Duress And Undue Influence On Parties In Contract Agreement Process

The Black’s Law Dictionary defines a contract as a lawfully binding pact among two or more parties which promulgates commitments, any violation of these commitments result in remedies in the form of damages or by any particular enforcement of the contract. Contract law explains the obligations of any persoms who would have entered into an agreement. Contract law in other words encompasses two divisions of jurisdiction. These are the rulings resulting from case law and regulations from statutes and Acts from the legislature. The non-existence of a factor that inhibits with an agreement is crucial to the creation of a contract. This feature is termed a vitiating element and this feature causes the contract to turn out to be voidable. Several vitiating factors affect the soundness of a contract, among these factors are duress, undue influence, and unconscionable or unfair conduct. J Poole (2010) infers that duress and undue influence are well established doctrines in the domain of English Law. These doctrines were enacted as the route through which a plaintiff can render a contract unenforceable on the grounds that there was unfairness or unfair pressure exercised to coax the other party into accepting the contract. This position adopted in this research paper is that duress and undue influence, both as doctrines are a suitable law in addressing unconscionable contracts principally because they deal with matters of disparity in negotiating power among contracting parties. The writer will first of all define duress and undue influence thereafter the characteristics of these two that make them apposite law against unconscionable contracts will be explained.

Undue influence is a situation wherein one contracting party yields real authority over the other contracting party with the result that the will power of the other contracting party is subjugated. Consequently this domineering position is utilised to assume unfair advantage over the other party. In addition there are three kinds of undue influence. The first type is actual undue influence and in this type its required that there be a demonstration that undue influence was actually exercised by a contracting party over another in the contract. The second type is called presumed undue influence, in this the connection among the contracting parties sums up to an assumption of undue influence if the contractual agreement can be demonstrated to have been existent. The other type is the one covering relationships of trust and confidence; in this case the connection between the persons equates to an assumption of undue influence. The trust ascribed to the other party, places conditions that makes it possible for the other party to appropriate unjust gain or concessions from the other. Lord Justice Lindely in the case of ALLCARD V SKINNER , gave explanation for the principle of undue influence by stressing that its fundamentals were based on the idea that there is need and necessity to avert abuse of some persons unfairly. Further to this the case of PATEL V THAKORE , the East African Court Of Appeal accepted the description of the then Indian Contract Act in Tanzania that undue influence prevails where one of the contracting parties in the contract; has the ability to gain a superior edge against the other contracting party by utilising his superior edge position to override or overturn the independent decision making power of the other party, in the end utilises that superior edge to do this.

Duress in a contract is a situation of inequality wherein someone is coerced through threats, coercion or gross coaxing to settle to the conditions of a contracting agreement. A contractual agreement which would have been performed under conditions of pressure from the end of the party performs it, the courts will nullify such an agreement. To begin with if the innocent party had accepted the contract in the absence of force, the other contracting party that issued the threat is still answerable grounded on the notion that the threats had affected the innocent party except if the contrary is demonstrated. Thus, the contract is nullified (voidable). There is need to point out expressly that the compelling power for the creation of the contractual agreement has to be illegal. For example, if the contracting person was issued threats but provided enough time and caution to recover the contractual terms, the contractual agreement would not be voidable. The contract will not be voidable at law because a valid promise to complete exists. The Competition and Consumer Act (No 3) 2010 (Cth) perfectly made provision for duress and undue influence where it is prohibited for a person to use physical force, or undue pestering or pressure, in relation to the supply or likely supply of commodities; or the payment for commodities, or any such similar commercial dealings in land.

The doctrine of undue influence provided a way for shielding weak contracting parties from being exploited. This is an equitable doctrine that provides a solution for contractual agreements that were entered into by persons under unsuitable pressure but not necessarily equating to duress. The courts may interfere in situations where there is some connection among the contracting parties, where the underlying connection would have been utilised to gain an unfair benefit. Undue influence can be related to conflict of interest in some instances. In the case of Alderton v Prudential Assurance Company Ltd, both unconscionable dealing and undue influence were observed to have tainted the deal. The claimants were all in circumstances where it was probable that the respondent was dominant, and the claimants would depend on his dominance. The claimants showed lack of appreciation of the form and implications of the deal, and that subsequently they were unduly coerced because of the dominancy the defendant had over them. Furthermore, the claimants were at a noteworthy disadvantaged position because they lacked independent advisory, and were ignotrant of the unfamiliar conditions of the agency loan. The defendants knew of the other parties lack of independent guidance, and the defendant never made any effort to ensue that the claimants had access to independent opinions. In this particular case, the evidence obviously points to claims in both undue influence and unconscionable dealing. In these two claims, the importance is on safeguarding the claimant’s helplessness, where it will be unconscionable for the courts not to interfere. It is obviously the element of conscience in safeguarding the weaker contracting parties that makes the doctrine of undue influence most appropriate for dealing with unconscionable contracts.

