952.

Although undue influence is a well-worn phrase, its precise meaning is unclear.

There are a number of obscurities. For example, what does ‘undue’ mean? Does it
mean ‘illegitimate’(and, if so, does it have the same meaning as in common law
duress?) or does it mean ‘too much’? And what about influence? Does it mean
‘pressure’ or is it more subtle, continuing form of domination? The courts have
not provided clear cut answers to these questions.

Although the scope of duress and undue influence may overlap, it is important to
note that the doctrine of undue influence was developed by the Court of
Chancery independent of duress.

One of the first attempts to define undue influence was made by Lindley L. J in
Allcard v Skinner (1887) 36 Ch D 148 at 181 as:
“Some unfair or improper conduct, some coercion from outside, some
over-reaching, some form of cheating and generally, though not always,
some personal advantage obtained by the guilty party”.

The doctrine was accurately stated by Ashburner on Equity thus:

In a court of equity if A obtains any benefit from B, whether under a

contract or gift, by exerting an influence over B which, in the opinion of
the court, prevents B from exercising an independent judgment in the
matter in question. B can set aside the contract or recover the gift.
Moreover in certain cases the relation between A and B may be such that A
has peculiar opportunities of exerting influence over B. If under such

3
R. Stone, 212.
4
Sagay, 344.
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circumstances A enters into a contract with B, or receives a gift from B, a

court of equity imposes upon A the burden, if he wishes to maintain the
contract or gift, of proving that in fact he exerted no influence for the
purpose of obtaining it.”5

It will be seen from foregoing attempt at defining UI that the courts have been
careful not to prescribe the exact limits of the term UI since to do so will limit
their powers to intervene and protect the victim.

Undue influence be considered under two circumstances: (i) where there is no

special relationship and (iii) where there is a special relationship.

Where there is no special relationship

Where there is no special relationship between the parties, undue
influence has to be proved by the party alleging that he is a victim of UI. Actual
undue influence comprises overt acts of improper pressure or coercion such as
unlawful threat. Thus, if it can be shown that one party exercised such domination
over the mind and will of the other that the latter’s independence of decisions
was substantially undermined, and this domination brought about the
transaction, the victim will be entitled to relief on the ground of undue influence. 6

See Williams v Bayley (1886) L.R. 1 HL 200.

Where there is a special relationship

Where a confidential relationship exist between the parties, equity will presume
the existence of UI. The onus is on the other party to prove that the contract was
free from UI. The basis for this rule was stated in Tate v Williams (1866) L.R. 2 Ch.
App 55 at p. 61. See pp. 347-8 of Sagay.

The doctrine was successfully invoked in the following cases

Powell v Powell [1900] 1 Ch 243.
See Morley v Loughnan [1839] 1 Ch 736.
Turton v Sperni [1952] 2 TLR 516.
Lloyd’s Bank v Bundy

However the plea was unsuccessful in the following cases:

Williams v Franklin [1961] 1 All NLR 218 – UI was rebutted on the ground that the
defendant had independent advice and that the terms were fair, among other
things.
Allcard v Skinner – UI was rebutted on the ground that there was affirmation for 6
year after the influence had ceased.
National Westminster Bank plc v. Morgan [1985] AC 686, [1985] 1 All ER 826. –
P.344 Cheshire & Fifoot.
See also Isiaka Lawal v. Awoyemi (Unreported, See Sagay, p.353)

5
2nd edn, p.299.
6
Anson, 279.
 9

Nnadozie v Disengoff

Note that the relationship in which UI will be presumed does not apply to a
husband and wife. See Howes v Bishop [1909] 2 KB 390.

Note that each case turns on a meticulous examination of its own facts.

Unconscionable Bargains
The terms apply to a selection of cases in which the courts were asked to set aside
a contract on the ground that it was, in some way, unfair. Here, a party is inviting
the court not to enforce the strict terms of the contract. He may therefore seek to
avoid the contract entirely or seek to review it in his favour on the basis that the
terms are manifestly unfair, onerous or oppressive.

Factors which appear to have influenced the court in their conclusion that the
contract should or should not be set aside include the following:
(i) The substantive unfairness of the contract;
(ii) Any unfairness in negotiating process;
(iii) Weakness or disability on the part of the person seeking to enforce the
contract,
(iv) Wrongdoing on the part of the person seeking to enforce the contract,
and
(v) Lack of independent advice

The concern of the court for fairness of bargains is not a recent phenomenon. It
has a respectable history.
See Evans v. Llewellin (1787) 1 Cox Eq Cas 333.
Earl of Aylesford v. Morris (1873) 8 Ch App 484, CA
Fry v. Lane (1888) 40 Ch D 312
The Medina (1876) 1 P. 272, Probate Division
The Port Caledonia and The Anna (1903) P. 184
Schroeder Music Publishing Co. Ltd. v. Macaulay [1974] 1 W.L.R. 1308.
Clifford Davies Management v. W.E.A. Records [1975] 1 WLR 61, [19975] 1 All ER 237.

Lord Denning attempted to bring all these disparate cases under one coherent
doctrine which he called ‘inequality of bargaining power” in Lloyd’s Bank Ltd v
Bundy [1975] Q.B 326, (1974) 3 All ER 757.
Denning classified the doctrine into 5 and attempted a comprehensive definition.
See pp. 345-6 Sagay.

The principle of unconscionability was applied in the Australian case of

Commercial Bank of Australia Ltd v. Amadio (1983) 151 CLR 447. See pp.339-340
Cheshire & Fifoot.

Although there were old cases under the rubric of unconscionable bargains which
turned on the infirmity of one of the parties. It is doubtful if an English court
would now set aside a transaction merely because one of the parties is poor,
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ignorant or weak minded. The plea failed in the English case of Portman Building
Society v. Dusangh [2000] 2 All ER (Comm) 221.

A Northern Ireland court and a Canadian Court however set aside contracts on the
ground that one of the parties was poor, ignorant or weak minded. See Buckley v
Irwin [1960] and Knupp v. Bell (1968) 151 CLR 447.

However, the principle was not applied in the Nigerian case of African Songs Ltd v.
Adeniyi. See Sagay , p. 356.

Assignment
Read, summarise and comment on the article titled “An attempt at Codifying the
Equitable Doctrine of Unconcionable Dealings” Dan Svantesson Bond Law Review
Vol 33 Issue 3, p.53- 73.