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Contractual Free Will: doctrines of

economic duress & undue influence
By Chenoy Ceil

Electronic copy available at: http://ssrn.com/abstract=2596998

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TABLE OF CONTENTS

Contents Pages

Critical analysis on: Undue Influence & Doctrine Page 03-06

of duress.

Actual undue influence & Duress in English law Page 07-09

Approach to the Economic Duress Page 10-11

The judicial approach of economic duress Page 11

Economic duress established by case law Page 12-13

The jurisprudence of economic duress Page 14-18

Conclusion Page 18-19

Electronic copy available at: http://ssrn.com/abstract=2596998

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Introduction

The law entails that a contract must be entered into by parties under consent without any undue
influence influencing their decision to enter into the contract. The historical origins of the
concept of duress are shrouded by the ancient mists of the common law. Yet contemporary
understanding of that same concept remains difficult to define with precision, notwithstanding
almost a millennium of definition and application in both civil and criminal contexts.

The classic formulation, “coercion of the will so as to vitiate consent” disguises at least as much
as it reveals about duress. Questions remain when the other party can claim that such a “new”
contract is voidable for duress. Although the language used by the courts is obscure, careful
examination of the judgments dealing with this problem lead to the conclusion that the test is
whether there was a reasonably sufficient alternative open to the innocent party when faced with
the threatened breach. The appropriateness of this test can be seen by examining the tensions
within the law which the test has to balance.

It was only in 19761 that economic duress was recognized under English common law2 as an
acceptable ground (under the general area of duress) to avoid an agreement.3 The first case
appears to be Occidental Worldwide Investment Corp v Skibs.4 The case was decided on the fact
that the threats made by the charterers were false and fraudulent and so the owners were entitled
to avoid the renegotiated terms. However, of greater importance in the present context, Kerr J.
accepted that, in principle, relief on the ground of economic duress was available to the owners.
Kerr J. stated5 : “But even assuming, as I think, that our law is open to further development in
relation to contracts concluded under some form of compulsion not amounting to duress to the
person, the Court must in every case at least be satisfied that the consent of the other party was

1 In contrast, in the United States economic duress was already widely acknowledged. See for example J. P. Dawson, “Economic
Duress--An Essay in Perspective” (1947) 45(3) Michigan Law Review 253-290; J. Dalzell, “Duress by Economic Pressure I” (1942)
20 North Carolina Law Review 237-277.
2 The Chancery Courts had considered economic pressure over a century earlier: in Ormes v Beadel (1860) 2 Giff. 166 the court

of equity had held that a contract entered into under circumstances of acute economic pressure, increased by a refusal of the
architect to pay a builder a sum which the court found was a fair and just demand for work done, would be set aside in equity.
The case was reversed on appeal on the ground of affirmation or acquiescence Ormes v Beadel (1860) 2 De G.F. & J. 333.
3 The origin of the common law position, that the only form of duress which would allow a party to avoid a contract was the

duress of the person, lay in the decision of the Court of Exchequer in Skeate v Beale (1841) 11 Ad. & E.L. 983. The courts have
since recognised that illegitimate pressure included threats of violence to the person. For example, Barton v Armstrong [1976]
A.C. 104 and Friedeberg-Seeley v Klass (1957) 101 S.J. 275. See also D&C Builders Ltd v Rees [1966] 2 Q.W.B. 617 at 625 per
Lord Denning M.R., who stated: “No person can insist on a settlement procured by intimidation.”
4 [1976] 1 Lloyd's Rep. 293 (The Sibeon and The Sibotre ) (also noted in (1976) 92 L.Q.R. 496).
5 See ibid., at 336.
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overborne6 by compulsion so as to deprive him of any animus contrahendi.”

In North Ocean Shipping Co Ltd v Hyundai Corporation Co,7 the shipbuilders threatened
(without legal justification) to terminate the contract unless the plaintiff agreed to increase the
price by 10 per cent. The ship owners had chartered the ship to Shell and fearing a loss in the
charter if the ship was delivered late, agreed to the additional payment. In this case, Mocatta J.
stated: “compulsion may take the form of ‘economic duress' if necessary facts are proved. A
threat to break a contract may amount to such ‘economic duress”’.

Similarly, in Pao On v Lau Yiu Long8 the Privy Council judgment delivered by Lord Scarman
concluded9 : “there is nothing contrary to principle to recognising economic duress as a factor
which may render a contract voidable …”

Although of more recent provenance,10 economic duress, which expands the application of the
concept of duress from physical pressures to economic bargaining pressures, duplicates and
complicates these problems, at the very least because it does not involve the easier case of actual
threatened physical violence, as shown by two House of Lords decisions11 and one Privy
Council12 decision, as well as lower court decisions in recent years, including from Canadian
appellate courts.

One recent case, however, from the New Brunswick Court of Appeal, Greater Fredericton
Airport Authority Inc v Nav Canada,13 moves the discussion about the nature of economic duress
forward, and for that reason, merits detailed consideration. Writing for a unanimous court,
Robertson J.A. carefully reviewed the Anglo-Canadian case law and proposed a new, simpler
test than those earlier proposed, that is, that economic duress only be found where the exercise of
pressure leaves the coerced party with no practical alternative but to submit. This test is

6 Lynch v DPP of Northern Ireland, n.4 above, established clear declarations of principle on the question of whether duress
negatives consent or whether contracts procured by duress are voidable. The latter was stated to be the correct analysis: see
especially the speech of Lord Wilberforce (at 680) who stated that “duress does not destroy the will, for example to enter into a
contract, but prevents the law from accepting what has happened as a contract valid in law”. However it should be noted in
Occidental, along with Pao On v Lau Yiu Long [1980] A.C. 614 and Universe Tankships of Monrovia v I.T.W.F. [1983] 1 A.C. 366
the judges spoke of economic duress as negativing true consent.
7 [1979] Q.B. 705, The Atlantic Baron.
8 [1980] A.C. 614.
9 See ibid., at 636.
10 Occidental Worldwide Investment Corp v Skibs A/S Avanti; The Siboen and The Sibotre [1976] 1 Lloyd's Rep. 293 QBD.
11 North Ocean Shipping Co Ltd v Hyundai Construction Co Ltd [1978] 3 All E.R. 1107 QBD sets the stage for Universe Tank Ships

of Monrovia v International Transport Workers' Federation [1982] 2 All E.R. 67 HL and Dimskal Shipping Co Ltd v ITWF [1991] 4
All E.R. 871 HL.
12 Pao On v Lau Yiu Long [1979] 3 All E.R. 65 PC (Hong Kong).
13 Greater Fredericton Airport Authority Inc v NAV Canada (2008) 290 D.L.R. (4th) 405 NBCA.
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somewhat similar to the “but for” test proposed by Mance J. in Huyton v Cremer14 and may be
usefully compared to it.