It was recognized in the case of Williams v Bayley that the doctrine of duress could not be relied upon for vitiating a contract, however the court was ready to give compensation under the doctrine of undue influence mainly because, the court was able to recognise a special connection where there was undue influence . This is appropriate whenever the connection between the parties concerned as a consequence of the dominance imposed by the other party in a bid to appropriate unfair benefit over the other. The court concluded that a pledge to pay the money will an effect of vitiating a contract, if attained by threats to prosecute the one proffering the promise or his spouse or family member for a illegal act. The relationships of the contracting parties must be existent as a crucial factor to prevail for a litigation under undue influence. In Daniel v Drew it was ruled by the appeals court that while real undue influence involved actually performing actions to “twist” the independent decision of the other party, as with regards to presumed undue influence the courts were concerned with the actions that had no been undertaken in the situation. Particularly, adopting precautionary measures to make sure that the deal was premised on the free and independent will of the benefactor. Notwithstanding, as mentioned in the case Turkey v Awadh , the case involved a contract in which the claimant’s daughter and his son in law arranged to handover his shareholding for a long lease agreement in their landownership to the respondent in exchange for him to agree to pay off the loan on the land property and additional debts. The appeal court ruled that the supposition of undue influence was not prevalent because the contract could be easily defined, by the type of connection that obtained among the contracting persons. In any case the assumption of undue influence was to emerge before giving room for rebuttal based on the reality through determination that the deal was a consequence of the utilisation of free will power and autonomous choices.

J Beatson, A Burrows and J Cartwright (2010) pointed out that duress and undue influence obtains in a situation where one of the contracting parties has pressured the other party or used such dominion that the domineered person’s free will was considerably dented. The consequence of both duress and undue influence is that the agreement is voidable, and not essentially annulled. If the fundamentals of an enforceable contract are prevalent and there is proof that the persons ab initio intended to make a legal bond, the court will be extremely hesitant to nullify the agreement. The courts are thus customarily akin to adopt the opinion that a contract obtained by either duress or undue influence is not void but voidable. This position is predicated on the belief that in spite of the existence of rudiments of duress and undue influence, there is also that of willingness to enter into an agreement and therefore the wronged party cannot allege that there was non-existence of a contract or intention adequate to render the agreement void. Nevertheless, he is still in a position to maintain that his appendag of the offer was obtained by coercion which the law considers to be inappropriate and unconscionable and thus these have to grounds for overturning the contract.

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Duress has to be accompanied by physical, violence or forceful acts. In the matter of Latter V Bradell, a domestic worker was directed by her employer to undergo medical examination, the employee attempted to not to conform with the directive but later on acceded to the directive of her boss. The court concluded that her acceding to the demands of her employer were not on the basis of duress as there were no threats of physical harm or infliction of such on her person while undue influence is applicable where there is inappropriate pressure not equating to duress in relation to common law. In Williams V Bayley it was upheld that a promise to make a payment will be overturned if it was secured by threats for prosecution to the one who made the promise or his close relations for a illegal doings. In Barton v Armstrong, an ex-chairperson of an enterprise issued death threats to an incumbent managing director if he did not authorise payment for the past chairman’s stocks. The plaintiff was able to prove that there was adequate duress which had predisposed his accord in the implementation of the contract. It has to be pointed out, that the contracting person making use of pressure commits a crime that can be punished at law and the ensuing contract can be suspended. The agreement was overturned on these grounds. In the case North Ocean Shipping Co. LTD v Hyundai an agreement was concluded to manufacture a super tanker at a set agreed contract amount. The contracting party was to supply the tanker then declined to finish his portion of the bargain demanding that the buyer make a commitment to pay an extra ten percent above the initially agreed amount. The buyer in turn acceded and effected the payments demands. The court ruled that the additional amount paid by the buyer has to be reimbursed on the basis of economic duress. According to Pool, economic duress can be described as circumstances where a contracting party issues threats of a violation of contract except some modification is done, and the other contracting party accepts the modification (renegotiation) instead of suffering catastrophic consequences after the violation of the contract. The other crucial issue to be deliberated is whether or not the consideration was adequate in the original contract made, in the matter between North Ocean Shipping Co. LTD and Hyundai. One crucial aspect of contracts, is that consideration does not have to be apposite in order to render a contract binding, but rather just sufficient. This implies that the courts will not involve themselves with a badly bargained deal negotiated by individuals in a contract out of their own free will. In the circumstances that the buyer acceded to a modification to pay 10% extra to the contract amount of his own free choice, the agreement was going to be biding because; the buyer would be assumed to have agreed to these changed conditions for some unknown reasons. It is possible that the buyer would have agreed to the modification of the contract for the following two reasons. Firstly the buyer could have intended to use the tank imminently such he accepts to pay the exra 10% out his own choice. Secondly the buyer could agree to the modification of the contract and agree to top up the amount with 10% probably maybe because other suppliers were charging above the extra 10% offered to the buyer such that the present supplier was still cheaper.

