Introduction
Duress, in the context of contract law, refers to illegitimate pressure exerted by one party to compel another to enter into a contract or agreement. This concept undermines the fundamental principle of free consent, a necessary element for a valid contract. The legal system recognizes that agreements made under duress are not genuine expressions of the parties' intentions and, therefore, provides remedies to the party subjected to such pressure. This principle extends beyond physical threats and encompasses situations where economic or other forms of coercion are employed to force a party's hand. Key requirements for establishing duress typically involve demonstrating that the pressure was illegitimate, that it caused the coerced party to enter into an agreement they otherwise would not have, and that the coerced party did not have a practical alternative. Formal language is used throughout the legal framework of duress, emphasizing its gravity within contract law.
D&C Builders v Rees: An Examination of Duress and Promissory Estoppel
The case of D&C Builders v Rees [1966] 2 QB 617 presents a situation where duress and promissory estoppel intersect, providing valuable insight into contract law. The plaintiffs, D&C Builders, had completed work for the defendant, Mrs. Rees, and were owed a balance of £482. Mrs. Rees, knowing that the builders were in financial difficulty, offered them a cheque for £300 in full settlement, making it clear that if the offer was not accepted, they would receive nothing. The builders, under significant financial pressure, reluctantly accepted the lesser sum. The builders subsequently sued for the outstanding balance of £182, and Mrs. Rees argued that they were estopped from doing so. Lord Denning MR equated the undue pressure brought to bear on the builders with the tort of intimidation. He refused to apply estoppel due to Mrs. Rees' inequitable actions. This case provides an important view into the judicial approach when considering financial pressure and contract enforceability.
Duress to the Person and Goods
Historically, duress was primarily understood as direct threats of physical harm to a person. The case of Barton v Armstrong [1976] AC 104, illustrates this concept. In this case, a company chairman threatened the managing director with death unless he agreed to purchase the chairman’s shares. The Privy Council ruled that if the threats were one of the reasons for the managing director's action, relief could be granted even if the managing director would have entered into the contract without the threats. The onus of proof was placed on the threatening party to show that the threats did not influence the decision. This demonstrates that even if a decision has independent merit, pressure of duress voids agreement.
However, the scope of duress expanded beyond direct violence. Skeate v Beale (1840) 11 Ad&El 983 addressed the situation of duress to goods. The court rejected a claim of duress when a tenant, threatened with the seizure of his goods, promised to pay rent. This case was later distinguished, however, in Maskell v Horner [1915] 3 KB 106. In Maskell, the plaintiff paid illegal tolls under the threat of having his market stall closed and his goods seized. The Court of Appeal found that this situation constituted duress and allowed the plaintiff to recover the money paid, indicating a move towards recognizing non-physical forms of coercion as duress. The court noted that the agreement in Maskell was compulsory, unlike the voluntary agreement in Skeate. This point highlights the legal system's increasing focus on the absence of free choice when assessing duress.
The Development of Economic Duress
The concept of economic duress emerged to address coercion that does not involve physical force but arises from exploitation of a party's financial vulnerabilities. The case of The Sibeon and The Sibotre [1976] 1 Lloyd’s Rep 293 was pivotal in this area. The charterers of two ships threatened bankruptcy if the hire rates were not lowered, and the owners were fully aware that the charterers had no other assets. Kerr J, while recognizing the pressure, said that commercial pressure alone would not be enough for economic duress, but that the consent of the other party must be overborne. The judge stated that two questions must be answered: whether the victim protested at the time of the demand, and whether the victim intended to repudiate the new agreement. This case highlighted that coercion can be present in commercial situations, but that the courts must also look at whether the pressured party had any real alternative to their actions.
The Atlantic Baron [1979] QB 705 established that a threat to break a contract could constitute economic duress. In this instance, a shipbuilder demanded a 10% price increase due to a change in the value of the US dollar, threatening to cease construction. Mocatta J found that this threat constituted illegitimate pressure and that the contract for extra payment was voidable. However, the plaintiff's right to set aside the contract was lost due to an eight-month delay. This case emphasizes the importance of timely action when seeking remedies for economic duress. The delay suggests acceptance of the new terms.
Key Tests for Economic Duress
Pao On v Lau Yiu Long [1980] AC 614 established key factors in determining whether economic duress exists. The Privy Council stated that there must be "coercion of will such that there was no true consent." Lord Scarman, agreeing with Kerr J's position in The Sibeon and The Sibotre, established four questions to help determine the existence of duress: did the coerced person protest; was there an alternative course available (such as a legal remedy); was the coerced person independently advised; and, did the coerced person take steps to avoid the contract once it had been entered into? This case suggests the courts must look at the options open to a party, and whether they could reasonably have avoided entering the agreement.
In B&S Contractors v Victor Green Publications [1984] ICR 419, a contractor threatened not to erect stands for an exhibition unless he was paid an extra sum. This left the client with no viable option given the deadline for the exhibition, and it was decided the payment was made under duress. The court took into account that the client had no practical alternative, which suggests a degree of immediacy in the threat must exist for economic duress to apply. The Alev [1989] 1 Lloyd’s Rep 138 involved a shipowner threatening to withhold cargo unless paid extra costs, which was held to constitute economic duress. Here, the courts emphasized the illegality of the threat, as the shipowners were legally required to carry the cargo. The presence of an illegal threat further supports a claim for economic duress.
Relationship Between Duress and Intimidation
The case of Morgan v Fry [1968] 2 QB 710 provides a definition of the tort of intimidation, which has similarities to duress. Lord Denning MR outlined that intimidation occurs when a person makes a threat to use unlawful means to compel another to obey their wishes. If the threatened person complies with the demand to avoid execution of the threat, they can sue for intimidation. This indicates that a connection exists between intimidation and duress, both involve pressure, however intimidation also requires a demonstrable unlawful action. This definition of intimidation can also apply in cases of duress, as in D&C Builders v Rees.
D&C Builders v Rees [1966] 2 QB 617 uses the concept of intimidation in relation to promissory estoppel. Lord Denning MR identified that the undue pressure placed on D&C Builders by Mrs. Rees was akin to intimidation, and it was because of this pressure that the court was unwilling to apply the principle of promissory estoppel. His Lordship was keen to stress that in the circumstances of the case it would not be equitable to allow promissory estoppel, as the actions of Mrs. Rees were inequitable. This indicates that an equitable remedy will be subject to scrutiny by the courts, and an abuse of position will mean they will not apply it. In this case, the court was unwilling to apply promissory estoppel because Mrs. Rees knew about the builders' financial situation, and had deliberately taken advantage of them.
Conclusion
The legal principles around duress are designed to safeguard fairness and equity in contractual arrangements, ensuring agreements are made through genuine consent, not coercion. Duress evolved from solely addressing physical violence, developing to include threats to goods, and finally into the realm of economic duress. Cases like Barton v Armstrong provided the basis for duress to the person, Maskell v Horner moved the law to include duress of goods, and The Sibeon and The Sibotre and Pao On v Lau Yiu Long provided insight into economic duress, establishing key tests for the establishment of economic duress. The court considers whether the coerced party had an alternative course, whether they protested at the time of demand, and whether the agreement is repudiated. The case of D&C Builders v Rees demonstrates the court’s ability to use the principles of duress to prevent inequity when considering the applicability of promissory estoppel. This comprehensive analysis shows that the application of duress is complex and situation-specific, underlining the importance of understanding the distinctions between different types of pressure in contract law. The concepts of duress and intimidation as defined in Morgan v Fry highlight the importance of lawful conduct in contract negotiations.
