Coercion and Duress

Coercion and Duress: Comparative Analysis
CHANAKYA NATIONAL LAW UNIVERSITY,

NYAYA NAGAR, MITHAPUR, PATNA – 800001.
TOPIC - “Comparative Analysis of Coercion and Duress ”
FINAL DRAFT SUBMITTED IN THE PARTIAL FULFILMENT OF THE

COURSE TITLED-
LAW OF CONTRACT-I
SUBMITTED TO:
MRS. SUSHMITA SINGH
Faculty of Law of Contracts
SUBMITTED BY:
BANDITA.
ROLL NO : 2221
SEMESTER : SECOND
SESSION : 2019-2024
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DECLARATION BY STUDENT
I, BANDITA ,student of Chanakya National Law University hereby declare that the work
reported in the B.B.A. LL.B.(HONS)project report entitled: “Comparative Analysis of
Coercion And Duress” submitted in Chanakya National Law University ,Patna is an authentic
record of my work carried out under the supervision of Mrs. Sushmita Singh. I have not
submitted this work elsewhere for any other degree of diploma. I am fully responsible for the
contents of my project report.
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ACKNOWLEDGEMENT
I would like to thank my faculty Mrs. Sushmita Singh whose guidance helped me a lot with
structuring of my project. I take this opportunity to take deep sense of gratitude for her
guidance and encouragement which sustained my efforts on all stage of this project.
I owe the present accomplishment of my project to my friends, who helped me immensely

with materials throughout the project and without whom I couldn’t have completed it in the
present way. I would also like to thank the library staff of my college which assisted me in
acquiring the sources necessary for the compilation of my project.
I would also like to extend my gratitude to my parents and all those unseen hands that helped
me out at every stage of my project.
THANKYOU.
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INDEX
CHAPTER 1:
INTRODUCTION…………………………………………………………………………05-06
CHAPTER 2:
COERCION………………………………………………………………………………07-08
CHAPTER 3:
DURESS…………………………………………………………………………………09-10
CHAPTER 4:
COMPARATIVE ANALYSIS BETWEEN COERCION AND
DURESS…………………………………………………………………………………11-12
CHAPTER 5:
CASE LAWS………..……………………………………………………………………13-20
CONCLUSION…………………………………………………………………………..21
BIBLIOGRAPHY…………………………………………………………….………………..22
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CHAPTER 1:
INTRODUCTION
The Indian Contract Act, 1872 prescribes the law relating to contracts in India and is the key
act regulating Indian contract law. The Act is based on the principles of English Common
Law. It is applicable to all the states of India. It determines the circumstances in which
promises made by the parties to a contract shall be legally binding. Under Section 2(h), the
Indian Contract Act defines a contract as an agreement which is enforceable by law. The Act
as enacted originally had 266 Sections, it had wide scope and
 General Principles of Law of Contract – Sections 01 to 75

