Facts
- D&C Builders completed building work for Mrs. Rees and were owed a balance of £482.
- Mrs. Rees, aware that D&C Builders were experiencing financial hardship, offered a cheque for £300 in full settlement, stating that if it was not accepted, the builders would receive nothing.
- Under significant financial pressure, D&C Builders accepted the reduced sum but indicated reluctance.
- D&C Builders later sued Mrs. Rees for the outstanding £182.
- Mrs. Rees contended that promissory estoppel prevented the builders from recovering the balance.
- The court found that Mrs. Rees had taken advantage of the builders’ financial difficulties.
Issues
- Whether part-payment of a debt, accepted under economic pressure or duress, prevented the creditor from recovering the balance.
- Whether the principle of promissory estoppel could be invoked by a debtor who had acted inequitably or exerted illegitimate pressure.
- Whether financial or economic duress constitutes sufficient illegitimate pressure to vitiate a contract or agreement.
Decision
- The court held that the acceptance of part-payment did not bar D&C Builders from recovering the balance, as consent was obtained by economic duress.
- Promissory estoppel was not applicable because Mrs. Rees had acted inequitably by taking advantage of the builders’ financial distress.
- Lord Denning MR equated the undue pressure to intimidation, making the agreement unenforceable as a full settlement.
- The builders were entitled to the outstanding balance.
Legal Principles
- Economic duress can vitiate consent where one party applies illegitimate pressure, leaving the other with no practical alternative.
- Promissory estoppel cannot be relied upon where the party seeking to invoke it has acted inequitably or with improper pressure.
- The law distinguishes between genuine agreements and those entered under coercion, focusing on whether the pressured party had a real choice.
- The doctrine of duress encompasses economic coercion as well as physical threats, and the remedy is available where unfair advantage has been taken.
Conclusion
D&C Builders Ltd v Rees established that agreements made under economic duress are not binding, and promissory estoppel will not assist a debtor acting inequitably; creditors may recover the full balance despite accepting a lesser sum under pressure.