DURESS, UNDUE INFLUENCE & ECONOMIC DURESS

The essence of an agreement and hence a legally binding contract is founded upon the parties
giving their free consent to be bound by the terms of the agreement. It follows that where a party
is coerced into a contract by threats or undue pressure that stifles the principle of free consent,
that individual should not be bound by that contract. Both the common law and equity concurred
in this fact, the common law through its strict doctrine of duress and equity through the doctrine
of undue influence, which had a wider sphere of operation than duress. Mere inequality of
bargaining power is, as a general rule, insufficient to vitiate a contract entered into, though in
more recent years Lord Denning attempted to develop a general concept under this heading
whereby relief would be given to an individual who had not entered into a contract as a free
agent. Finally, the Contract Act has intervened to protect individuals in certain types of contracts.

DURESS
Key points to Note:
Duress looks at circumstances where one party alleges that he only entered into a contract as a
result of improper pressure of some kind.
Circumstances under which consent to contract is vitiated.
Explicit threats are needed, not implied ones.
Core authorities:
Universe Tankships of Monrovia v. International Transport Workers' Federation, The Universe
Sentinel [The Universe Sentinel] [1983]

Any agreement obtained by threats or undue or improper persuasion or pressure is insufficient.

Where a party is coerced into a contract by threats or undue or improper pressure that adversely
affects the notion of free consent, he or she should not be bound by that contract. In Uganda,
improper pressure is viewed from the lens of duress/coercion and undue influence. This section
examines the nature and scope of the common law and equitable concepts of duress/coercion and
undue influence respectively.
As professor Twinomugisho notes, although the Contracts Act does not use the term duress, it
provides in section 13 (a) that consent of the parties to the contract is not free where it is
obtained by coercion, coercion is defined in Section 2 as ‘the commission or threatening to
commit any act forbidden under any law or the unlawful detaining or threatening to detain any
property, to the prejudice of any person with the intention of causing any person to enter into any
agreement’.

Duress at Common Law

Duress at common law relates to contracts induced by violence or the threat of violence. The act
or threatened act must be illegal in that it may amount to either a tort or a crime. It follows that if
the threatened act is one which would otherwise be lawful then this cannot amount to duress (as,
for example, a threat of lawful imprisonment as in Williams v Bayley (1886) LR 1 HL 200). The
effect of duress at common law is to render the contract voidable.

At common law it was always considered that duress had to be directed against the person and
that a threat to goods could not amount to duress. At common law, for the plaintiff to
successfully plead duress, it had to be duress of his or her person and not his or her property.
However, under the Contract Act, (see section 2) threats to detain his or her property may
amount to coercion.
There are 3 types of duress:
1. Physical duress,
2. Duress of goods,
3. Economic duress.

Core requirements
- Universe Tankships of Monrovia v. International Transport Workers' Federation, The Universe
Sentinel [TheUniverse Sentinel] [1983]: L. Scarman identified 2 elements to duress: the first was
pressure amounting to compulsion of the will of the victim; the second was the illegitimacy of
that pressure. When looking at the illegitimacy of the pressure, the act should in turn look to 2
things (a) the nature of the pressure (eg is is an illegal act? Blackmail etc), and (b) the nature of
the demand which the pressure is applied to support (was the objective in making the threat
legitimate?)
- Attorney-General v R [2003]: Former soldier in the SAS made an agreement with a publisher to
publish his account of the 1991 Gulf War. He had earlier signed a confidentiality agreement
when joining the SAS. This came to the attention of the Brit Gov. The AG brought an action for
breach of contract. The soldier claimed he had signed this confidentiality agreement because if
he did not, he would have been removed from the SAS and demoted to the regular army, which
he would have regarded as a public humiliation. The Privy Council identified the key essential
requirement of duress to be illegitimate pressure amounting to compulsion of the will of the
victim. However, they held that he was pressured into signing the agreement, but the pressure
was not improper or illegitimate because restriction disclosures about the military operations was
a legitimate objective for the army. Appeal dismissed.

