LLB170 Lecture 10: Week 10 – Vitiating Factors – Abuse of Power
Week 10 – Vitiating Factors – Abuse of Power: Duress, Undue Influence, Unconscionable
Dealing
Vitiating Factors
'the law in general leaves every man at liberty to make such bargains as he pleases, and to
dispose of property as he chooses. However improvident, unreasonable or unjust such
bargains or dispositions may be, they are binding on every party to them unless he can
prove affirmatively the existence of one or more of the recognised invalidating
circumstances......' Brusewitz v Brown [1923] NZLR 106 (Salmond J)
Effect of Proving Abuse of Power
• Contract is rendered voidable
• Innocent party can elect to rescind or affirm
• Right to rescind can be lost by:
- Election to affirm (Hawker Pacific)
- Estoppel (Hawker Pacific)
- Intervention of innocent third party rights
• Justified on the basis that it would be unconscionable for the defendant to retain any
benefits obtained under the contract, given his/her improper behaviour
• Procedural unfairness – concerned with unfairness in the way in which the contract
was bought about e.g. misleading conduct
• Substantive unfairness – the unfairness of the terms of the contract itself e.g.
inadequate consideration or harsh, one-sided terms
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Duress
• Procuring contractual assent by illegitimate threats/pressure - developed at
common law to deal with coercion – originally very limited in scope
• Not all forms of pressure are regarded as duress
• Main remedy – rescission
- May not be available if restoration of parties to their original position is
impossible
• A contract which has been entered into due to such duress will be
considered voidable
Two key elements:
1. Illegitimate Pressure Applied to P – ore tha oral ecessar
Pressure is illegitimate if:
1. Consists of unlawful threats, or
2. Amounts to unconscionable conduct
3. Absence of choice, e.g. look to see
- if there is any protest
- threats
- immediately after the threat has subsided → legal action bought
• A lawful threat can be illegitimate if there is pressure put on someone
However, these are not closed categories. Overwhelming pressure not constituting unlawful
threats or unconscionable conduct can still amount to duress
A party who has entered a contract as a result of duress will be entitled to rescind the
contract
Three categories recognised:
• Duress to person – actual or threatened violence to, or unlawful imprisonment of, a
contractig pat o pats fail Barton v Armstrong)
- At common law, the doctrine was extremely narrow, which meant that subtle
ways of manipulation were not remedied. Equity intervened to recognise such
pressures as coercion and as duress. This included cases not only of violence but
also where a promise was induced by a threat of lawful prosecution of a person
or his family
- The duress needs to be only one of the reasons why the contract was entered
into, and not the sole or main reason
- It is up to the defendant (or threatener) to prove that the threats played no role.
A finding that the threatened party would have still entered the contract without
the threats will not automatically rule that there is no duress
Crescendo management Pty Ltd v Westpac Banking Corp (1988) 19 NSWLR 40
• It is unnecessary for the victim to prove the duress was the sole reason for him entering the contract
• It only needs to be a reason
• Then, the onus lies on the threatener to prove it made o otiutio to the itis eteig the
agreement.
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• Duress of goods – wrongfully detaining or damaging or threatening to detain or
daage a pats goods Hawker Pacific)
- Money paid under duress can be claimed back in restitution for unjust
enrichment (Maskel v Horner)
- If a person promised to pay money in order to obtain the release of goods
unlawfully taken or retained, there was authority that provided consideration
as gie suh a poise as efoeale ad the otat ouldt e aoided
on the basis of duress (Skeate v Beale)
- The above was rejected in Astley v Reynolds where the money was paid to
prevent unlawful seizure or to obtain goods actually seized
• Economic duress – threats to a pats eooi iteests
- E.g. threat to discontinue performing existing contractual obligations if not
additional payments are made (North Ocean Shipping)
- Extra money paid is recoverable
- Must distinguish illegitimate pressure amounting to duress from legitimate
commercial pressure (Crescendo Management)
- If the plaintiff entered into re-negotiations with the intention of closing the
matter in order to avoid the inconvenience of litigation, such a contract will be
upheld as a settlement
- If the plaintiff entered to avoid illegitimate pressure, to avoid threat and its
consequences, the contract will be voidable
- Note relationship between economic duress and the existing duty cases (Stilk v
Myrick; Wigan v Edwards; Williams v Roffey Bros; Musumeci v Winadell)
- Example: if a builder is building you a house and wont progress until you pay and
extra amount however knows you have sold your existing house and need to
move into this one, this may amount to duress
2. That Ipairs Ps Coset, Causig P to Eter ito the Cotract or Var Eistig
Contract – i.e. illegitimate pressure forces the person to enter into contract
• Pessue ust esult i patial effet of 'opulsio of Ps ill' – consent given
because there is no other practical choice available (Universe Tankships)
• Absence of choice often indicated by protest at time of submission or party declaring
its at is ithout pejudie to its legal ights Universe Tankships)
• Does the pessue eed to e the sole ause of pats et ito otat/ o
contractual variation? (Barton v Armstrong)
• Who bears the onus of proof in establishing the pressure caused P to enter contract?
(Barton v Armstrong)
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
Week 10 vitiating factors abuse of power: duress, undue influence, unconscionable. "the law in general leaves every man at liberty to make such bargains as he pleases, and to dispose of property as he chooses. Effect of proving abuse of power: contract is rendered voidable, right to rescind can be lost by: Innocent party can elect to rescind or affirm. Duress: procuring contractual assent by illegitimate threats/pressure - developed at common law to deal with coercion originally very limited in scope, not all forms of pressure are regarded as duress, main remedy rescission. May not be available if restoration of parties to their original position is impossible: a contract which has been entered into due to such duress will be considered voidable. Two key elements: illegitimate pressure applied to p (cid:858)(cid:373)ore tha(cid:374) (cid:374)or(cid:373)al (cid:374)ecessar(cid:455)(cid:859) Overwhelming pressure not constituting unlawful threats or unconscionable conduct can still amount to duress.