 Contract relating to Sale of Goods – Sections 76 to 123
 Special Contracts- Indemnity, Guarantee, Bailment & Pledge and Agency – Sections 124
to 238
 Contracts relating to Partnership – Sections 239 to 266
According to section 10 of Indian Contract act ,1872 “All agreements are contract if they
are made by the free consent of parties competent to contract, for a lawful consideration
and with a lawful object, and are not hereby expressly declared to be void”.
FREE CONSENT
According to Section 13, " two or more persons are said to be in consent when they agree
upon the same thing in the same sense (Consensus-ad-idem).
Elements Vitiating free Consent
1. Coercion (Section 15): "Coercion" is the committing, or threatening to commit, any act
forbidden by the Indian Penal Code under(45,1860), or the unlawful detaining, or threatening
to detain, any property, to the prejudice of any person whatever, with the intention of causing
any person to enter into an agreement. For example, "A" threatens to shoot "B"if he doesn't
release him from a debt which he owes to "B". "B" releases "A" under threat. Since the
release has been brought about by coercion, such release is not valid.
2. Undue influence (Section 16): "Where a person who is in a position to dominate the will of
another enters into a contract with him and the transaction appears on the face of it, or on the
evidence, to be unconscionable, the burden of proving that such contract was not induced by
undue influence shall lie upon the person in the position to dominate the will of the other."
3. Fraud (Section 17): "Fraud" means and includes any act or concealment of material fact or
misrepresentation made knowingly by a party to a contract, or with his connivance, or by his
agent, with intent to deceive another party thereto of his agent, or to induce him to enter into
the contract. Mere silence is not fraud. a contracting party is not obliged to disclose each and
everything to the other party. There are two exceptions where even mere silence may be
fraud, one is where there is a duty to speak, then keeping silence is fraud. or when silence is
in itself equivalent to speech, such silence is fraud.
4. Misrepresentation (Section 18): " causing, however innocently, a party to an agreement to
make a mistake as to the substance of the thing which is the subject of the agreement".
5. Mistake of fact (Section 20): "Where both the parties to an agreement are under a mistake
as to a matter of fact essential to the agreement, the agreement is void". A party cannot be
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allowed to get any relief on the ground that he had done some particular act in ignorance of
law. Mistake may be bilateral mistake where both parties to an agreement are under mistake
as to the matter of fact. The mistake must relate to a matter of fact essential to the agreement.
DURESS
Duress, under Common Law, consists in actual violence or threat of violence to a person. It
includes doing an illegal act against a person, whether it is to be crime or tort. Duress is not
confined to unlawful acts Forbidden by any specific penal law, like the Indian penal code in
India. In England, duress is constituted by acts or threats against any person of a man and not
against his property. In England, duress should proceed from a party to the contract and is
also directed against the party to the contract himself, or his wife, parent, child or other near
relatives.
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CHAPTER 2: COERCION
Coercion is committing, or threatening to commit, any act forbidden by the Indian Penal
Code (Section 45 of 1860), or the unlawful detaining, or threatening to detain, any property,
to the prejudice of any person whatever, with the intention of causing any person to enter into
an agreement. The words in this segment are significantly more extensive which existed amid
the English authorities1 . This definition expresses that the coercion which refutes a contract
ought to not really go from a gathering to an agreement 2 , or ought to be quick against a man
whom it was proposed to cause to go into a contract or anything which influences his
property. For example – 1) A was going out for a walk, B a stranger comes to A, takes out his
gun and asks A to give all his possessions. Here A’s consent is obtained through coercion. 2)
A government in order to realize fine, due from the son, has attached the property belonging
to the son and the father pays the fine in order to save the property from being sold; here the
payment is made out of the coercion3. The definition contained in section 15 is exclusively
expected to consider whether the consent in a specific case is a free consent falling inside
area 14 and it doesn't administer the importance of the word coercion as utilized as a part of
segment 70 of the Act4. There are certain words in this section that needs to be defined:
 Act forbidden by IPC- The word act forbidden by Indian Penal Code make it necessary for
the court to decide in a civil action, whether the alleged act of coercion is such as to amount
to an offence5. A threat of bringing a false charm with the object of making another do a thing
amount, to blackmail or coercion6. In the case of Ranganayakamma v Alwar Setti 7 , where the
widow was obstructed from removing the corpse of her husband until she consented for the
adoption. The court held that her consent was not free and it was coerced. It is clear that
coercion is committing or threatening to commit any act which is contrary to law.
 Unlawful Detaining of Property: A consent can be said to be caused by coercion, if it is
caused because of unlawful confining of a property, or a risk to do as such. Where with a
specific end goal to acknowledge fine due from child, the legislature appended the property
having a place both of him and his dad, instalment at that point made by the father keeping in
mind the end goal to spare the property from being sold was held to have been made under
coercion. Refusal by government office to discharge the instalment of a temporary worker
unless he surrendered his claim for additional rates added up to intimidation under the class
of detainment of property.
 Prejudice- Mere sentimental prejudice is no ground for coercion rather there should be
some legal injury in order to be prejudiced. For instance, a wife been threatened by her
husband to commit suicide8.
 Causing any person to enter into an agreement- In the case of Vibha Mehta v Hotel
Marina9 at the point when coercion is charged, the claim like extortion or distortion must be
1
(1912) 15 Oudh Cas 192
2
Chuni Lal v Maula Baksh, AIR 1936 Lah 6
3
Bansraj v. Secretary of State, AIR 1939 All 373: 183 IC 134.
4
P.B. Mills Co. v. Union of India, AIR 1970 Guj 59:
5
Ammiraju v Seshamma AIR 1918 Mad 414
6
AIR 1936 Lah 6. 7
7
(1890) ILR 13 Mad 214
8
Supra 5
9
2012 (132) DRJ 638
7
upheld by particulars. It is simply after entire particulars of the affirmed coercion are given
that the court can ask into it and choose whether it stands demonstrated or not.
Burden of proof:
The burden of proof lies on the party taking the defence of the coercion 10. The onus of proof
on him is heavier. It is so as mere probability or suspicion doesn’t amount to coercion. To
establish coercion a person must prove there was a threat which was forbidden by law and
that compelled him to get into a contract which otherwise he wouldn’t have.
Effects of coercion in a contract-
In this case any benefit received by the either parties to contract must be restored back. If the
aggrieved party has suffered loss, he can recover the loss from the other party to contract.
Whenever there is an unfair advantage to the plaintiff over the defendants while making a
contract, the court may refuse specific performance to the plaintiff. On the contrary if the
defendant had entered into contract which makes it unfair to enforce specific performance in
that case he may be refused too for the specific performance.11
10
Palanippa Mudaliar v Kandaswamy Mudaliar, (1971) 1 Mys LJ 258
11
Specific Relief Act,1963, s.20(2)
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CHAPTER 3: DURESS
Duress in contract law is focused on the concept of undue influence. This means the use of
false imprisonment, threats, force, psychological pressure, or coercion to influence someone
to act in a way that is not in their best interest or to act in a manner they do not wish to act.
Compelling someone to act in a manner against their better judgment or to do something they
don't want to do is against the law. In the eyes of the law, any agreement made by a person
under duress is invalid.
When duress is being determined, it is not based on the pressure exerted on the person but by
their state of mind. In a contract law court proceeding, in order for duress to exist, there must
be an illegal or wrongful act. When a claim of duress is filed, it is because a party wants to
prove that their agreement to a contract wasn't made in good faith, making the essential
requirements necessary to form a contract unfulfilled. If a party is claiming duress because
another party is threatening to file suit for more money, that would be an invalid reason
because filing suit is a legal action.
A party fearing for their safety can file duress. An example would be threatening to harm
someone's family if they refused to sign a contract. If a wrongful or illegal threatened act
takes place, that qualifies as duress.
Evolution of Doctrine of Duress
At common law duress was first confined to actual or threatened violence to the person. For
the next seven centuries the common law required a “wrongful” or an “unlawful” act before it
could provide redress for duress, but the presence of fear in the victim would be relatively
less important.
Common law duress of the person was often assimilated to crime or tort; indeed these
categories often overlapped, and for that reason perhaps it failed to develop much beyond the
narrow scope of threatened personal violence. Victims of more subtle forms of pressure had
to seek equitable redress in Chancery which acted generally to protect mentally and
physically handicapped persons who had been impoverished by the exercise of undue
influence. Equity was concerned with promises which had been extracted by the unethical or
immoral use of a superior bargaining position, such as was found in confidential or fiduciary
relationships, which inhibited the victim’s free exercise of his will. The inequity in the
equitable doctrine of “pressure” was that the victim had been compelled to do what he did not
want to do.
Historically, there was one exception to the common law rule that duress would create a
voidable contract when it was induced by threatened personal violence, that is, duress of
goods. This single, early incursion into the area of economic duress began in the eighteenth
century in simple cases of wrongful seizure or detention of personal property. There were no
parallel developments in England. Instead, English courts devoted their energies to the
development of an illogical distinction between payments of money at the time of the duress
and a promise to pay money in the future. In the former case the victim was given restitution
of his money, whereas in the latter case he was ordered to pay the money to his coercer.
In summary, common law distress was a crude, ill-defined and obscure notion, little used and
of little use except in cases of overt threats. Equally, while invoked by the courts more often,
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undue influence or pressure have lacked sufficient definition to be effective controls when
economic coercion in the marketplace was at issue12.
Contracts Entered Under Duress

