LWZ118 Lecture Notes - Lecture 6: Glaisdale, Domineering, Constructive Notice
Lecture 6
Contracts
DURESS means the presence of illegitimate pressure or threats stemming from Party A which influence
Party B to enter into a contract.
Result: Where duress is established, the contract is voidable. However, the courts may order recovery of
monies in cases of economic duress: Universe Tankships of Monrovia v International Transport Workers
Federation [1983] 1 AC 366.
There are three categories of duress:
1. Duress of the person (threats to life & limb);
2. Duress of goods (threats to property); and
3. Economic duress.
Elements of Duress –
1. Pressure amounting to compulsion of the will of the victim, and
2. The illegitimacy of the pressure exerted.
What amounts to ‘Compulsion’? - Coercion or vitiation of consent, thus abrogating victim’s choice. The
absence of choice can be proved by either of the following:
1.1. Protest
1.2. The absence of independent advice
1.3. A declaration of intention to go to law to recover the money paid or the property
transferred.
These elements, however, are not exclusive - the victim’s silence does not aid the bully.
What determines ‘illegitimacy’ of pressure? Many acts are done under ‘pressure’, but not duress. In
determining what is legitimate, consider two matters:
1.1. The nature of the pressure; and if required,
1.2. The nature of the demand which the pressure is applied to support.
Threat of unlawful action is illegitimate. Universe Tankships of Monrovia v International Transport
In Barton v Armstrong [1976] AC 104 at 121D per Lord Wilberforce and Lord Simon of Glaisdale: “the
pressure must be one of a kind which the law does not regard as legitimate.”
In Thorne v Motor Trade Association [1937] AC 797 at 806 per Lord Atkin, explained the difference
between Illegitimate Pressure and Unlawful Threats. He said, “The ordinary blackmailer normally
threatens to do what he has a perfect right to do - namely, communicate some compromising conduct to
a person whose knowledge is likely to affect the person threatened. Often indeed he has not only the right
but also the duty to make the disclosure, as of a felony, to the competent authorities. What he has to
justify is not the threat, but the demand of money.”
Elements – Will of the victim – In Crescendo Management Pty Ltd v Westpac Banking Corporation (1988)
19 NSWLR 40 at 45-46 the Court said, “In my opinion the overbearing of the will theory of duress should be
rejected. A person who is the subject of duress usually knows only too well what he is doing. But he chooses
to submit to the demand or pressure rather than take an alternative course of action. The proper
1
find more resources at oneclass.com
find more resources at oneclass.com
approach in my opinion is to ask whether any applied pressure induced the victim to enter into the contract
and then ask whether that pressure went beyond what the law is prepared to countenance as legitimate?”
Assessing Whether Duress Present -
Court will assess all of the relevant circumstances: Pao On v Lau Yiu Long [1980] AC 614.
Duress need not be the only reason why the contract was entered into: Barton v Armstrong [1973] 2
NSWLR 598; In Crescendo Management Pty Ltd v Westpac Banking Corporation (1988) 19 NSWLR 40 at
46, the court said, “It is unnecessary, however, for the victim to prove that the illegitimate pressure was
the sole reason for him entering into the contract. It is sufficient that the illegitimate pressure was one of
the reasons for the person entering into the agreement. Once the evidence establishes that the pressure
exerted on the victim was illegitimate, the onus lies on the person applying the pressure to show that it
made no contribution to the victim entering into the agreement.”
Categories of Duress – Duress of the Person
Involves actual or threatened violence to, or actual or threatened imprisonment of, the
victim or an associate of the victim, so as to induce the other person to enter into a contract. In
Barton v Armstrong [1973] 2 NSWLR 598, Armstrong was the chairman and held the largest sharing
holding in Landmark Corporation Ltd a public company. Barton was the managing director and also
had a substantial shareholding in. There were two other directors Bovil and Cottrel. There had been a
long history of ill will between the parties and a struggle over who should have controlling power
with Armstrong being the most aggressive. The other directors in the company were also unhappy
with Armstrong and wanted him to be removed for abusing certain privileges and they disagreed
with the way he ran the company believing him to be putting the company at risk of insolvency.
However, Armstrong refused to resign. The three managed to take control of subsidiary companies
and removed all credit facilities from Landmark Corp. When Armstrong discovered the credit had
been removed he made a number of death threats to Barton to pressure him into signing an
agreement which contained various elements including the purchase by Barton of Armstrong's
shares in the company at a substantial over value. Barton agreed to this partly due to the threats but
also due to the fact that it would mean that Armstrong would no longer have controlling interest and
he believed he would be able to turn the company around without Armstrong's dealings. However,
the company became insolvent shortly after and Barton sought to have the contract set aside.