In recent years the debate surrounding the true jurisprudential basis of undue influence has been
renewed with increased vigour.15 The catalyst for the burgeoning academic literature on this
subject can, in part, be attributed to Professors Birks and Chin who argued that “the doctrine of
undue influence is about impaired consent, not about wicked exploitation.”16 They classified the
latter as defendant-sided and the former as claimant-sided, arguing that where a claimant-sided
analysis is adopted: “It is not necessary for the party claiming relief to point to fraud or
unconscionable behaviour on the part of the other.”17

Such a view, at least ostensibly, is strongly supported by a group of Court of Appeal authorities,
spearheaded by Hammond v Osborn,18 and to a lesser extent by significant decisions in both
Canada19 and Australia.20 Yet, the Court of Appeal has not always been so unequivocal21 and,
indeed, in Dunbar Bank Plc v Nadeem,22 appeared to adopt the opposite view. The conclusions
of Birks and Chin also sit uneasily with the language adopted by the House of Lords in its
landmark decisions of National Westminster Bank Plc v Morgan,23Barclays Bank Plc v O'Brien24
and Royal Bank of Scotland v Etridge (No.2),25 reinforced by recent opinions of the Privy
Council which reveal an unconscionability-based perspective of undue influence.26

This research work analyses the problem which occurs where one party threatens a breach of an
existing contract to procure revised contractual terms by exerting undue influence or by putting
the other party under economic duress. The question which is considered is when the other party
can claim that such a “new” contract is voidable for duress. Although the language used by the

14 Huyton v Cremer [1999] 1 Lloyd's Rep. 620 QBD.

15 Bigwood, “Undue Influence: ‘Impaired Consent’ or ‘Wicked Exploitation”’ (1996) 16 O.J.L.S. 503
16 Birks and Chin, “On the Nature of Undue Influence” in Beatson and Friedmann (eds), Good Faith and Fault in Contract Law

(Clarendon Press, 1995).

17 Birks and Chin, above
18 2002] EWCACiv 885, noted inDevenney, “Hammond v. Osborn” (2003) 25 J.S.W.F.L. 169.
19 Morrison v Coast Finance Ltd (1965) 55 D.L.R. (3d) 710 at 713 per Davey J.A.
20 The Commercial Bank of Australia v Amadio (1983) 57 A.L.J.R. 358 at 363 per Mason J.
21 See Portman Building Society v Dusangh [2000] 2 All E.R. (Comm) 221 at 233 per Ward L.J.; Credit Lyonnais Bank Nederland

NV v Burch [1997] 1 All E.R. 144; and Irvani v Irvani [2000] 1 Lloyd's Rep. 412.
22 [1998] 3 All E.R. 876; discussed in Chandler, “Manifest Disadvantage: Limits of Application” (1999) 115 L.Q.R. 213.
23 [1985] A.C. 686.
24 [1994] A.C. 180.
25 [2001] UKHL 44, particularly at [6]-[7].
26 See R. v Attorney-General for England and Wales [2003] UKPC 22 and National Commercial Bank (Jamaica) Ltd [2003] UKPC

51. Even the late Professor Birks noted the difficulties these decisions created for his and Chin's thesis: see Birks, “Undue
Influence as Wrongful Exploitation” (2004) 120 L.Q.R. 34.
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courts is obscure, careful examination of the judgments dealing with this problem lead to the
conclusion that the test is whether there was a reasonably sufficient alternative open to the
innocent party when faced with the threatened breach. The appropriateness of this test can be
seen by examining the tensions within the law which the test has to balance.

Economic duress in construction cases have played a pivotal role developing the doctrine. In the
seminal case of Williams v. Roffrey Brothers,27 the Court of Appeal, by taking an expansive view
of the doctrine of consideration, established economic duress as the device for policing
renegotiation of contracts. Recently, the cases of DSND Subsea v. Petroleum Geo-Services28 and
Carillion Construction Limited v. Felix (U.K.) Limited29 in the Technology and Construction
Court have resulted in further development.

This research work examines the contribution of doctrine of economic duress, and argues that the
doctrine emerging from the cases may be difficult to reconcile with established contractual
principles. A more predictable approach, drawing on established legal principles, is then
proposed. On the other hand undue influence is based on a notion of unconscionability. In
particular, the unconscionable bargain doctrine, a doctrine which is both contextually and
historically linked to undue influence, clearly suggests that a claimant-sided approach is not
necessarily incompatible with an unconscionability-based approach to undue influence.
Furthermore, there is an overriding, explicit, unconscionability requirement in cases of undue
influence, albeit often overlooked.

The doctrine of duress, economic duress and doctrine of undue influence provides a vital role
while determining the free will of contract. In this research work, effect of economic duress and
undue influence on the validity of contracts will be critically analyzed and examined to
understand the depth of the concept.

Critical analysis on Undue Influence and Doctrine of Duress

Essentially, undue influence requires a relationship between the parties, generally one of trust
and confidence or of vulnerability and dependency, where one party exploits the other to his own

27 [1991] 1 Q.B. 1 at 21, per Purchas L.J.; see Phang, “Consideration at the crossroads” in (1991) 107 L.Q.R. 21.
28 [2000] Build.L.R. 530 (“DSND ”).
29 [2001] Build.L.R. 1, (“Carrillion ”).
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advantage.30 Consequently, the vulnerable party's consent is vitiated, and so the contract is held
by the court of equity to be unenforceable. It is this vitiation of consent which apparently
provides the justification for the court's intervention in cases of undue influence;31 thus Ward
L.J. emphasised in Daniel v. Drew that, in all cases of undue influence the critical question is
whether or not the persuasion or the advice, in other words the influence, has invaded the free
volition of the donor to accept or reject the persuasion or advice or withstand the influence. The
donor may be led but she must not be driven and her will must be the offspring of her own
volition, not a record of someone else's.32

This doctrine holds itself out as a doctrine of procedural unfairness only: the law will investigate
“how the intention was produced”33 in order to determine its presence, not the content of the
transaction itself. The same is true in the cases of the common law doctrine of duress and the
equitable jurisdiction to set contracts aside on the basis of unconscionability. It has been
observed that it is the vitiation of the vulnerable party's consent which provides the justification
for relief in these cases as well. Thus, duress is “a coercion of the will so as to vitiate consent”;34
and in unconscionability cases, the vulnerable party's consent is vitiated by the fact that they are
at a serious disadvantage due to some weakness or disability, which has been exploited in a
reprehensible manner by the other party. The coercion of the will theory has, however, been
criticised in the context of duress in particular.35 Atiyah has pointed out36 that a party who is
subject to duress does choose to enter into the contract, but does so in order to avoid the greater

30 Thus, in Royal Bank of Scotland plc v. Etridge (No.2) [2001] UKHL 44, Lord Nicholls repeatedly describes undue influence as a
“wrong” and explains (at [9]) that “Typically [undue influence] occurs when one person places trust in another to look after his
affairs and interests, and the latter betrays this trust by preferring his own interests. He abuses the influence he has acquired.”
31 This also accounts for the fact that Lord Cotton V.C. was at pains to stress in Allcard v. Skinner (1887) L.R. 36 Ch. D. 145, 171,

that “The court interferes, not on the ground that any wrongful act has in fact been committed by the donee, but on the
ground of public policy, and to prevent the relations which existed between the parties and the influence arising therefrom
being abused.” He did not want to impugn the conduct of the Mother Superior who had induced a new member of the
sisterhood to pauperise herself by giving all her property to the nunnery: Birks and Chin explain that the claimant had been
“under a spell compounded of her enthusiasm for the sisterhood” and “her autonomy was impaired to an exceptional degree”
(P. Birks and Chin Nyuk Yin, “On the Nature of Undue Influence” in J. Beatson and D. Friedmann (eds), Good Faith and Fault in
Contract Law (Oxford 1995), ch. 3, p. 68). It was the vitiation of her consent in the circumstances which allowed the court to
find that there had been undue influence.
32 [2005] EWCA Civ 507, at [36].
33 Huguenin v. Baseley (1807) 14 Vesey Junior 273, 300, per Lord Eldon L.C.
34 Pao On v. Lau Yiu Long [1980] A.C. 614, 635, per Lord Scarman; see also The Siboen and The Sibotre [1976] 1 Lloyd's Rep. 293,