Duress to an Individual: When an individual enters into a contract because of threats to that
person physically, then the contract may be set aside as long as the threat of physical violence
was the reason the person entered into the contract. In this case, there is no need to establish
that the party would not have entered into the contract had there been no physical threat.
Duress to Goods: Claiming duress due to goods is not recognized as a valid reason to set a
contract aside.
Economic Duress: Economic duress is a common claim in disputes of commercial contracts.
Proving Duress
Proving duress in a contract requires three things be provided:
1. There must be an existing continuous contract between the defendant and the plaintiff.
2. The defendant has threatened to end the pre-existing contract.
3. The plaintiff under duress accepts and enters into the contract because of the threat.
Courts also look at other factors when determining if one party is exerting undue pressure on
the other party. These factors include:
 The timeframe in place for each party regarding the completion of contract
performance.
 The level of bargaining power each party had when the agreement was made.
 The mental state of each party at the time the agreement was made
 Determining if each party felt the agreement was fair when it was made.
 If any contract modification were in place when the contract was agreed to.
 Whether other legal remedies provide reasonable solutions to the situation.13
12
https://www.lawctopus.com/academike/doctrine-duress/
13
http://docs.manupatra.in/newsline/articles/Upload/94FBB7C2-19A0-483D-AE76-9C9BC8A35E4C.com
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CHAPTER 4: COERCION AND DURESS: COMPARATIVE

ANALYSIS
1. Meaning
 Coercion -What the Indian Law calls ‘coercion’ is called in English Law
‘Duress’. Coercion as defined in Section 15 is much wider and includes the
unlawful detention of property also. Further, coercion is may be committed by
any person not necessarily a party to the contract. Again, it need not be
directed against the contracting party, or his parent, even if he is a stranger.
Coercion is the act of forcing, while duress is more the consequence (or
stressful feeling} that happens as a result of coercion. In this way the extent of
coercion is more extensive than duress.
 Duress - While in English Law, duress must be such as will cause immediate
violence and also unnerve a person of ordinary firmness of mind, these
requisites are not necessary in Indian Law. 14 Under the English law, actual or
threatened violence to the victim’s person has long been recognized to amount
to duress.
2. Who can perform:
 Coercion-In coercion even third party can perform the act but in duress
only the party to contract should perform the act.
 Duress- In Duress, it is only applied for person and cannot detain