Physical duress:
- Barton v Armstrong (1976): MD of a company executed a deed on behalf of his company
agreeing to pay £320,000 to A to remove him from Board of Directors. B entered this partly
because it made good commercial sense, and partly because A threatened to kill him. Privy
Council held that A’s threats were a reason for B to enter into the contract even if B would
probably have done so anyway. Absence of choice… does not negate consent in law; for this the
pressure must be one of a kind which the law does not regard as legitimate. Thus, out of the
various means by which consent may be obtained - advice, persuasion, influence, inducement,
representation, commercial pressure - the law had come to select some which it will not accept
as a reason for voluntary action: fraud, abuse of relation of confidence, undue influence, duress
or coercion.
In this the law, under the influence of equity, has developed from the old common law
conception of duress - threat to life and limb - and it has arrived at the modern generalisation
expressed by Holmes J - ‘subjected to an improper motive for action” (Lord Wilberforce and
Lord Simon).

Duress of goods
The nineteenth century limitation on duress meant that it could not be applied to 'duress of
goods ‘- not considered to be sufficient duress to enable a contract to be avoided (Skeate v Beale
(1840).
However, there was a restitution rule to the effect that money paid to obtain the release of goods
wrongfully retained, or to avoid their seizure, may be recovered (Maskell v Horner [1915] 3 KB
106).
- Vantage Navigation v Suhail and Saud Bahwan, (The Alev) [1989]: P’s ship was chartered to
carry a cargo of steel. The charterers defaulted on payments. Meanwhile, ownership of the steel
passed to S. V told S that unless they paid all outstanding monies owed by the charterers, they
would not receive the cargo of steel. S agreed but later sought to have the agreement set aside.
Held- that the agreement could be avoided becauseit was entered into under illegitimate threat of
(i) duress of goods, and (ii) economic duress.
Economic duress
Establishing the boundaries of acceptable behaviour is difficult - economic pressure clearly has
a legitimate place in business dealings.
The “rough and tumble” of business - “If you don’t agree to this contract, we will take our
custom elsewhere”or “we will not give you credit in future” or “we will provide these goods to
your main competitor at a discount”.
The courts will intervene only where one party enters into a contract he would not have entered
into if it were not for the threats.

Although at common law, the notion of duress does not extend to goods or other property, courts
have developed what is known as economic duress. Where there is undue pressure, the courts
may intervene. For example, in D & C Builders Ltd v. Rees, Lord Denning refused to invoke
estoppel on grounds that the wife, who knew that the builders were in urgent need of money,
exerted improper pressure to compel them to accept a sum, which was substantially less than the
one they were owed.

2 key questions:

(1) Were the defendant’s threats legitimate?

(2) Did the claimant enter into the contract at least partly as a result of illegitimate threats from
the defendant?
In Occidental Worldwide Investment Corporation v Skibs A/S Avanti, The Sibeon and The
Sibotre [1976] 1 Lloyd’s Rep 293 There was a worldwide recession in the shipping industry with
the result that the charter rates had fallen substantially. The charterers of two ships renegotiated
the rates of the charters having warned the owners that they would become insolvent unless this
was done, although it was shown that the existing rates would probably not have had this effect
on the charterers. They also stated that should action be taken against them for breach of contract
no benefit would accrue to the owners since they, the charterers, had insignificant assets against
which a claim could be made. The charterers were also cognisant of the fact that, should the
charterers break their contract, the owners would be highly unlikely to be able to re-charter the
vessels given the depth of the recession. This would result in the ships being laid up and the
owners themselves would probably be forced into liquidation. This was a grossly pessimistic
outlook, but nevertheless the defendants, the owners, agreed to reduce their hire rates. Later they
withdrew both ships from the charters. The charterers sued claiming that the contract had been
wrongly repudiated, whilst the owners claimed that they had renegotiated the charters only
because of the duress placed upon them by the charterers. It was held that the owners’ claim for
duress would fail. Kerr J rejected the early doctrine of duress that was based simply on a threat
of physical violence.
He stated:
I do not think that English law is as limited . . . For instance, if I should be compelled to
sign a leas or some other contract for a nominal but legally sufficient consideration under
an imminent threatnof having my house burnt down or a valuable picture slashed, though
without any threat of physical violence to anyone, I do not think that the law would
uphold the agreement. I think that a plea of coercion or compulsion would be available in
such cases . . .
In this statement Kerr J unlocked the door to the development of a notion of economic duress,
albeit that he had not pushed the door wide open. He was cautious, stating that mere commercial
pressure was inadequate to set up the defence. He considered that there had to be such a degree
of coercion of will that the other party was deprived of their ability freely to consent. How was
this test to be satisfied? Kerr J identified two questions that had to be asked before the test could
be satisfied. First, did the victim protest at the time of the demand and, secondly, did the victim
regard the transaction as closed or did they intend to repudiate the new agreement?

