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Duress in the context of contract law is a common law defense, and if one is successful in proving that the contract is vitiated by duress, the contract may be rescinded, since it is then voidable.
Duress has been defined as a "threat of harm made to compel a person to do something against his or her will or judgment; esp., a wrongful threat made by one person to compel a manifestation of seeming assent by another person to a transaction without real volition." - Black's Law Dictionary (8th ed. 2004)
Duress in contract law falls into two broad categories:
- Physical duress, and
- Economic duress
Contents |
Physical duress
Duress to the person
Professor Ronald Griffin, Washburn University School of Law, Topeka, KS, puts physical duress simply: "Ya money o yo life." In Barton v. Armstrong [1976] AC 104, a decision of the Privy Council, Armstrong threatened to kill Barton if he did not sign a contract, which was set aside due to duress to the person. An innocent party wishing to set aside a contract for duress to the person need to prove only that the threat was made and that it was a reason for entry into the contract; the onus of proof then shifts to the other party to prove that the threat had no effect in causing the party to enter into the contract. Duress can be made also by social influence.
Duress to goods
In such cases, one party refuses to release the goods belonging to the other party until the other party enters into a contract with them. For example, in Hawker Pacific Pty Ltd v Helicopter Charter Pty Ltd (1991) 22 NSWLR 298, the contract was set aside after Hawker Pacific's threats to withhold the helicopter from the plaintiff unless further payments were made for repairing a botched paint job.
Economic duress
Although hard bargaining occurs legitimately in commercial contracts, duress may be in the form of breaching an existing contract between the two parties unless the innocent party agrees to enter into another contract. Austin v. Loral. The contract is voidable if the innocent party can prove that it had no other practical choice (as opposed to legal choice) but to agree to the contract.
The elements of economic duress
- Wrongful or improper threat: No precise definition of what is wrongful or improper. Examples include: morally wrong, criminal, or tortuous conduct; one that is a threat to breach a contract "in bad faith" or threaten to withhold an admitted debt "in bad faith".
- Lack of reasonable alternative (but to accept the other party's terms). If there is an available legal remedy, an available market substitute (in the form of funds, goods, or services), or any other sources of funds this element is not met.
- The threat actually induces the making of the contract. This is a subjective standard, and takes into account the victim's age, their background (especially their education), relationship of the parties, and the ability to receive advice.
- The other party caused the financial distress. The majority opinion is that the other party must have caused the distress, while the minority opinion allows them to merely take advantage of the distress.