property.
 For ex- Pointing a gun is coercion and signing the contract is coercion.
Duress is said to consist in actual or threatened violence or
imprisonment of the contracting party or his wife, or his parent or
child, by the other party or by anyone acting with his knowledge and
for his advantage.
3. Essentials:
 Coercion- Essential elements of Coercion are as follows :

a) Committing or threatening to commit any act forbidden by Indian
Penal Code or,
b) The unlawful detaining or threatening to detain any property to the
prejudice of any person whatever.
c) with the intention of causing any person to enter into an agreement.
 Duress-essential element of duress are as follows:

(a)The reasonable belief of the defendant;
14
Contract and Specific Relief , Avtar Singh(12th Edn,2019).
11
(b)The fact that this gave him good cause to be fearful; and
(c)Whether the response was to be expected of a sober person of
reasonable firmness.
4. Effect on contract:
 Coercion- An agreement entered into under coercion is voidable at the
option of the party. According to section 1015, there must me free
consent of parties competent to contract but coercion violates the free
consent as the parties are under direct threat.
 Duress- The effect of a finding of duress and undue influence is that

the contract is voidable. The innocent party may rescind the contract
and claim damages. The normal bars to rescission operate.
5. Burden of proof:
 Coercion- The burden of proof lies on the party taking the defence of
the coercion. The onus of proof on him is heavier. It is so as mere
probability or suspicion doesn’t amount to coercion. To establish
coercion a person must prove there was a threat which was forbidden
by law and that compelled him to get into a contract which otherwise
he wouldn’t have.
 Duress- An obvious case involving "lawful act duress" is blackmail.

The blackmailer has to justify, not doing the lawful act they threaten,
but against a person highly vulnerable to them, the demand of money.
Chapter 5: Case laws

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Indian Contracts Act 1872
12
Coercion:
Goyal MG Gases Ltd. Vs. Double Dot Finance Ltd.
Facts: On 27.3.1998 the petitioner had taken an Inter-Corporate Deposit of Rs.1 crore
from respondent No.1 on interest @ 21.5% per annum. This loan was for a period of 90
days. The agreement provided that so long the loan amount remained unpaid after the due
date of payment the petitioner would be liable to pay penal interest @ 3% per month. The
agreement contained an arbitration clause also. On 25.6.1998 in pursuance of the
agreement, the petitioner issued a cheque for Rs.1 crore dated 25.6.1998 in favor of
respondent No.1 and also issued a demand promissory note. Later on, it made a request
for extension of time for payment due to financial constraints which request was not
acceded to by respondent No.1 and the cheque was presented for payment. The cheque
was dishonoured with the remarks ''funds insufficient''.
The respondent No.1 filed a complaint under Section 138 of the Negotiable Instruments
Act in the Court of Metropolitan Magistrate, Mumbai. Simultaneously, the respondent
No.1 initiated winding up proceedings also against the petitioner company in the High
Court at Chennai. This petition was registered as Company Petition No.307/1998. The
High Court at Chennai dismissed the Company petition filed by respondent No.1 for
winding up the petitioner company against which the respondent No.1 file an appeal (SA
No.5/1999). In the course of the proceedings in the appeal a settlement was arrived at
between the parties. On 27.1.1999, the hearing was adjourned after recording that the
petitioner had undertaken to pay a sum of Rs.1,15,00,000/- to respondent No. (sic) on or
before 2.2.1999 subject to the right of the appellant to work out his remedy for the
balance in accordance with law. The interim orders dated 25.1.1999 were vacated. On
1.2.1999, the petitioner paid a sum of Rs.1,13,95,000/- to respondent No.1 by a pay order
after deducting TDS from the interest payment. The respondent No.1 issued receipt dated
1.2.1999 acknowledging the receipt of the pay order and saying that, subject to the
realization of the payment, the same will be treated as having received in full and final
settlement of petitioner's liabilities towards its Inter-Corporate Deposit. it was also stated
that on realization of the payment as aforesaid, the respondent No.1 agrees to withdraw
all cases whatsoever pending before the Courts for recovery of its Inter-Corporate
Deposit dues. In the receipt also attached to the letter dated 1.2.1999 issued by respondent
No.1, it was stated that this payment was being accepted in full and final settlement of all
dues against Inter-Corporate Deposit advanced by respondent No.1. Thereafter, the OSA
No.5/1999 came up for hearing before the Court on 11.2.1999 on which date the High
Court at Chennai passed orders that the counsel for respondent No.1 submits that the
matter has been settled out of Court and as such, the appeal is being withdrawn. The
appeal was accordingly dismissed as withdrawn.
The respondent No.1, however, appointed the Arbitrator thereafter and initiated arbitral
proceedings claiming the balance amount of Inter-Corporate Deposit. The petitioner
appeared before the Arbitrator and pleaded that he has no jurisdiction to enter on the
reference inasmuch as the disputes between the parties have been amicably settled and
there remains no arbitrable dispute between them. Issue were framed on the objections of
the petitioner as to whether the Arbitral Tribunal has jurisdiction to adjudicate the dispute
and as to whether the claim arising out of the agreement of loan stood discharged or not.
13
Learned Arbitrator after considering the pleas of the parties and the evidence recorded by
him held that the Arbitral Tribunal had jurisdiction to adjudicate the referred dispute and
the liability arising out of the loan agreement had not been discharged. The plea of
respondent No.1 was accepted that the letter and the receipt dated 1.2.1999 were issued
under coercion and undue influence as the respondent No.1 was to receive a huge amount
of Rs.1,15,00,000/- from the petitioner and in case he had not agreed to issue the letter
and the receipt it would not have been able to get the major part of amount from
petitioner.
Learned counsel for the petitioner vehemently argues that the impugned Award is liable
to be set aside as the Arbitrator had no jurisdiction to enter upon the reference as neither
there was any subsisting arbitration agreement nor an arbitrable dispute.
According to him, after the acceptance of the amount vide letter dated 1.2.1999 and the
receipt which recorded ''full and final settlement'' of all claims of respondent No.1 against
the petitioner, no dispute remained between the parties which could be referred to
arbitration. According to him, the plea of financial expediency and coercion as raised by
respondent No.1 and accepted by the learned Arbitrator was untenable, false and malafide
inasmuch as the respondent No.1 after accepting the amount from the petitioner in full
and final settlement could not turn around and say that he was coerced to do so.
JUDGEMENT:
The learned Single Judge by the impugned judgment has held that there was no coercion or
duress exercised against the appellant when the receipt dt 1.2.99 was signed receiving the
amount of Rs. 1,15,00,000/-. The learned Single Judge in the impugned judgment has held as
under:
Coming to the question as to what is "coercion or "duress" in commercial contracts, we may