per Kerr J. Pao On v. Lau Yiu Long [1980] A.C. 614, 635, per Lord Scarman; see also The Siboen and The Sibotre [1976] 1 Lloyd's
Rep. 293, per Kerr J.
35 See e.g. The Evia Luck (No.2) [1992] 2 A.C. 152, per Lord Goff.
36 P.S. Atiyah, “Economic Duress and the Overborne Will” [1982] L.Q.R. 197, 200.
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evil presented by the threat made.37 Consequently, Mance J. has advocated the imposition of an
objective test as well as a subjective ‘but for’ test.38 The availability of alternatives is, for him,
the most important of the Pao On factors set out by Lord Scarman. When the cases say that the
victim had no “real” choice, they are better understood as saying that he had no “reasonable”
choice. By contrast, there is no objectivity requirement in the case of undue influence, because in
each case consent is vitiated in different ways: undue influence operates at an unconscious level,
whereas the victim of duress is only too aware of the situation and acts “through gritted teeth”. In
any case, the rationale behind duress remains that the victim of the duress has not had the
opportunity to give true consent, and, in effect, the doctrines of undue influence, duress and
unconscionability all deal with cases where, in the words of Lord Nicholls, “the intention was
produced by an unacceptable means”, and consequently “the law will not permit the transaction
to stand”.39 In all three doctrines, our focus is on the way in which the contract is formed, not on
the substantive terms of the contract.40

Smith, in the course of his argument that vitiated consent should alone be sufficient to establish
duress (without the requirement of illegitimacy), gives us the reason why upholding consent is so
important: freedom underlies both the broad contours of the common law of contract and the
political ideals of the countries in which that law is in place, and so consent (and consequently
matters of procedural fairness which might serve to undermine that consent) should be taken
seriously.41

Certainly, procedural fairness is an important matter in itself; however, this does not mean that
the substantive terms of the contract are irrelevant to the court's enquiry into the existence of
undue influence, duress or unconscionability. If the substantive terms are particularly
disadvantageous to the weaker side, then this will help to establish the evidentiary presumption
in favour of undue influence, and will add weight to a claimant's accusations of duress or
unconscionability. Furthermore, in any case, it likely that the transaction will display substantive

37 Indeed, Lord Scarman himself conceded in The Universe Sentinel [1983] 1 A.C. 366, 400, that “The classic case of duress is,
however, not the lack of will to submit but the victim's intentional submission arising from the realisation that there is no other
practical choice open to him.”
38 Huyton SA v. Peter Cremer GmbH & Co [1999] 1 Lloyd's Rep. 620.
39 Royal Bank of Scotland plc v. Etridge (No.2) [2001] UKHL 44, at [7].
40 There is an obvious analogy between setting aside a transaction for duress, undue influence or unconscionability and setting

it aside for fraud: in each case, “the party has been subjected to an improper motive for action” (Fairbanks v. Snow (1887) 13
N.E. 2d 596, 598, per Holmes J.).
41 S.A. Smith, “Contracting Under Pressure: A Theory of Duress” [1997] C.L.J. 343.
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unfairness as well, since, naturally, parties will rarely seek to set aside a transaction where this is
not the case.

Undue influence has proved a difficult concept to define, partly because of the fear that an overly
precise definition would bar deserving complainants from relief, but also because of the
difficulty of drawing a clear line between cases of undue influence, duress, and
unconscionability: “It is something which can be more easily recognised when found than
exhaustively analysed in the abstract.”42 The cases have dealt with this lack of definition, and
with the fact that there is often no concrete evidence of undue influence, which frequently occurs
subtly within a relationship of trust, without documents or dispassionate witnesses, by dividing
undue influence into two areas: actual and presumed.43 This division was the subject of much
comment in Etridge (No.2) but the speech of Lord Nicholls makes it clear that these dual
categories do still exist as instances of one overall doctrine of undue influence, 44 and the
concepts of actual and undue influence have been applied in subsequent cases.45

“Actual” undue influence calls for no explanation; it simply means that the party to a transaction
has in fact been unduly influenced when entering into the transaction such that their consent has
been vitiated.46 Insofar as actual undue influence is based on the application of “undue pressure”
it would appear to be the equitable counterpart of common law duress,47 but this is not strictly
accurate because undue influence extends further than duress and cannot realistically be exerted
in the absence of a relationship.48

It is in the case of presumed undue influence that the link to substantive unfairness becomes
apparent. Presumed undue influence involves a relationship of influence - that is, a relationship
which has been demonstrated on the facts to be one of influence, or a relationship which falls
within a list of relationships which are supposed automatically to be relationships of influence,
such as that between a solicitor and his or her client49 and, in addition, a transaction which “calls

42 Royal Bank of Scotland plc v. Etridge (No.2) [2001] UKHL 44, at [92], per Lord Clyde.
43 Bank of Credit and Commerce International SA v. Aboody [1990] 1 Q.B. 923, per Slade L.J.
44 Royal Bank of Scotland plc v. Etridge (No.2) [2001] UKHL 44, at e.g. [16].
45 See, e.g., Hammond v. Osborn [2002] EWCA Civ 886; Niersmans v. Pesticcio [2003] EWHC 2293; Goodchild v. Bradbury [2006]

EWCA Civ 1868.

46 Williams v. Bayley (1866) L.R. 1 H.L. 200.
47 See, e.g., R. v. Attorney-General for England and Wales [2003] UKPC 22 (P.C.).
48 Lord Nicholls said in Royal Bank of Scotland plc v. Etridge (No.2) [2001] UKHL 44, [8], that undue influence “comprises overt

acts of improper pressure or coercion such as unlawful threats”, but “Equity extended the reach of the law to other
unacceptable forms of persuasion.”
49 Wright v. Carter [1903] 1 Ch. 27.
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for explanation”.50 Thus, in CIBC Mortgages v. Pitt,51 Lord Browne-Wilkinson explained that if
actual undue influence is proved, the victim's right to have the transaction set aside will not
depend upon the disadvantageous quality of the transaction; but where a presumption of undue
influence is said to arise, the nature of the impugned transaction will always be material, no
matter what the relationship between the parties.52 The courts used to use the language of
“manifest disadvantage”53 to describe the nature of the transaction, but this was thought
imprecise in the husband-and-wife context where the wife's and husband's fortunes are
supposedly interlinked.54 It can thus be seen that the concept of substantive unfairness plays an
important evidentiary role in making out a case of presumed undue influence, meaning that
undue influence can be presumed even if there is no obvious misconduct involved.55

Actual Undue Influence & Duress under English law

Although in Allcard v Skinner56 Lindley L.J. noted that no court had ever attempted to define
undue influence,57 he considered it to involve “some unfair and improper conduct, some coercion
from outside, some overreaching, some form of cheating …”58 Moreover, it is possible to
identify, at a very general level, different factual situations where undue influence might be
found.59 In particular, some forms of influence are not dependent upon the establishment of a
pre-existing relationship of influence (hereinafter referred to as a “protected relationship”). 60