Under the circumstances of duress the threats of physical harm have to be on the other contracting party and must not be directed at their property, this means that it doesn’t deal with issues of third parties. In the case of Skeate V Beale, the court ruled that an undertaking made for the salvage of property that had been illegally withheld didn’t constitute duress adequate to nullify the contract. The threats issued weren’t directed at the contracting party and again they did not embody violence, the threats were just directed at the goods in particular and the court was reluctant to nullify the contract on the basis of such kind of a threat. Nevertheless although undue influence also covers third parties, this mostly addresses the perculiar safeguarding of spouses. In the case Barclays Bank plc V O’Brien, the court of appeal spelt out the guiding principles for protection of certain category of persons. It highlighted that the connection between the guarantor and main debtor should have been clear to the creditor by the time the contract was promulgated. Also acceptance to the agreement should not have been obtained by undue influence or distortion of the major debtor. Lastly the creditor should have botched to take rational actions to make sure that the guarantor had a complete understanding of the contractual commitments that are involved.

In the circumstances of duress it’s needless to demonstrate that duress was the only reason for persuasion the agreement. It is adequatet if it was an enticement and when duress is purported the the contracting party who exerted the duress bears the responsibility to demonstrate that the party didn’t entice the contract. In the case of Barton V Armstrong, the court ruled that it is enough if it was an enticement and when duress is realised the onus is on the person who exerted the duress to demonstrate that the person didn’t entice the agreement. On the other hand under undue influence, where it can be confirmed that the individual has an upper hand to influence the thinking of the other contracting person and the resultant agreement in its form appears to be shortchanging the interests of the feebler contracting person or entity, then the domineering party bears the responsibility to demonstrate that he didn’t unduly influence the weaker contracting person or entity.

The courts require that threats be the only reason for appending to a contract for them to ascribe such a contract as duress. Lord Scarman proffered significant guidelines for establishing coaxing of the will in circumstances of duress in the matter of Pao On V Lau Yiu Long. He indicated that in establishing if there was violation of the independent decision making power under duress to the end that there was no accord, it is vital whether the contracting party supposed to have been coerced protested or not, if at the point of enacting the contract, the contracting party didnot have an alternate option available to them like an acceptable legal solution. Also it needs to be confirmed, if the contracting party obtained autonomous legal advisory. At the apex of the matter it has to be confirmed if the individual undertook any measures to evade the agreement after agreeing to it. All these actions constitute duress. In contrast, in the case of C.H Patel V Pankaj S. Thakore, the court established that for undue influence to be successful in evading the contract, it needs to be demonstrated that the undue influence was used by one of the contracting parties to the on the other in the agreement. For the agreement to be overturned it had to be confirmed that the alleged party who had an upper hand was able to domineer the will of the seemingly weaker party and that they utilised this unfair superior position for their benefit. Thus the foregoing are the fundamentals that constitute undue influence.

GH Treitel (2003) maintains that in similar fashion to the doctrine of duress, the doctrine of undue influence scrutinizes the way in which the decision to be part of a contractual deal came about. It occurs principally where a contract is agreed due to coercion which is next to duress in common law since there will be no use of violence to the other contracting party. Elliot and Quinn (2007) highlight that if the decision to contract came about through improper means, the rule of undue influence doesn’t not all the contract to remain standing and the courts may overturn it or amend its terms so as to allay the shortcomings on the aggrieved contracting parties. The case of the Royal Bank of Scotland v Etridge (No 2) [2001] provided a clear illustration of this principle. N Enonchong (2006) contended that because an array of demeanor that was not viewed as improper at law was viewed so by equity, there was a protection loophole between these two doctrines, with equity giving broader protection through undue influence as opposed to what common law gave by means of duress.

To sum up both the doctrines of duress and undue influence are targeted at safeguarding that contracting parties do not coerce each other into agreeing to enter into contracts. In the event that such a scenario happens the aggrieved party is given respite to have the agreement pronounced voidable. At common law, when duress is established it offers remedy to the aggrieved contracting parties as an entitlement and the agreement can be overturned. In the case of undue influence the plaintiff must not just demonstrate the undue influence but the plaintiff also have to demonstrate that it was equitable for the courts to provide a remedy. It can be thus be concluded that duress and undue influence do constitute an suitable law in addressing unconscionable contracts.