refer to the Privy Council case "Pao On and Ors. v. Lau Yiu and Anr." reported in 1979 (3) of
England Reporter Page-65. Economic duress in commercial context was dealt with by their
Lordships and it was held that in contractual relations, a mere financial pressure is not
enough. It was also held that the question as to whether at the time the person making a
contract allegedly under coercion had or not any alternative course open to him which could
be an adequate legal remedy and whether after entering into the contract, he took steps or not
to avoid it are matters which are relevant for determining as to whether he acted voluntarily
or not. It was also held that the compulsion has to be of a nature which deprives a party of his
freedom of exercising free will leaving no alternative course open to him. Therefore, the
'coercion' or 'duress' required for vitiating 'free consent' has to be of the category under which
the person under 'duress' is left with no other option but to give consent and is unable to take
an independent decision, which is in his interest. Bargaining and thereafter accepting an offer
by give and take to solve one's financial difficulties cannot be treated as 'coercion' or 'duress'
for the reason that in trade and commerce every day such situations arise and decisions are
taken by parties some of which they might not have taken but for their immediate financial
requirements and economic emergencies.
14
The legal position that emerges, therefore, is that the Arbitrator has jurisdiction to adjudicate
a dispute in regard to the existence of 'full and final settlement'. In case the plea of 'full and
final settlement' between the parties is accepted by the Arbitrator, no Award can be passed in
favour of a claimant but in case this plea is rejected, the Arbitrator would be well within his
rights to pass an Award in respect of the claims filed before him. The Arbitrator can go into
the question as to whether the 'accord and satisfaction' recorded between the parties was
voluntary or not inasmuch as 'free consent' remains the foundation of all agreements
including the agreement in regard to the settlement of disputes between the parties. However,
the plea of coercion, undue influence or duress raised by a party to challenge the 'accord and
satisfaction' cannot be accepted lightly merely upon word of mouth. The facts and
circumstances, material on record and conduct of the parties at the time of signing the
settlement agreement and soon thereafter have to be looked into. It need not be stated that the
burden to establish this plea remains on the party which raises it.
If such pleas are sustained, the sanctity and purpose of 'amicable settlement' between the
parties would stand totally eroded. Amicable resolution of disputes and negotiated
settlements is 'public policy of India'. Section 89 of the Code of Civil Procedure, Arbitration
and Conciliation Act, 1996 as well as Legal Services Authorities Act, 1995 call upon the
Courts to encourage settlement of legal disputes through negotiations between the parties. If
amicable settlements are discarded and rejected on flimsy pleas, the parties would be wary of
entering into negotiated settlements and making payments thereunder as a shrewed party after
entering into a negotiated settlement, may pocket the amount received under it and thereafter
challenge the settlement and re-agitate the dispute causing immeasurable loss and harassment
to the party making payment thereunder. This tendency has to be checked and such litigants
discouraged by the Courts. It would be in consonance with public policy of India. The
Arbitrator, therefore, had acted against public policy of India by accepting the plea as raised
by the respondent No. 1 and thereafter, passing an Award. The view taken by the Arbitrator
was absolutely capricious, unfair and unreasonable and as such, the impugned Award dated
29.11.2002 passed by him is liable to be set aside.
4. We find that the learned Single Judge was perfectly justified in allowing the objections.
The learned Single Judge has taken note of the following points to hold that there is no
coercion or duress; (i) the receipt dated 1st February, 1999 clearly says that the amount
received thereunder was in full and final satisfaction of all the claims of the appellant. (ii) On
11th February, 1999 the appellant withdrew its appeal unconditionally after having signed the
receipt dated 1st February, 1999. (iii) The appellant had in the meanwhile encashed the pay
order of Rs. 1,13,95,000/- (that is Rs. 1,15,00,000/- minus the TDS).
5. In addition to the above reasoning of the learned Single Judge which we fully affirm and
reiterate, we find that at no point of time after 1st February, 1999 of having signed the receipt
till as many as 10 days later on 11.2.1999, when the appeal was withdrawn, any notice or any
communication whatsoever was sent by the appellant to the respondent that the receipt dated
1st February, 1999 has been got signed by it by the respondent under duress or coercion.
15
6. Thus there is no existence of ingredients as required by Section 15 of the Contract Act,