50 Royal Bank of Scotland plc v. Etridge (No.2) [2001] UKHL 44, at [14].
51 [1994] 1 A.C. 200.
52 The “suspicious transaction” requirement is thus a necessary limitation on the presumption, as otherwise, as Lord Nicholls

observed in Royal Bank of Scotland plc v. Etridge (No.2) [2001] UKHL 44, at [24], “the law would be rightly open to ridicule” for
calling normal transactions between parents and children or solicitors and clients into question.
53 Natwest v. Morgan [1985] A.C. 686, per Lord Scarman.
54 Royal Bank of Scotland plc v. Etridge (No.2) [2001] UKHL 44, at [19], per Lord Nicholls.
55 See Macklin v. Dowsett [2004] EWCA Civ 904. Thus, Sir Martin Nourse held in Hammond v. Osborn [2002] EWCA Civ 886, at

[32], that “Even if it is correct to say that [the donee]'s conduct was unimpeachable and that there was nothing sinister in it,
that would be no answer to an application of the presumption.” However, it is not correct to say that undue influence has
nothing to do with wrongfulness; O'Sullivan and Hilliard, in J. O'Sullivan and J. Hilliard, The Law of Contract, 3rd ed. (Oxford
2007), p. 275, call the continued citation of Allcard v. Skinner (1887) L.R. 36 Ch. D. 145 for this proposition “unfortunate”.
Rather, Royal Bank of Scotland plc v. Etridge (No.2) [2001] UKHL 44 makes clear that the true position is that it is wrongful per
se to prefer your own interests where someone has placed trust and confidence in you, without seeing to it that he or she is
acting freely and voluntarily, by, for example, ensuring that they are acting on the basis of independent advice.
56 (1887) 36 Ch.D. 145.
57 Bank of Scotland v Bennett [1997] 3 F.C.R. 193 at 216C.
58 See, for example, Bank of Credit and Commerce International SA v Aboody [1990] 1 Q.B. 923 at 964 per Slade L.J.
59 In Royal Bank of Scotland v Etridge (No.2), above fn.11, [8], Lord Nicholls stated:“Equity identified broadly two forms of

unacceptable conduct. The first comprises overt acts of improper pressure … The second form arises out of a relationship
between two persons where one has acquired over another a measure of influence, or ascendancy …”
60 A phrase used by Steyn L.J. in CTN Cash and Carry Ltd v Gallagher [1994] 4 All E.R. 714 at 719d.
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Such case law, often referred to as the “pressure cases”, 61 largely consists of threats, either
express or implied,62 and therefore allows for an obvious analogy to be drawn with the common
law concept of duress.63 Historically the common law concept of duress was very narrow in that:

“It could only be pleaded where the end arrived at was achieved by the use of something in the
nature of unlawful force or the threat of unlawful force against the person of the other
contracting party.”64

In such cases the Court of Chancery enjoyed a concurrent jurisdiction, 65 granting relief against
any pressure which was considered to be “illegitimate”.66 The elasticity of this concept remains a
moot point, but certainly includes threats to prosecute a person or a member of that person's
family,67 and at least some instances of what would nowadays be probably termed economic
duress.68 We would therefore support Professors Birks and Chin's argument that “it is time that
in this field we overcame the old jurisdictional duality”, 69 for to hold that part of our law regards
a certain type of pressure as acceptable while another part of it regards it as unacceptable is
surely undesirable. Perhaps the doctrine of economic duress will be a vehicle for such a
merger?70

Non-relational undue influence may be contrasted with situations where a particular type of
antecedent relationship is crucial to a finding of undue influence.71 In this latter class, undue
influence may again take many forms.72 At one extreme are those cases where the relationship of
the parties makes one person more susceptible to overt pressure from the other,73 or where the
pressure exerted is not regarded as illegitimate or unconscionable “outside the field of protected
relationships.”74 At the other extreme are cases where, without any overt pressure, a person
defers their will to that of another so that the latter becomes a “mere channel through which the

61 See Cope, Duress, Undue Influence and Unconscientious Bargains (The Law Book Company Ltd, 1985), para.125.
62 e.g. Mutual Finance Ltd v John Wetton & Sons Ltd [1937] 2 K.B. 389.
63 cf. for example, Barton v Armstrong [1973] 2N.S.W.L.R. 598 at 621F per Taylor A.J.A.
64 29 E.R. 1191 at 1194.
65 See, for example, Martin, Hanbury and Martin: Modern Equity (15th edn, Sweet & Maxwell, 1997), p.828.
66 Barton v Armstrong [1976] A.C. 104 at 118d per Lord Cross of Chelsea.
67 Williams v Bayley (1866) L.R. 1 H.L. 200.
68 See, for example, Ormes v Beadel 2 Giff. 166.
69 Birks and Chin, above fn.2, p.63.
70 cf. Dawson, “Economic Duress--an Essay in Perspective” (1947) 45 Michigan Law Review 253 at pp.262-267.
71 cf. Royal Bank of Scotland v Etridge (No.2) [1998] 4 All E.R. 705 at 711j-713c, CA.
72 Above fn.9, 183 per Lindley L.J.
73 cf. Wingrove v Wingrove 11 P.D. 81; Hampson v Guy 64 L.T. 778.
74 fn.101, 719d per Steyn L.J.
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will of the defendant operated.”75 Thus in Bank of Montreal v Stuart76 the defendant:

“… had no will of her own. Nor had she any means of forming an independent judgment even if
she had desired to do so. She was ready to sign anything her husband asked her to sign and do
anything he told her to do.”77

The middle ground is occupied by cases where, although there is no “routine dependence or
submissiveness”,78 nor “unpleasantness”,79 the complainant can show that: “(a) the other party to
the transaction (or someone who induced the transaction for his own benefit) had the capacity to
influence the complainant; (b) the influence was exercised; (c) its exercise was undue; (d) its
exercise brought about the transaction.”80 For example, a parent may be able to influence an
unemancipated child81 and such influence may be undue.82 The same might apply, mutatis
mutandis, to the relationship of spiritual advisee and spiritual adviser,83 “confidential adviser and
counsel”,84 or even to the more general relationships of “ascendancy and dependency”.85

Professors Birks and Chin argue that “non-relational” undue influence should not be litigated as
undue influence but rather “as pressure, or as ‘duress”’,86 thereby obviating the existing
jurisdictional duality. The advantage would be that it avoided the need to reconcile the
undoubted illegitimacy requirement with Birks and Chin's claimant-sided view of undue
influence. However, such an approach appears arbitrary. It is true that in cases where there is
“routine dependence or submissiveness”87 there is little that resembles pressure, but not all cases
of undue influence involve such a scenario. Leaving aside those cases where the relationship
between the parties makes the weaker party more submissive to the other's threatening
behaviour, the exercise of influence (for example, by a parent on an unemancipated child or a

75 Tufton v Sperni [1952] 2 T.L.R. 516 at 530 per Jenkins L.J.

76 [1911] A.C. 120.
77 Above fn.11, 136-137 per Lord Macnaghten.
78 Birks and Chin, “On the Nature of Undue Influence” in Beatson and Friedmann (eds), Good Faith and Fault in Contract Law

(Clarendon Press, 1995).

