Duress and Undue Influence

Duress and Undue Influence: Both at law and in equity, if a person enters into a contract under duress or as a result of undue influence exercised over him at the material time, it will be deemed that the person has not voluntarily consented to the transaction; consequently, the contract will be voidable at his option. The justification for this rule is that contract falls in the realm of private law, the basis of which must be the free consent of the parties.

Duress at Common Law

Duress, which is a common law doctrine, means any actual or threatened violence, imprisonment or restraint of personal liberty of a person, his wife, child, parent or relatives, which induces him to enter into a contract against his will. Duress renders the contract voidable at the instance of the party who was forced to enter into the contract. But, the violence or threats of violence must be to the person of the contracting party. Therefore, threats to ones property will not amount to duress. Thus, in Skeate v Beale, it was held that, a landlord’s threat to sell the goods of his tenant was not duress.

But, in Friedeberg-Seeley v Klass, the plaintiff was alone in her flat. There was a knock at the door, the defendants entered and refused to leave. They physically forced her to sign a receipt for a jewel case and its contents which they took away. When they had gone, she found on the table a cheque for E90.
It was held that, the receipt was obtained by duress, and the transaction was, therefore, set aside.

As already mentioned, duress makes the contract voidable at the option of the party who has suffered it, when there is

  1. Actual or Threatened Physical Violence or Imprisonment. In Cumming v Ince, X was taken to a private asylum and an inquisition under a commission of lunacy was held upon her. Before the verdict was given, it was agreed that X should be released and should give up certain deeds she possessed.
    It was held that, as the agreement to give up the deeds was made under fear of confinement in the asylum, it was not binding upon X.
  2. Threatened Criminal Proceedings. The person threatened need not be the actual contracting party, but may be the husband or wife or near relative of the party. Thus, in Kaufman v Gerson, G. misappropriated his employer’s money. K. the employer threatened G’s wife that if she did not promise to make good money out of her own property, he would prosecute her husband. Consequently, G’s wife agreed to do so, provided that there would be no prosecution.
    It was held that, such an agreement could not be enforced against her as it had been induced by moral coercion (i.e. duress).
  3. Implied Threat of Criminal Proceedings. In Mutual finance Ltd v John Wetton and Sons, W’s son forged the company’s signature to a guarantee. In exchange for the forged guarantee, M obtained a valid guarantee from the company, because, as M knew, W’s state of health was such that the prosecution of his son would be likely to endanger his life. The company was W’s family company. No actual threat of prosecution was made.
    It was held that, the guarantee was obtained by undue influence and was voidable.
  4. Wrongful Detention or threatened seizure of Property. In Maskell v Horner, H owned a market and claimed tolls from M, a produce dealer. M refused to pay, and H seized his goods, whereupon M paid and continued to pay yearly under protest. H’s right to tolls was subsequently declared illegal.
    It was held, M could recover the payments made.

Economic Duress – Duress and Undue Influence

The widening scope of duress at common law can be illustrated by the recognition being given to the concept of economic duress. Thus, in North Ocean Shipping Co. Ltd v Hyundai Construction Co. Ltd., the defendants ship builders forced the plaintiffs for whom they were building a ship to pay an extra 10 per cent, over and above the agreed cost of the ship by threatening to abandon the construction of the ship midway, knowing that the plaintiffs had already concluded a lucrative contract to lease the ship to a third party on completion of the construction.
It was held, by Mocatta, J., that, the action of the defendants constituted economic duress.

Undue Influence

This arises when a party obtains from the other, whether under a contract or by means of a gift, by exerting an influence over the latter which prevents him from exercising an independent judgment. Undue influence is a doctrine of equity and arose because courts of equity regarded the common law doctrine of duress as too narrow. Accordingly, the doctrine was developed to cope with situations of constructive fraud in which contracts or dispositions of property were made without free or genuine consent. The allegation of undue influence is therefore based on the fact that the complainant entered into the contract (or made a gift of property) without free consent, in that the other party exerted an influence over him, which prevented him from exercising an independent judgment in the matter. And, for influence to be regarded as undue within the meaning of any rule of law which will be sufficient to vitiate a will, it must be an influence exercised by coercion or fraud.
The presumptions of undue influence may arise in two cases:-

  1. Where there exists a special fiduciary relationship between the contracting parties, and
  2. Where no special fiduciary relationship exists between the parties.

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