1872 in the facts of the present case to hold the existence of coercion. In our view on 27th
January, 1999 the Division Bench of the Madras High Court had recorded an order, the
relevant portion of which order records as follows:
...both the parties have filed a memo, wherein the respondent has undertaken to pay a sum of
Rs. 1,15,00,000/- to the appellant on or before 2nd February, 1999 subject to the right of the
appellant to work out his remedy for the balance in accordance with law. The memo is placed
on record and the interim order dated 25th Jan, 1999 stands vacated. W.M.P. No. 1101 of
1999 is disposed of in terms of the memo. Call the appeal on 5th Feb. 1999 AND THIS
COURT DOTH FURTHER ORDER THAT THIS ORDER ON BEING PRODUCED BE
FUNCTIONALLY OBSERVED AND CARRIED INTO EXECUTION BY ALL
CONCERNED.
7. The following unconditional receipt was only thereafter issued by the appellant on 1st
February, 1999:
Accordingly on receipt of your pay order for Rs. 11395000/- and subject to realization to
your payment, the same would have been treated as having received as full and final
settlement of your liability towards our inter corporate deposit.
8. On 11th February, 1999 the following order was passed by the Division Bench:
Counsel for the appellant submits that the matter has been settled out of Court and the
Original Side Appeal is being withdrawn.
2. Original Side Appeal is dismissed as withdrawn. No costs. Connected Civil Miscellaneous

