How to answer Duress Question

Issue: Was there economic duress in the dealings between [A] and [B]?

Law and Application:

Common Law allows [plaintiff] to sue [defendant] for Economic Duress. If economic duress is present, the
contract is voidable by the innocent party.

There are 2 elements to prove economic duress.

1. Illegitimate pressure
e.g. The threat to breach contract is illegitimate pressure, [the defendant] does not have good
reason to threaten to breach contract, and [the defendant] is not acting in good faith (Kafco)
e.g. the [conduct] is not illegitimate pressure, [the defendant] has good reason to threaten to
breach conduct [because], and [the defendant] is acting in good faith (Walmsley)
Walmsley v Christchurch CC

2. Coercion

Did the illegitimate pressure coerce the party into the contract?

There are 4 questions to answer in determining whether the innocent party was coerced into the contract

1. Did the innocent party protest?

e.g. [Innocent party] strongly protested
e.g. [Innocent party] did not protest
2. Did the innocent party get legal or other independent advice?
e.g. [Innocent party] was given legal advice
e.g. [Innocent party] was not given legal advice
3. Did the innocent party have some alternative course open apart from submitting?
e.g. [Innocent party] only had one alternative, which was to [], in which case [innocent party] stood
to [e.g. breach another contract]
Atlas Express Ltd v Kafco [1989]
e.g. [innocent party] had no other alternatives, and if they did not submit they would [be in
breach of another contract] (Kafco)
e.g. [Innocent party] had many alternatives, such as [] and []
4. Did the innocent party take prompt action to avoid?
Atlantic Baron case
e.g. [innocent party] has not yet taken and therefore has not taken prompt action to avoid
e.g. [Innocent party] took action promptly [e.g. immediately after construction was complete]

On the facts, illegitimate pressure coerced [innocent party] into [description, e.g. paying additional money],
illegitimate pressure does not have to be sole inducement
On the facts, the illegitimate pressure did not coerce [innocent party] into [description, e.g. paying
additional money]

Conclusion
Illegitimate pressure and coercion were present, [innocent party] may sue
There was Illegitimate pressure but [innocent party] were not coerced into the contract, [innocent party]
may not sue
There was no illegitimate pressure, [innocent party] may not sue
How to answer Undue Influence

Issue: Was undue influenced used by [defendant] over [innocent party]?

Law and Application:

Common Law allows [innocent party] to sue [defendant] for undue influence. If undue influence is present,
[innocent party] may rescind the contract.

Which class does this relationship fall under?

Class A:
X dominated the mind and will of [Y] so that the mind and will of Y becomes a mere
channel through which the wishes of [X] flowed
In other words actual undue influence, e.g. a threat to end a relationship, or violence
e.g. [defendant] threatened to [], which amounts to actual undue influence, and hence
class A
Class 2A:
A relationship of trust and confidence is presumed in the following relationships:
Parent and child
Guardian and ward
Doctor and patient
Solicitor and client
Trustee
and beneficiary
Religious pastor and pupil
e.g. The relationship is [], therefore a relationship of trust and confidence is presumed.
The transaction calls for an explanation as the transaction is not in [innocent partys] best
interests and cannot be reasonably accounted for on the grounds of friendship, relationship,
charity, or upon other ordinary motives on which ordinary men act. Therefore presumed
influence is raised
Class 2B:
Influence can arise from trust and confidence and/or domination/ascendancy
Is there a relationship of trust and confidence?
Does the transaction call for explanation (i.e. is the transaction in favour of the
innocent party?)
If yes on both = presumed influence
e.g. [innocent party] was smitten with [trusted party] which amounts to a relationship of trust
and confidence. The transaction calls for an explanation, as the transaction is not in
[innocent partys] best interests. Presumed influence is raised.

Can the trusted party prove they did not use their influence to get innocent party to do the act?
Did the innocent party use their usual/an unbiased solicitor?
Was the trusted party in the room when the solicitor was giving advice?
Was information about the matter given?
Can the trusted party prove the innocent party made the decision of their own free will?
e.g. [innocent party] did not use their usual solicitor, and [trusted party] was in the room while
solicitor was giving advice. [innocent party] was not given all the information about the matter.
[trusted party] is unlikely to rebut the presumption.

Conclusion:
[innocent party] can sue [trusted party] for undue influence.
Undue Influence in regards to guarantee/guarantor (suing the finance company)

Issue: Can [Finance Company] enforce the guarantee?

Did Finance Company have knowledge of undue influence?

Was there actual knowledge of the undue influence?
Maybe [why?]
Constructive notice?
Is relationship between B and G non-commercial?
Is transaction not to the financial advantage of G?
If yes to both = constructive notice
e.g. Relationship between [borrower] and [guarantor] is non-commercial and the transaction
was not to the financial advantage of [borrower]. [Finance company] had constructive notice
of undue influence

Did the Finance Company take necessary steps?

Did the Finance company provide, or urge legal advice? (and was it unbiased?)
e.g. [Finance company] urged [guarantor] to obtain legal advice however [guarantor]
rejected this notion
Did the Finance company disclose financial information or other relevant facts to G or Gs solicitor?
e.g. Lawyer did not totally understand what [innocent party] stood to lose, and the lawyer
did not understand the extent of [trusted partys] debts.
Did the Finance company obtain solicitors written confirmation?

Conclusion:
On the facts, [borrower] exercised undue influence over [guarantor], [finance company] had [constructive or
actual] knowledge, and [finance company] did not take the required steps. [Finance company] cannot
enforce the guarantee.