Economic Duress

Vitiating Factor

Definition (AO1)

• A pre-contract fact / Circumstance

• Which impairs the validity of the subsequent contract

• A contract may be voidable or void.

Vitiate = To make false

Economic Duress

Definition (AO1)

“Where the contract has been made as a result of illegitimate commercial pressure exerted by one of the CPs.” - (Making a threat to force someone into a contract).

Contract is not voluntary and has not ‘freely entered into’

Economic Duress

Case (AO3)

(Atlas Express Ltd v Kafco)

C demanded additional payment for deliveries from D, knowing D needed to avoid breach of contract with who they were supplying to as it was a contract for them.

3 Elements for ED seen in Atlas Express

Definition (AO1)

1. Illegitimate Pressure by CP2 against CP1 - A threat that is improper and not just ‘business negotiations’ or ‘driving a hard bargain’

2. Illegitimate pressure compels CP1 to contract - Has the threat left the other part with no choice but to agree to enter the contract. - If there was alternative action but chose to comply with threat then no duress.

3. Illegitimate pressure is a ‘significant case’ of CP1 contracting

Threats that can warrant illigitimate pressure

(AO2)

• Threats to commit a crime or tort will always be illigitimate pressure

• A threat to breach a contract may be illigitimate pressure

Limits that will make ED fail

Types (AO2)

• Normal commercial pressure

• Lawful action

• No protest made at the time

• Delays in taking legal action

• When other options were available at time

Limits that will make ED fail - Delay in legal action

Case (AO3)

(The Atlantic Baron)

Contract voidable for duress, but since Cs had left it so long in bringing their claim, they had lost the right to rescind.

Limits that will make ED fail - Lawful Action

Case (AO3)

(CTN Cash & Carry v Gallaher)

The threat to withdraw credit facility was lawful since under the terms of the credit agreement, credit could be withdrawn at anytime.

Therefore threat was lefitimate and ED could not be established

Remedies for Economic Duress

Definition (AO1)

So innocent CP may avoid the contract by recission and where contract is (part) performed:

• C may apply for restitution:

  • D returns any money / property acquired under the void contract

Remedies for Economic Duress - Recission

Definition (AO1)

The aim is to return the victim to the position they would have been in were it not for the duress, so the court may order property or money to be returned as well as voiding the contract between CPs

An equitable remedy and so is discretionary

When recission will not be available
Rule (AO1)

• When the innocent party has affirmed the contract i.e. they continued to act in accordance with the contract and took no steps to set the contract aside when no longer subject to duress.

  OR

• It is not possible to return the parties to their pre-contractual position (e.g. because property has been transferred on to an innocent third party), in which case damages may be available.