Petition also are dismissed.
Thus at least before the Division Bench on 11th February, 1999 the appellant could have
complained about coercion but did not do so.
9. Therefore the invocation of the arbitration clause contained in the ICD Agreement dated
27th March, 1998 after having received the entire amount in full and final settlement was
clearly an abuse of process of law by the appellant more so because the Arbitrator was to be
the nominee of the appellant and was not to be a person to be jointly appointed by the both
16
the parties. As rightly held by the learned Single Judge if such pleas as urged by the appellant
are allowed to be taken up, it will be a grave travesty of justice and no settlement would be
sacrosanct.
10. The learned Counsel for the appellant has strongly relied upon question No. 11 which was
put before the Arbitrator to the witness of the respondent and which reads as under:
Question No. 11 : Is it correct that you have refused to deliver the Draft and the Cheque
without the delivery of the letter dated 1.2.1999 and receipt dated 1.2.1999? It is true that we
needed a receipt at the time of handing over of the payment as the same would be required to
be produced before the Court in Madras. We had not made a pre-condition for the letter.
In our view there is nothing illegal or coercive about a debtor who is seeking to pay his
creditor to ask for a receipt for the same against the delivery of the pay order which was to be
made in full and final settlement of the dues. This question and answer cannot under any
circumstance prove that the appellant had received the amount under coercion or duress.
Besides the above the appellant is not a widow or an illiterate workman who had been
forced/duped into signing a receipt. The appellant is a corporation which in no stranger to
litigation and thus was deemed to be fully aware of signing a full and final settlement without
any reservation. The appellant knew fully well that the order of 27th January, 1999 of the
Madras High Court granted the appellant a sum of Rs. 1,15,00,000/- with a right to work out
his remedy for the balance in accordance with law. Nevertheless in spite of knowing the
above order it chose to give an unconditional receipt on 1st February, 1999.
11. We may also reproduce para 32 of the Arbitrator's Award which reads as follows:
The opposite party have cited some judgments-none of them apply to the facts of the case in
hand, and are distinguishable.
In our view the Arbitrator was not a layperson in law but was in fact a practising senior
advocate of the Supreme Court well versed in law. The judgments relied upon by the
respondent could not have been brushed aside with such a laconic statement. In our view the
paragraph 32 was itself sufficient to throw considerable doubts about the approach adopted
by the learned Arbitrator.
12. A reading of the Award of the Arbitrator also shows that the relevant points which were
determinative of the issues as stated in para 4 above with regard to the receipt of Rs.
1,15,00,000/- by the appellant in full and final settlement have been unnecessarily given a go
bye and only a lip service has been paid to the same by referring to the same without
discussing as to how the same are not important or clinching. We are conscious of the
position in law relied upon by the appellant by citing Hindustan Tea Co. v. K. Sashikant &
Co. and Anr. MANU/SC/0002/1986 : AIR1987SC81 to the effect that no interference with
the award is warranted on the ground that the Arbitrator arrived at a wrong conclusion or
failed to appreciate the facts. Municipal Corporation of Delhi v. Jagan Nath Ashok Kumar
and Anr. MANU/SC/0013/1987 : [1988]1SCR180 was also cited to urge that the
reasonableness of the reasons for the award cannot be challenged. However, in the present
case the Arbitrator has failed to follow the law laid down in Nathani Steels Ltd. v. Associated
Constructions to the effect that once there is a full and final settlement such a dispute does
not remain an arbitrable dispute by merely observing that the cases cited are distinguishable
without stating any reasons therefor. Thus this Court is sustaining the judgment of the single
17
judge as we are satisfied that the dispute was finally settled and could not have been
arbitrated upon. However in the facts of the present case we are also of the view that the
findings of the Arbitrator are grossly unconscionable and do not even deal with the legal
position espoused by the respondent before the Arbitrator. The award is thus vitiated as no
reasonable person could have arrived at the conclusion of coercion arrived at by the
Arbitrator and the learned Single Judge was justified in allowing the objections preferred by
the respondent.
13. Accordingly, the present appeal which is a gross abuse of process of law is dismissed
with costs of Rs. 50,000/-. The costs shall be paid within a period of four weeks from today,
failing which the same shall carry interest at the rate of 9% per annum.16
16
https://www.manupatrafast.in/pers/Personalized.aspx
18
DURESS:
Pao On and others v Lau Yiu Long and another17
FACTS OF THE CASE:
Fu Chip Investment Co Ltd, a newly formed public company, majority owned by Lau Yiu
Long and his younger brother Benjamin (the defendants), wished to buy a building called
"Wing On", owned by Tsuen Wan Shing On Estate Co. Ltd. ("Shing On"), whose majority
shareholder was Pao On and family (the claimants). Instead of simply selling the building for
cash, Lau and Pao did a swap deal for the shares in their companies. Shing On would get
4.2m $1 shares in Fu Chip, and Fu Chip bought all the shares of Shing On. Fu Chip bought
all the shares in Shing On, and Pao received as payment 4.2m shares in Fu Chip (worth $2.50
for each $1 share). To ensure the share price of Fu Chip suffered no shock, Pao agreed to not
sell 60% of the shares for at least one year. Also, in case the share price dropped in that year,
Lau agreed to buy 60% of the shares back from Pao at $2.50. But then Pao realised, if the
share price rose over $2.50 in the year, the price would stay fixed and he would not get the
gains. So he demanded that instead of that, Lau would merely indemnify Pao if the share
price fell below $2.50. Pao made clear that unless he got this "guarantee agreement", he
would not complete the main contract. It was signed on 4 May 1973. But as it turned out the
shares did slump in value. Pao tried to enforce the guarantee agreement. Lau argued the
guarantee agreement was not valid
(1) because there was no consideration, only in the past and under a pre-existing duty, and
(2) because it was a contract procured by duress.
JUDGEMENT:
Lord Scarman, giving the Privy Council’s advice first disposed of the question about past
consideration, because a promise to perform a pre-existing contractual obligation to a third
party can be good consideration18 The question of whether consideration can be invalidated
‘if there has been a threat to repudiate a pre-existing contractual obligation or an unfair use of
a dominating bargaining position’ was rejected because ‘where businessmen are negotiating
at arm’s length it is unnecessary for the achievement of justice’. On the idea of past
consideration, Lord Scarman said this:
“Their Lordships agree that the mere existence or recital of a prior request is not
sufficient in itself to convert what is prima facie past consideration into sufficient
consideration in law to support a promise: as they have indicated, it is only the first
of three necessary preconditions. As for the second of those preconditions, whether
the act done at the request of the promisor raises an implication of promised
remuneration or other return is simply one of the constructions of the words of the
contract in the circumstances of its making. Once it is recognised, as the Board
considers it inevitably must be, that the expressed consideration includes a reference
17
[1979] UKPC 17, [1980] AC 614, [1979] HKLR 225
18
[1980] AC 614, 635
19
to the Paos' promise not to sell the shares before the 30th April 1974—-a promise to
be performed in the future, though given in the past-—it is not possible to treat the
Laus' promise of indemnity as independent of the Paos' antecedent promise, given at
Lau's request, not to sell. The promise of indemnity was given because at the time
of the main agreement the parties intended that Lau should confer upon the Paos the
benefit of his protection against a fall in price. When the subsidiary agreement was
cancelled, all were well aware that the Paos were still to have the benefit of his
protection as consideration for the restriction on selling. It matters not whether the
indemnity thus given be regarded as the best evidence of the benefit intended to be
conferred in return for the promise not to sell, or as the positive bargain which fixes
the benefit on the faith of which the promise was given—though where, as here, the
subject is a written contract, the better analysis is probably that of the " positive
bargain". Their Lordships, therefore, accept the submission that the contract itself
states a valid consideration for the promise of indemnity.”
On the point of duress, Lord Scarman held the following.19
“There must be present some factor ‘which could in law be regarded as a

