Defenses to enforceability - Duress and undue influence

Learning Outcomes

After reading this article, you will be able to identify and apply the rules governing duress and undue influence as defenses to contract enforceability. You will understand the elements, types, and consequences of each defense, distinguish between them, and analyze their effect on contract validity in MBE-style scenarios.

MBE Syllabus

For MBE, you are required to understand when a contract may be set aside due to improper pressure or unfair persuasion. This article covers:

  • Recognizing duress as a defense to contract enforcement.
  • Distinguishing between physical, economic, and third-party duress.
  • Understanding undue influence and its elements.
  • Identifying the effect of duress or undue influence on contract validity.
  • Applying these defenses to typical MBE questions.

Test Your Knowledge

Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.

  1. Which of the following is most likely to render a contract voidable?
    1. A party enters a contract after being threatened with lawful litigation.
    2. A party signs a contract after being threatened with immediate physical harm.
    3. A party is persuaded by a friend to accept a low offer.
    4. A party is offered a better deal by a competitor.
  2. Undue influence generally involves:
    1. A threat of violence.
    2. A misrepresentation of law.
    3. Abuse of a position of trust to gain an unfair advantage.
    4. A mistake about price.
  3. If a contract is entered into under economic duress, the typical remedy is:
    1. The contract is automatically void.
    2. The contract is voidable at the option of the pressured party.
    3. The contract is enforceable regardless of duress.
    4. The contract is enforceable only if in writing.

Introduction

Contracts require genuine agreement. If a party's consent is obtained by improper threats or unfair persuasion, the contract may not be enforceable. The two main defenses in this area are duress and undue influence. Both allow a party to avoid a contract if their will was overborne, but the legal standards and consequences differ.

Duress

Duress arises when one party is induced to enter a contract by an improper threat that leaves no reasonable alternative but to agree. The law recognizes several forms:

Key Term: Duress The use of an improper threat or actual harm to force a party to enter into a contract, depriving them of free will.

  • Physical duress: Threats of physical violence. Contracts made under physical duress are void.
  • Economic duress: Threats to a party's economic interests, such as wrongful withholding of goods or payments, where the threatened party has no reasonable alternative.
  • Duress by third parties: If a third party, not the other contracting party, applies the duress, the contract is voidable only if the other party knew or should have known of the duress. Key Term: Economic Duress A situation where a party is forced into a contract by wrongful or unlawful economic pressure, leaving no reasonable alternative. Key Term: Voidable Contract A contract that is valid and enforceable unless and until the party subject to duress or undue influence chooses to rescind it.

Elements of Duress

To establish duress as a defense, the pressured party must show:

  • An improper threat (e.g., violence, unlawful economic pressure).
  • The threat induced assent.
  • No reasonable alternative existed.

If duress is proven, the contract is void (for physical duress) or voidable (for other types) at the option of the victim.

Undue Influence

Undue influence occurs when one party uses a position of trust or authority to unfairly persuade another to enter a contract.

Key Term: Undue Influence Unfair persuasion of a party who is under the domination of another or in a relationship of trust, resulting in a contract not reflecting the true will of the influenced party.

Elements of Undue Influence

The key factors are:

  • A special relationship (e.g., parent-child, solicitor-client, trustee-beneficiary).
  • Excessive or unfair persuasion.
  • The weaker party's will is overborne.

Unlike duress, undue influence does not require threats—just improper pressure or manipulation.

Effect on Contract

A contract formed under undue influence is voidable at the option of the influenced party.

Worked Example 1.1

Question: A supplier threatens to stop delivering essential goods to a retailer unless the retailer agrees to pay a higher price, knowing the retailer cannot obtain the goods elsewhere in time. The retailer agrees. Is the new agreement enforceable?

Answer: Likely not. This is economic duress. The supplier's wrongful threat left the retailer with no reasonable alternative. The retailer may void the new agreement.

Worked Example 1.2

Question: An elderly woman, dependent on her nephew for daily care, is persuaded by him to sell her house at a fraction of its value. She later regrets the sale. Can she set aside the contract?

Answer: Yes. The nephew's position of trust and the unfair terms suggest undue influence. The contract is voidable at the woman's option.

Exam Warning

Be careful: Not all pressure or persuasion amounts to duress or undue influence. Lawful threats (e.g., to sue on a valid claim) or hard bargaining do not make a contract voidable.

Revision Tip

If a party claims duress or undue influence, always ask: Was the threat or persuasion improper? Did it leave the party with no reasonable alternative? Was there a relationship of trust or domination?

Key Point Checklist

This article has covered the following key knowledge points:

  • Duress is a defense to contract enforceability where improper threats deprive a party of free will.
  • Physical duress renders a contract void; economic duress and undue influence make it voidable.
  • Undue influence involves unfair persuasion by a party in a position of trust or authority.
  • Both defenses require proof of improper conduct and causation.
  • Contracts set aside for duress or undue influence can be affirmed if the victim acts freely after the pressure ends.

Key Terms and Concepts

  • Duress
  • Economic Duress
  • Voidable Contract
  • Undue Influence
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