79 [2002] EWCACiv 885, noted inDevenney, “Hammond v. Osborn” (2003) 25 J.S.W.F.L. 169.
80 Morrison v Coast Finance Ltd (1965) 55 D.L.R. (3d) 710 at 713 per Davey J.A.
81 See, for example, Blundon v Hester (1720) 1 P.Wms. 634.
82 cf. Jevers v Jevers (1735) 1 Bro. P.C. 272.
83 e.g. Nottidge v Prince (1860) 2 Giff. 246; Morley v Loughnan [1893] 1 Ch. 736.
84 Brown v Kennedy (1863) 33 Beav. 133 per Sir John Romilly M.R.
85 [1998] 3 All E.R. 876; discussed in Chandler, “Manifest Disadvantage: Limits of Application” (1999) 115 L.Q.R. 213.
86 See R. v Attorney-General for England and Wales [2003] UKPC 22 and National Commercial Bank (Jamaica) Ltd [2003] UKPC

51. Even the late Professor Birks noted the difficulties these decisions created for his and Chin's thesis: see Birks, “Undue
Influence as Wrongful Exploitation” (2004) 120 L.Q.R. 34.
87 See Chesterfield v Jansen (1750) 2 Ves. Sen. 125 at 130.
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spiritual advisor on a spiritual advisee) necessarily exerts pressure, albeit of a surreptitious

nature. Thus, in Cowdry v Day,88 Stuart V.C. opined that relief stemmed: “from the pressure
arising from the relation of solicitor … unless enough is done to extricate the client from the
pressure of the relation.”89 In Morgan v Higgins,90 the same judge expressed the view that: “in all
these cases … pressure … constitutes an imperfection in the consent given by the party who is to
be bound by the contract.”91

Therefore, if any distinction is to be drawn it should be between cases of “pressure” (relational

and non-relational) and those involving “routine dependence or submissiveness”.92 Indeed, it will
be our contention that the former and the latter are linked inextricably together by the concept of
unconscionability.

An Approach to Economic Duress

It was only in 197693 that economic duress was recognised under English common law94 as an
acceptable ground (under the general area of duress) to avoid an agreement.95 The first case
appears to be Occidental Worldwide Investment Corp v Skibs.96 In this case, the charterers of
two ships insisted that the ship owners reduce the rate of hire (after a slump in market rates) by
threatening the owners that they had no assets and would go bankrupt unless the rates were
reduced. The charterers also knew that, if the ships were returned, the owners would face
financial difficulty because, given the slump, they would be unable to find alternative charterers.

88 1 Giff. 316.
89 cf. Phang, “Undue Influence Methodology, Sources and Linkages” [1995] J.B.L. 552 at p.562.
90 (1859) 1 Giff. 270.
91 cf. Winder, “Undue Influence and Fiduciary Relationship” (1940) 4 Conv. 274 at pp.285-288, and Sheridan, above fn.21,

pp.92-93.
92 e.g. Cobbett v Brock (1855) 20 Beav. 524.
93 In contrast, in the United States economic duress was already widely acknowledged. See for example J. P. Dawson,

“Economic Duress--An Essay in Perspective” (1947) 45(3) Michigan Law Review 253-290; J. Dalzell, “Duress by Economic
Pressure I” (1942) 20 North Carolina Law Review 237-277.
94 The Chancery Courts had considered economic pressure over a century earlier: in Ormes v Beadel (1860) 2 Giff. 166 the court

of equity had held that a contract entered into under circumstances of acute economic pressure, increased by a refusal of the
architect to pay a builder a sum which the court found was a fair and just demand for work done, would be set aside in equity.
The case was reversed on appeal on the ground of affirmation or acquiescence Ormes v Beadel (1860) 2 De G.F. & J. 333.
95 The origin of the common law position, that the only form of duress which would allow a party to avoid a contract was the

duress of the person, lay in the decision of the Court of Exchequer in Skeate v Beale (1841) 11 Ad. & E.L. 983. The courts have
since recognised that illegitimate pressure included threats of violence to the person. For example, Barton v Armstrong [1976]
A.C. 104 and Friedeberg-Seeley v Klass (1957) 101 S.J. 275. See also D&C Builders Ltd v Rees [1966] 2 Q.W.B. 617 at 625 per
Lord Denning M.R., who stated: “No person can insist on a settlement procured by intimidation.”
96 [1976] 1 Lloyd's Rep. 293 (The Sibeon and The Sibotre ) (also noted in (1976) 92 L.Q.R. 496).
14 | P a g e

The case was decided on the fact that the threats made by the charterers were false and
fraudulent and so the owners were entitled to avoid the renegotiated terms. However, of greater
importance in the present context, Kerr J. accepted that, in principle, relief on the ground of
economic duress was available to the owners. Kerr J. stated97 :

“But even assuming, as I think, that our law is open to further development in relation to
contracts concluded under some form of compulsion not amounting to duress to the person, the
Court must in every case at least be satisfied that the consent of the other party was overborne 98
by compulsion so as to deprive him of any animus contrahendi.”

In North Ocean Shipping Co Ltd v Hyundai Corporation Co,99 the shipbuilders threatened
(without legal justification) to terminate the contract unless the plaintiff agreed to increase the
price by 10 per cent. The ship owners had chartered the ship to Shell and fearing a loss in the
charter if the ship was delivered late, agreed to the additional payment. Mocatta J. stated:
“compulsion may take the form of ‘economic duress' if necessary facts are proved. A threat to
break a contract may amount to such ‘economic duress”’. Similarly, in Pao On v Lau Yiu
Long100 the Privy Council judgment delivered by Lord Scarman concluded101 : “there is nothing
contrary to principle to recognising economic duress as a factor which may render a contract
voidable …”102

The judicial approach of economic duress

In 1992, the House of Lords in Dimskal Shipping Co Ltd v ITWF103 accepted that “economic
pressure may be sufficient to amount to duress … provided at least that the economic pressure
may be characterised as illegitimate and has constituted a significant cause inducing the plaintiff

97 See ibid., at 336.

98 Lynch v DPP of Northern Ireland, n.4 above, established clear declarations of principle on the question of whether duress
negatives consent or whether contracts procured by duress are voidable. The latter was stated to be the correct analysis: see
especially the speech of Lord Wilberforce (at 680) who stated that “duress does not destroy the will, for example to enter into a
contract, but prevents the law from accepting what has happened as a contract valid in law”. However it should be noted in
Occidental, along with Pao On v Lau Yiu Long [1980] A.C. 614 and Universe Tankships of Monrovia v I.T.W.F. [1983] 1 A.C. 366
the judges spoke of economic duress as negativing true consent.
99 [1979] Q.B. 705, The Atlantic Baron.
100 [1980] A.C. 614.
101 See ibid., at 636.
102 [1980] A.C. 614.
103 [1991] 4 All E.R. 871.
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to enter into the relevant contract”.104 In Dimskal, the ship owners' agreement to pay certain
sums to the crew and its union because of the latter's threats 105 was held to be unenforceable on
the grounds of economic duress. Economic duress has been applied in a small number of
cases.106 Of most relevance to the construction industry are the two cases of DSND Subsea107
and Carillion Construction Ltd v Felix (UK) Ltd.108 Both cases were decided by Dyson J. (as he
then was). Economic duress was found in Carillion but not in DSND. Before examining the test
for economic duress as distilled from previous cases and reformulated by Dyson J., it is
beneficial to review the facts of each case. What indicators do the facts of Carillion and DSND
give to a victim when predicting success with the test?