coercion of his will so as to vitiate his consent.’ This conception is in line with
what was said in this Board's decision in Barton v Armstrong [1976] AC 104,
121 by Lord Wilberforce and Lord Simon of Glaisdale - observations with which
the majority judgment appears to be in agreement. In determining whether there
was a coercion of will such that there was no true consent, it is material to inquire
whether the person alleged to have been coerced did or did not protest; whether,
at the time he was allegedly coerced into making the contract, he did or did not
have an alternative course open to him such as an adequate legal remedy;
whether he was independently advised; and whether after entering the contract he
took steps to avoid it. All these matters are, as was recognised in Maskell v
Horner [1915] 3 KB 106, relevant in determining whether he acted voluntarily or
not.”
This was commercial pressure and no more, since the company really just wanted to avoid
adverse publicity. For a general doctrine of economic duress, it must be shown ‘the victim’s
consent to the contract was not a voluntary act on his part… provided always that the basis of
such recognition is that it must amount to a coercion of will, which vitiates consent.’
19
[1980] AC 614, 635
20
CONCLUSION
It can be said that coercion is one of the major factors which influences the decision of an
individual, it compels him to enter into a contract which otherwise he wouldn’t. The section
also enumerates how a person can distinguish an act from coercion or not. In case of coercion
the burden of proof lies on the person taking defence of coercion. The reason behind it is that
if it was not so anybody could have approached saying that he has been coerced. There is a
fine line between the narrower aspect under English law that is duress and the wider aspect of
the Indian Contract law that is coercion. Duress can be done only by the parties to contract
whereas coercion can be done by any third party also. Duress focuses on mainly threat to life.
Any contract under coercion and duress is voidable at the option of the aggrieved party.
21
BIBLIOGRAPHY
BOOK REFERRED:
Contract and Specific Relief , Avtar Singh(12th Edn,2019).
SITES
 https://www.manupatrafast.in/pers/Personalized.aspx
 http://docs.manupatra.in/newsline/articles/Upload/94FBB7C2-19A0-483D-AE76-
9C9BC8A35E4C.com
 www.upcounsel.com/duress-in-contract-law
 www.lawctopus.com/academike/doctrine-duress
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Coercion and Duress

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Coercion and Duress

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Coercion and Duress: Comparative Analysis

CHANAKYA NATIONAL LAW UNIVERSITY,

TOPIC - “Comparative Analysis of Coercion and Duress ”

FINAL DRAFT SUBMITTED IN THE PARTIAL FULFILMENT OF THE

I owe the present accomplishment of my project to my friends, who helped me immensely

 General Principles of Law of Contract – Sections 01 to 75

Contracts Entered Under Duress

CHAPTER 4: COERCION AND DURESS: COMPARATIVE

2. Who can perform:

 Duress- In Duress, it is only applied for person and cannot detain

 Coercion- Essential elements of Coercion are as follows :

 Duress-essential element of duress are as follows:

 Duress- The effect of a finding of duress and undue influence is that

 Duress- An obvious case involving "lawful act duress" is blackmail.

Chapter 5: Case laws

Goyal MG Gases Ltd. Vs. Double Dot Finance Ltd.

Coming to the question as to what is "coercion or "duress" in commercial contracts, we may

6. Thus there is no existence of ingredients as required by Section 15 of the Contract Act,

2. Original Side Appeal is dismissed as withdrawn. No costs. Connected Civil Miscellaneous

Pao On and others v Lau Yiu Long and another17

FACTS OF THE CASE:

(2) because it was a contract procured by duress.

On the point of duress, Lord Scarman held the following.19

“There must be present some factor ‘which could in law be regarded as a

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