-D & C Builders v Rees (1966): P builders did work for Ds, owed £500. D knew P was in
financial difficulties, offered them £300 and told them they were unlikely to receive more. P
accepted part-payment, later attempted to recover the balance of the debt. Held- P could recover
the balance of the debt because consent to part-payment was no true accord.

-Northern Ocean Shipping Co v Hyundai construction, The Atlantic Baron (1979): Devaluation
of the dollar led to a demand for an increase in the price payable under a contract for the
construction of a tanker. The builders of the tanker were adamant in insisting on a higher price
without having any legal justification for doing so. The owners offered an arbitration process but
this was rejected. The plaintiffs paid the extra money because they had a lucrative contract
arranged with Shell.
The facts of the case were that the defendants had agreed to build a tanker for the plaintiffs at a
price to be payable in five instalments in dollars. The plaintiffs paid the first instalment but then
the dollar suffered a 10 per cent drop in the international money market. The defendants
demanded a 10 per cent increase in the contract price, stating that they would not complete the
ship unless this was forthcoming. At the time the defendants were not aware that this threat was
particularly damaging to the plaintiffs since they had an agreement to charter the ship when it
was completed. The plaintiffs agreed to pay the extra money despite the fact that, as they pointed
out to the defendants, they were not legally obliged to do so. Eventually all four of the further
instalments were paid, increased by 10 per cent, and the plaintiffs took delivery of the ship. Eight
months later the plaintiffs sought to recover the extra moneys paid, but failed in their action.
While Mocatta J considered that this was a case of economic duress, he held that they would be
unable to recover since their delay in seeking the recovery of the extra moneys paid amounted to
affirmation of the contract, even if they had no intention of affirming the contract as such.
The court found that the demand had been made under compulsion – The defendant’s threat to
break the contract was made with no legal justification and the Plaintiff had no real alternative
but to agree. This amounted to economic duress. Because the Plaintiffs delayed their claim for 8
months they actually lost, but this case is very important because it recognised the possibility of
duress based on improper commercial pressure.
The Universe Sentinel (1983): A trade union instructed its members not to deal with the P’s ship
during an industrial dispute, thereby preventing it from leaving port. In order to escape from this,
the owners made a
£6500 payment to the union’s welfare fund. They later brought an action to recover this as a
payment made under duress. Trade union admitted the economic pressure but claimed demand
was made in furtherance of a trade dispute and so was protected by Section 13 of the Trade
Union Relations Act 1974.
Lord Scarman identified 2 elements to duress: the first was pressure amounting to compulsion
of the will of the victim; the second was the illegitimacy of that pressure.
When looking at the illegitimacy of the pressure, the ct should in turn look to 2 things (a) the
nature of the pressure (eg is is an illegal act? Blackmail etc etc), and (b) the nature of the demand
which the pressure is applied to support (was the objective in making the threat legitimate?)
- Universe Sentinel: Held- That
(i) potential loss from was so catastrophic as to overcome their consent, and
(ii)unlawful under Trade Union Relations Act 1974. The payment was recoverable.

Pao on v Lau Yiu Long (1980): P threated not to go ahead with a contract for the sale of shares a
company unless D’s agreed to negotiate certain arrangements in their business relationship. The
D agreed, but when P tried to enforce these agreements at a later date, D claimed they had been
extracted under duress and were therefore voidable. Lord Scarman identified four factors as
being relevant as to whether a person acted voluntarily or under duress:
“[I]t is material to inquire whether:
 the person alleged to have been coerced did or did not protest;
 (ii)whether, at the time he was allegedly coerced into making the contract, he did or did
not have an alternative course open to him such as an adequate legal remedy;
 (iii) whether he was independently advised; and
 (iv) whether after entering the contract he took steps to avoid it.”

In Pao case- claim failed because D had an alternative course open i.e. He has an adequate legal
remedy in anaction for specific performance in relation to the earlier agreement that he could
have pursued instead of submitting to pressure.