Economic duress established by case law

In Carillion, the test for economic duress was fulfilled. Carillion was the main contractor
engaged to construct an office building.109 Carillion subcontracted the design, manufacture and
supply of the cladding to Felix. Carillion would be liable to the developer for liquidated
ascertained damages at the rate of £75,000 per week if the office was delivered late. Although
Felix was behind schedule, it insisted that Carillion sign an agreement relating to the financial
account (which was being disputed), before Felix would complete the delivery schedule of the
cladding.

Felix may have good commercial reasons for insisting that Carillion signed the “final account
agreement”. For example, it was clear that Felix's representative was very annoyed by what he
considered to be Carillion's unreasonable refusal to enter into meaningful negotiations over the
final account and the introduction by Carillion of a scaffolding contra-charge. Some members of
104 See ibid., at 878 per Lord Gaff of Chieveley.
105 The ITWF made a threat that the ship would be “blacked” unless the owners entered into ITF employment/contract with the
crew and demanded (1) a sum representing all crew members' wages backdated to the commencement of the employment of
crew members, should be paid to the ITF in London; (2) a bank guarantee in the sum of US$200,000 be provided; (3) owners
provided undertakings not to institute proceedings against the Filipino nationals who were members of the crew; (4) owners
execute a special agreement with the ITWF; (5) owners execute a document declaring that the owners were complying
voluntarily with the ITF's demands; (6) owners provide letters of indemnity to all members of the crew.
106 Atlas Express Ltd v Kafco Ltd [1989] Q.B. 333 (where the carrier refused to perform without extra payment after it had

miscalculated the number of cartons it could carry per loads); The Alev [1989] 1 Lloyd's Rep. 138 (where the owner demanded
“financial assistance” from consignee before it would deliver goods under freight pre-paid bills when the charterer had failed to
pay hire); Cantor Index Ltd v Shortall [2002] All E.R. (D) 161 (where payments were made under a threat to close the customer's
bets); Carillion Construction Ltd v Felix (UK) Ltd [2001] B.L.R. 1, discussed below.
107 See n.2 above.
108 [2001] B.L.R. 1.
109 Located at 16-17 Old Bailey, London, EC4 and so in the so called “square mile”.
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the construction industry (especially sub-contractors) may consider that, Felix's actions were
consistent with reasonable behaviour by a contractor in a difficult commercial situation.
However, Dyson J. held that Felix's threat to withhold deliveries was a threat to commit a clear
breach of contract. The threat was made by Felix when it knew that there were a number of
trades that were dependent on Felix completing its work. 110 It was also accepted that Felix knew
that Carillion could not complete the works by the completion date (and so incur liquidated
damages) unless Felix completed the cladding works. Further, Dyson J. accepted that Felix
“must also have known that it would be impossible for Carillion to find an alternative supplier in
time to meet the Completion Date”. Did Carillion have any practical alternative(s)? Carillion
argued that it had considered (and rejected) the possibility of injunction proceedings. It had also
considered that, even if adjudication proceedings were a possibility, they would take several
weeks to complete: “that was too long”. Carillion decided that there was no way of ensuring that
Felix would make the outstanding deliveries and concluded that the only option was to agree to
Felix's demands, agree the final account and seek redress using economic duress. Dyson J.
agreed that Carillion had no practical alternative. With respect to adjudication, Dyson J. said:
“Carillion was acting reasonably in deciding that it could not afford to wait 6 weeks”. Although
counsel for Felix abandoned the “affirmation” argument, Dyson J. decided that Carillion did not
affirm and “stopped performing the Settlement Agreement as soon as it ceased to be subject to
the effect of the threat” (i.e. as soon as Felix had made its final delivery).

A risky situation111,Dyson J. has referred to his formulation of the test as being “an accurate
statement of the law”112 in Carillion. While Dyson J.'s test provides clarity in this area it is
submitted that it is a relatively broad-ranging test and it is expected that a very small number of
cases would fulfil the requirements successfully to plead economic duress. This means that a
large number of victims who have been commercially exploited, but who cannot establish the
whole range of factors in the test, would be unable to avoid, or escape from, the new contract.

One particular difficulty for the employer, contractor, sub-contractor, or supplier victim wishing

110 Or at least completing the outstanding work at ground floor level in order to make the building watertight.
111 This sub-heading is intended to draw a parallel with the “risky enterprise” of advancing global claims. See John Doyle v Laing
Management (2002) 393 B.L.R. at 407 per Lord Macfadyen: “Advancing a claim for loss and expense in global form is therefore
a risky enterprise”.
112 See above, at 6.
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to rely on economic duress is the issue of affirmation. In practical terms, it will often be the case
that, following the alleged duress, the victim carries on performing the contract in question. For
example, the purchaser in the case of the supplier who withholds deliveries until payments are
revised upwards may continue to order additional materials such that he carries on performing
his side of the bargain. Further, if one stops and considers the scenario discussed above at the
beginning of the article--the employer insists that the contractor execute a collateral construction
contract before it will even consider the contractor's claim for an extension of time under the
initial contract--in practice it is possible that, although the illegitimate pressure may cease, the
contractor may be unable to stop the collateral contract (because he has already entered into sub-
contractors', or supply agreements). In such a case, it appears likely that the victim will fall foul
of the “affirmation” hurdle in Dyson J.'s test.

There does not appear to be any judicial authority that undermines Dyson J's test. However, there
is academic criticism of the test113 and the precise meaning of “illegitimate pressure”.114 For
example, Tan suggests that Dyson J.'s formulation distinguishes between “mere” and “flagrant”
breaches of contract and between bad and good faith. Tan says this is conceptually incorrect. He
says a distinction between different types of breach is difficult and inconsistent with general
contract law. Although Tan's “three stage test” may appear to be simpler than the Dyson J. test, it
is submitted that the desire to reduce this complex area into three discrete definable “labels”
ignores the fundamental point that jurisprudential analysis of economic duress leads to the
conclusion that each case is a question of fact and that the courts are generally unwilling to
depart from the freedom of contract ideology. This means that only in the rare cases that satisfy
the various requirements, or factors, in Dyson J.'s test will contracts be avoided. It may be more
beneficial for a victim to plead its case on a basis that does not seek to make contracts voidable
(undermine the freedom of contract ideology), but instead reverse unjust enrichment, or
opportunistic exploitation. This is discussed in the second part of the article. Prior to this, it is
vital to explore the jurisprudential foundations underlying judicial treatment of economic duress.