Held: The contract could be set aside. Where there is duress to the person there was no obligation
to show that he would not have entered the agreement but for the threat, it simply being sufficient
that the death threats were a cause.
A threat must be of death or bodily harm or imprisonment and be calculated to cause fear
and actually cause fear on the part of the victim (ibid)
Duress of Goods - Where a person unlawfully seizes or detains, damages or destroys the property of
another person, or threatens to do so, so as to induce the other person to enter into a contract, this will
constitute duress (Hawker Pacific Pty Ltd v Helicopter Charter Pty Ltd (1991) 22 NSWLR 298)
Economic Duress
Illegitimate pressure must be distinguished from the rough and tumble of the pressures of
normal commercial bargaining (DSND Subsea v Petroleum Go-Services [2000] BLR 530)
Where illegitimate pressure is applied by a party towards the contractual, proprietary or
other rights of another party, whether actual or by threat, in order to obtain some benefit to which
find more resources at oneclass.com
find more resources at oneclass.com
Lecture 6
Contracts
that person is not otherwise entitled, the contract will be vitiated by economic duress (North Ocean
Shipping Company Ltd v Hyundai Construction Company Ltd [1978] 3 All ER 1170).
Ordinary commercial pressure typical of the particular transaction in question will not
amount to illegitimate pressure (Pao On v Lau Yiu Long [1979] 3 All ER 65)
Economic Duress – Examples
North Ocean Shipping Company Ltd v Hyundai Construction Company Ltd [1978] 3 All ER
1170). The defendants agreed to build a ship for the claimants for a certain price specified in US
dollars. After entering the contract the US dollar was devalued by 10%. The defendants threatened
not to complete unless the claimants paid an additional 10% on the contractually agreed price. The
claimants had a valuable charter lined up so agreed to pay the additional sums and did pay them
without protest. 8 months after delivery of the ship the claimants brought an action to recover the
additional sums paid.
Held: The contract was voidable for duress, however, since the claimants had left it so long
in bringing their claim they had affirmed the contract and lost their right to rescind.
Crescendo Management Pty Ltd v Westpac Banking Corporation (1988) 19 NSWLR 40
NATURE OF EQUITY
“Unconscionability was and remains the fulcrum upon which entitlement to equitable relief turns”: Lift
Capital Partners Pty Ltd v Merrill Lynch International (2009) 253 ALR 482 at 507
Spigelman J in Attorney General of New South Wales v World Best Holdings Limited & Ors [2005] NSWCA
261:
“Unconscionability is a concept which requires a high level of moral obloquy. If it were to be applied as if it
were equivalent to what was “fair” or “just”, it could transform commercial relationships in a manner
which the Minister expressly stated was not the intention of the legislation. The principle of
“unconscionability” would not be a doctrine of occasional application, when the circumstances are highly
unethical, it would be transformed into the first and easiest port of call when any dispute … arises.”
UNDUE INFLUENCE – arises when a gift/contract results from unfair and undue pressure by the beneficiary
and not free and independent judgment. In Johnson v Buttress (1936) 56 CLR 113, Johnson (the appellant),
had for many years looked after the deceased, Buttress. Buttress was illiterate, unsophisticated in business
affairs and reliant upon Johnson. Buttress transferred ownership of a piece of land to Johnson without
receiving independent legal advice. After Buttress' death, this transfer was challenged by his son.
The Court set aside the transfer. Although there was no evidence that J had actually pressured
Buttress to make the transfer, there was an antecedent relationship between them (because Buttress
placed trust and confidence in Johnson and relied upon her for advice.) which cast upon her the burden of
proving that she had not taken advantage of her position. This she had been unable to do. Importantly,
there was evidence that Buttress did not realise he was parting with his property permanently.
Further the court explained 'Presumed' undue influence arises whenever the relation between the
parties is such that the donee is in position to exercise dominion over the donee by reason of trust and
confidence reposed in the done. Where presumed undue influence arises the donee must prove that
3
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
Duress means the presence of illegitimate pressure or threats stemming from party a which influence. Result: where duress is established, the contract is voidable. However, the courts may order recovery of monies in cases of economic duress: universe tankships of monrovia v international transport workers. Duress of the person (threats to life & limb); Elements of duress : pressure amounting to compulsion of the will of the victim, and, the illegitimacy of the pressure exerted. Coercion or vitiation of consent, thus abrogating victim"s choice. The absence of choice can be proved by either of the following: A declaration of intention to go to law to recover the money paid or the property. These elements, however, are not exclusive - the victim"s silence does not aid the bully. Many acts are done under pressure", but not duress. In determining what is legitimate, consider two matters: The nature of the pressure; and if required,