-B & S Contractors v Victor Green Publications (1984): contractor who had undertaken to
erect stands for an exhibition told his client, less than a week before the exhibition was due to
open, that the contract would be cancelled unless the client paid an additional sum to meet claims
which were being made against the contractor by his workforce. The consequence of not having
the stands erected in time would have been disastrous for the client – reputation, damages. Held
that the payment had been made under duress and thatthe client was entitled to recover it back.
-Atlas Express Ltd v Kafco (1989): D’s were a small manufacturing company who had a contract
with
Woolworths, A were the company they employed to make their deliveries. A realised they had
charged far too little for their services, and told K that if they did not increase the charge for
transport, they would not make deliveries. K could not risk losing the contract with W, and so
agreed to pay an increased charge under protest. K later refused to pay, A sued, K resisted on the
grounds of duress. The ct accepted D’s argument that losing the contract with Woolworths would
have been so disastrous for K that they had no choice but to submit to the demands of Atlas. The
threatened breach of contract amounted to illegitimate pressure. K did not have to pay the extra
charge.

Williams v Roffey Bros (1991): Courts recognised that practical benefit of performing timely
performance of an existing obligation means that situations of duress will not be a bar to finding
consideration. Economic duress now controls the limits of “more for the same” agreements.
Courts will still want to prevent opportunistic exploitation of the need for timely completion,
difficulty in finding replacement etc.

Can a perfectly lawful act constitute duress?

“The origin of the doctrine of duress in threats to life and limb, or to property, suggests strongly
that the law regards the threat of unlawful action as illegitimate, whatever the demand. Duress
can, of course, exist even if the threat is one of lawful action: whether it does so depend upon the
nature of the demand. Blackmail is often a demand supported by a threat to do what is lawful”
(Lord Scarman in Universe Sentinel).

-CTN Cash and Carry v Gallaher (1994): P ordered cigarettes worth £17,000 from D. D made a
mistake, delivered them to the wrong warehouse, it was burgled and the cigarettes were stolen. D
believed mistakenly as a matter of law that the cigarettes were at P risk when they were stolen,
regardless of their mistake. They therefore insisted that P should pay for them, and backed this
up with a threat to withdraw credit from the pls. P reluctantly paid, but then brought an action to
recover the money on the basis that it had been paid under duress. CoA found on the facts that
there was no duress, partly because the threat was issued in good faith by D. Though it looked
like they were abusing their position, it was lawful for D to insist they would no longer grant
credit to the pls. The courts showed a reluctance to extend duress to situations where a fully
lawful

-Occidental Worldwide Investment v Skibs (The Sibeon & The Sibotre) (1976): The defendants
chartered two vessels from the claimant. The defendants told the claimants that they would go
bankrupt if they did not lower the cost of charter. The claimants feared that they would lose
valuable customers and they were also being owed substantial amounts of money by the
defendant which they feared they would lose if the defendants did become insolvent. The
claimants therefore agreed to renegotiate the contract to lower the cost of charter. Held: To
amount to economic duress there had to be a coercion of the will so as to vitiate consent.
Commercial pressure was not sufficient.

-Smith v William Charlick ltd (1924): Australian Wheat Wharvest Board, a monopoly supplier,
threatened not to supply a miller with flour in the future. This refusal was not a breach of any
existing contract. The demand was made for the payment of a ‘surcharge’ additional to the cost
of wheat. The High Court said that the surcharge could not be recovered because as a general
principle, refusing to deal (not being in breach of contract), should not amount to economic
duress. The threat not to contract is implicit in all contract negotiations.
Relating to application of Ugandan cases of the principles underlying duress, the decision of
Kerr J in Occidental Worldwide Investment case above, which was largely confirmed by
Scarman LJ in Pao On case above, was applied by Mulyagonja Kakooza J in Steven Seruwagi
Kavuma v. Barclays Bank (U)Ltd, where the judge held that the applicant was not induced to
sign the consent judgment by duress.

In another case of Makubuya E. William t/a Polla Plast v. Umeme (U) Ltd,where the plaintiff
contended that he signed a document in which he undertook to clear outstanding electricity bills
under duress, Madrama J stated that for economic duress to be made out, the pressure must be
unlawful; it must be a wrongful act of force which overcomes the free will of a party. That the
defendant did not exert unlawful pressure since it was exercising its lawful right to disconnect
electricity as the plaintiff had a huge outstanding bill. In Liberty Construction Co. Ltd v. Lamba
Enterprises Ltd, it was also held that in order to amount to economic duress, the pressure
complained of must be illegitimate and improper.

Remedies
The following remedies are available to a party who was coerced into entering a contract against
their will.
The contract is voidable if duress is found.
The remedy for duress is rescission of the contract, though it can be lost by affirmation of the
contract, lapse of time or the intervention of third party rights, just the bars to the remedy of
rescission discussed under misrepresentation
It should be noted that damages are not available for duress, even where the contract is not
rescinded.