113 D. Tan, “Constructing a Doctrine of Economic Duress” (2002) 18 Const. L.J. 87.
114 G. Virgo, The Principles of the Law of Restitution (Clarendon Press, Oxford, 1999).
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The jurisprudence of economic duress

The broad-ranging nature115 of Dyson J.'s test appears to suggest that the judges will not lightly
break parties' bargains. Market-individualism appears to be the chief ideology operating in this
area. Market-individualism116 involves two related ideologies: the market philosophy and the
individualistic philosophy. The former sees the function of the law of contract as the means of
competitive exchange. Individualism is about “freedom of contract” and “sanctity of contract”.
The key is to allow individuals maximum licence in setting the terms of their contracts, but then
to hold the parties to their contract.117 Evidence of this can be found in Pao On, where Lord
Scarman said118 : “Where businessmen are negotiating at arm's length it is unnecessary for the
achievement of justice, and unhelpful in the development of the law to invoke such a rule of
public policy. It would also create unacceptable anomaly. It is unnecessary because justice
requires that men, who have negotiated at arm's length, be held to their bargains, unless it can be
shown that their consent was vitiated by fraud, mistake or duress”. Further, in CTN Cash and
Carry v Gallagher Ltd,119 Steyn L.J. was very careful to point out the importance of commercial
certainty: “allowing lawful act duress would introduce a substantial and undesirable element of
uncertainty in the commercial bargaining process. Moreover it will often enable bona fide settled
accounts to be reopened when parties to commercial dealings fall out”. Steyn L.J. did not like the
concept of the courts looking into whether contracts were morally, or socially, unacceptable. It
appears that part of marketindividualism involves eliminating, or reducing, to the barest
minimum any extra legal, or moral, factors that could lead to uncertainty. Freedom of contract
theory also explains the cases of Atlas Express Ltd v Kafco120 and North Ocean Shipping.121
Although the borderline between economic duress and legitimate commercial pressure may in
some cases be indistinct,122 only in cases where the facts are so compelling will the courts find

115 We also see broad tests in the analogous doctrine of undue influence. The courts also appear to be reluctant to lay down
precise limits to that doctrine. This is because the facts with which judges are presented can vary widely and so it is the
underlying jurisprudential decision-making that decides the cases based on as wide a range of facts as possible.
116 For greater background on market-individualism see J. N. Adams and R. Brownsword, Understanding Contract Law (4th ed.,

Sweet & Maxwell, London, 2004).

117 The market-individualism approach is said to discourage one party (the contractor) from underbidding, or underpricing, and

then holding the other party (the employer) to ransom. In practical terms, decisions based on market-individualism protect
against renegotiation of (good, or bad) commercial bargains.
118 [1980] A.C. 614.
119 [1994] 4 All E.R. 714 at 719.
120 [1989] Q.B. 833.
121 See n.14 above.
122 See n.41 above, at 845 per Tucker J.
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economic duress. For example, in Atlas the plaintiff carriers, having underpriced a contract to
transport the defendant's basketware goods to various retail outlets, demanded that the price
should be adjusted upwards. In fact, the plaintiffs drew up a new agreement and gave their
drivers instructions to drive away empty, without the defendant's goods, unless the defendants
signed. Given this ultimatum and the fact that this was happening in the run-up to Christmas
(when the defendants could not make alternative arrangements, or let down their retail outlets)
the defendants had no option but to sign. The facts in the scenarios at the beginning of the article
may not be so compelling and so may not fall within the test for economic duress. It is submitted
that judicial decision-making based upon market-individualism means that the economic duress
test is a very high test for victims involved in the commercial rough and tumble within the
construction industry, but who have been unfairly commercially exploited. It is submitted that
victims need to look elsewhere for a remedy. That other place is restitution. It is not dependent
on making contracts voidable and so the “freedom of contract” theory should not be such an
obstacle.

The doctrine of restitution is concerned with whether a victim can recover a benefit from the
defendant rather than whether the victim can be compensated for loss suffered. In 1943, Lord
Wright123 said exactly that: “It is clear that any civilised system of law is bound to provide
remedies for cases of what has been called unjust enrichment or unjust benefit, that is, to prevent
a man from retaining the money of, or some benefit derived from, another which it is against
conscience that he should keep”. Restitutionary remedies under English law have been
recognised by the House of Lords124 and are generically different from remedies in the law of
contract or tort. It is submitted that, in the present context, the victim should seek restitution
rather than rescission of a contract.125

In the present case, “unjust enrichment” is the primary theoretical basis for the restitution sought
by the victim. Unjust enrichment restitutionary remedies are only available where the defendant
has been unjustly enriched at the expense of the victim. This is the premise upon which the
victim is seeking redress because the hurdle of avoiding the contract may on the facts be

123 Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour [1943] A.C. 32 at 61.
124 Lipkin Gorman Ltd v Karpnale Ltd [1991] 2 A.C. 548; Woolwich Equitable Building Society v IRC [1993] A.C. 70; Westdeutsche
Landesbank Girozentrale v Islington LBC [1996] A.C. 669; Foskett v McKeown [2002] 1 A.C. 102.
125 Interestingly, of the reported cases in the area of economic duress only North Ocean Shipping v Hyundai, n.14 above, and

B&S Contracts v Victor Green Publications [1984] I.C.R. 419 concerned restitution rather than rescission of a contract.
20 | P a g e

insurmountable. It is submitted that, by pleading unjust enrichment, the victim will increase the
chance of neutralising the commercial opportunism, or exploitation, carried out by the defendant.
According to Lord Hoffmann,126 the appropriate questions regarding restitution are: “first,
whether the defendant would be enriched at the plaintiff's expense; secondly, whether such
enrichment would be unjust; and thirdly, whether there are nevertheless reasons of policy for
denying a remedy”.

Further, Lord Woolf127 said: “restitution is an area of the law which is still in the process of
being evolved by the courts ”. Building on the speech of Lord Wright in Fibrosa,128 it has been
explicitly recognised by the House of Lords that unjust enrichment lies at the heart and is the
principle underlying individual instances in which the law does give a right of recovery in
restitution. For example, in Lipkin Gorman129 Lord Goff of Chieveley stated: “The recovery of
money in restitution is not, as a general rule, a matter of discretion for the court. A claim to
recover money at common law is made as matter of right; and even though the underlying
principle of recovery is the principle of unjust enrichment, nevertheless, where recovery is
denied, it is denied on the basis of legal principle.” Although there is no general cause of action
in English law for unjust enrichment, in Woolwich Building Society v IRC130 Lord Browne-
Wilkinson recognised that principles can be reinterpreted so as to give a right of recovery. He
said131 : “In the present case the concept of unjust enrichment suggests that the plaintiffs should
have a remedy … if the Crown is right, it will be enriched by the interest on the money to which
it had no right during that period. In my judgement, this is the paradigm of a case of unjust
enrichment.” It is submitted that in the present context, a victim in any of the scenarios created at
the beginning of the article could (if unable successfully to plead economic duress) plead unjust
enrichment as a cause of action.132 The relationship between pleading unjust enrichment and
success for the victim must, it is submitted, be related to the unjustness of the enrichment, or in
other words to the extent of the bad faith and opportunism employed by the defendant. As Lord

126 Banque Financière de la Cité v Parc

127 Westdeutsche Landesbank v Islington LBC [1996] 2 W.L.R. 802 at 845.
128 G. Virgo, The Principles of the Law of Restitution (Clarendon Press, Oxford, 1999).
129 Lipkin Gorman v Karpnale Ltd
130 n.7 above.
131 ibid., at 780.
132 Indeed Peter Birks in Unjust Enrichment (2003) emphasised his preference for this doctrine being called by its cause of

action (rather than restitution).

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Goff stated in Woolwich133 : “I would not think it right, especially bearing in mind the
development of the concept of economic duress, to regard the categories of compulsion for
present purposes as closed.” The above would appear to allow the victim to recover benefits
unjustly obtained by a defendant in a factual matrix less than that needed to satisfy the
broadranging test of economic duress. The categories of compulsion are not closed and so
something less than that required for economic duress could be allowed (especially since the
victim seeks restitution and not rescission).

There is clearly overlap between commercial pressure, compulsion and economic duress. For
example, in Universe Tankships Inc of Monrovia v ITWF Lord Diplock commented:
“Commercial pressure in some degree, exists whenever one party to a commercial transaction is
in a stronger bargaining position than the other party.”134 The possibility that something short of
duress, such as an unfair use of strong bargaining position, could be used to avoid contracts was
considered by Lord Scarman135 in Pao : “It would become a question of fact and degree to
determine in each case whether there had been, short of duress, an unfair use of strong
bargaining position.”

Lord Scarman's dismissal of “strong bargaining position” was based upon the issue of avoiding
contracts. Avoiding contracts is laden with jurisprudence dealing with sanctity of contract and
the factual circumstances need to be highly compelling before a contract can be avoided using
economic duress. In the present context, the victim would not be seeking to avoid the contract,
but merely reverse the unjust enrichment of the defendant. The law of restitution has evolved
significantly since Pao and it is submitted that something less than economic duress could now
be successfully pleaded in a case of unjust enrichment. Further support for this proposition can
be found in CTN Cash and Carry Ltd v Gallagher Ltd.136 In CTN, the plaintiffs purchased a
consignment of cigarettes from the defendants. Owing to a mistake, the consignment was
delivered to the wrong warehouse. Arrangements were made to transfer the consignment to its
correct destination. However, a robbery occurred the day before the redelivery was to take place
and the consignment was stolen. The defendants subsequently delivered a new consignment to
the correct warehouse, which was duly paid for. But the defendants also invoiced the plaintiffs

133 See n.7 above, at 742.

134 [1982] 2 All E.R. 67 at 76.
135 n.15 above, at 634.
136 n.40 above.
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for the price of the stolen goods. The defendant's representative made it clear to the plaintiff that,
unless the plaintiffs paid for the stolen goods, the defendants would cease to grant credit to the
plaintiffs in the future. The plaintiffs decided to pay for the stolen goods, but sought to recover
this money on the grounds of economic duress. The Court of Appeal held that the economic
argument failed. Steyn L.J. considered that the defendants were merely exerting “commercial
pressure” in the bona fide pursuit of “commercial self interest”.

Conclusion

Freedom of contract ideology means that the courts are reluctant to interfere in commercial
contracts. Only the most extreme factual circumstances may succeed to avoid the contract. The
practical problem of affirmation, however, remains. Consequently, the notion that substantively
unfair contracts should be overseen by the courts does have some currency; there are both
statutory and non-statutory instances in which the court will explicitly intervene to correct a
substantively unfair bargain, and substantive unfairness has a key role to play in the doctrines of
procedural unfairness of duress, undue influence and economic duress, such that substantively
unfair bargains are in practice often set aside by the courts. Economic duress involving unlawful
threats is worthy of consideration in its own right. It is part of commercial life and it is a problem
with which the courts are having to deal. For this reason, and also because it may form the basis
of expansion of the courts' intervention into cases involving lawful threats, the restrictions upon
it should be worked out with great care. The open-ended and fact-dependent nature of the
economic duress inquiry means that a myriad of factors has to be taken into account. The
challenge is to articulate a clear and practical test, which allows principled consideration of
relevant factors, for the benefit of future cases and the commercial community at large. Intuitive
reasoning should not be adopted in deciding the result in any particular case.137 The question to
be answered is whether a particular (renegotiated) contract should be upheld. Seen in this light, it
is easy to see the link between the doctrine and other contractual “vitiating” factors. Oliver
Wendell Holmes' famous aphorism that “[t]he life of the law has not been logic: it has been
experience”138 may provide some comfort that whatever moral compulsions we may have to

137 As Nicholls V.-C. in CTN Cash and Carry, supra, n. 11, at p. 720, was so nearly guilty of when he described the party applying
the pressure as being “prima facie … unconscionable even though economic duress was not made out on the facts.
138 Holmes, The Common Law (39th printing Little Brown and Company, Boston, 1946).
23 | P a g e

reach a particular result, these would already have found expression elsewhere in the law. It
would be a great pity, and indeed a discredit to our legal tradition, if we do not avail ourselves of
established legal principles in navigating the economic duress inquiry. It may be more beneficial
for a victim to rely upon restitution. This is an area under significant evolution, where the
categories of when unjust enrichment may be reversed remain open. Factors less than required to
prove economic duress may be utilized successfully to reverse unjust enrichment. The main
theoretical obstacle of the market-individualism theory is not so significant in reversing unjust
enrichment, primarily because it does not involve avoiding contracts.

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Montgomery v Montgomery (1879) 14 I.L.T.R. 1
Niell v Morely (1804) 9 Ves. 478
Niersmans v. Pesticcio [2003] EWHC 2293
Pao On v. Lau Yiu Long [1980] A.C. 614
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Phillips Hong Kong Ltd v. Attorney-General of Hong Kong (1993) 61 B.L.R. 41 (P.C.)
R. v. Attorney-General for England and Wales [2003] UKPC 22 (P.C.)
Raineri v. Miles [1981] A.C. 1050
Royal Bank of Scotland plc v. Etridge (No.2) [2001] UKHL 44
The Evia Luck (No.2) [1992] 2 A.C. 152
The Siboen and The Sibotre [1976] 1 Lloyd's Rep. 293
Universal Cargo Carrier Corporation v. Citati [1957] 2 Q.B. 401
Willis v Jernegan (1741) 2 Atk. 251
Wright v. Carter [1903] 1 Ch. 27

B. Articles
Bigwood, R, ‘Economic duress by (threatened) breach of contract’ (2001) 117 L.Q.R. 376
Hardingham, ‘The High Court of Australia and Unconscionable Dealing’ (1984) 4 O.J.L.S. 275
Leff, ‘Unconscionability and the Code--the Emperor's New Clause’ (1967) 115 U. Pa. L. Rev.
485
Ross-Martyn, ‘Unconscionable Bargains’ (1971) 121 N.L.J. 1159
Smith, S, ‘Contracting Under Pressure: a Theory of Duress’, (1997) 56 C.L.J. 343
Tan, D, ‘Constructing a Doctrine of Economic Duress’ (2002) 18 Const. L.J. 87
Nolan, D, ‘Economic Duress and the Availability of a Reasonable Alternative’ (1999) R.L.R.
105
Clark, ‘The Unconscionability Doctrine Viewed from an Irish Perspective’ (1980) 31 N.I.L.Q.
114
Davies, PS, ‘Case Comment: Bank Charges and Unfair Terms’ (2008) 67(3) C.L.J. 466
Smith, SA, ‘Contracting Under Pressure: A Theory of Duress’ (1997) C.L.J. 343

C. Books

Birks, P, An Introduction to the Law of Restitution (Clarendon Press, Oxford 1988)

Birks and Chin, “On the Nature of Undue Influence” in Beatson and Friedmann (eds), Good
Faith and Fault in Contract Law (Clarendon Press, 1995)
Deutch, Unfair Contracts (Health, New York, 1977)
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Goff and Jones, The Law of Restitution (Sweet & Maxwell 1998)
McKendrick, E, Contract Law, 3rd ed. (Oxford 2007)
Sheridan, Fraud in Equity (Pitman, 1957)
Spiker, “The Rights of the Poor: Conceptual Issues” in Robson and Kjonstad (eds), Poverty and
the Law (Hart Publishing, 2001)
Virgo, G, The Principles of the Law of Restitution (Clarendon Press, Oxford, 1999)