⇒ Duress and undue influence are about pressure, one party on another, in the contracting process and negotiation which "disturbs the balance of the negotiations"

⇒ Pressure is not necessarily a bad thing in negotiation – to an extent, it is an important part of negotiation

⇒ Some pressure is acceptable and some is not – if you have unacceptable pressure by one party on another party then there is a defence

• What pressure is acceptable and what pressure is unacceptable is a difficult quest and is something judges have not always agreed on - this line has moved over the years because society develops/changes
• It is also difficult for judges to know when the contract is being signed voluntarily and when it is signed involuntarily

⇒ Origin of duress and undue influence: duress is the common law response to pressure in the contractual process and undue influence is the equity court response to pressure in the contractual process

⇒ Previously the common law court took quite a narrow view about what was unacceptable, but the court of equity took a more expansive approach on the meaning of unacceptable pressure

⇒ Today all courts are courts of common law and equity so the sensible thing would have been to merge the 2 doctrines, but for historical reasons they did not do this and they are dealt with separately

⇒ Duress is a defence in contract and IF duress is present in the contractual process the contract is voidable, allowing the innocent party to set aside the contract

⇒ What is duress? Traditionally there were 2 main requirements:

• A coercion of the will
• Illegitimate pressure
• In other words, there must have been a coercion of the will of one party as a result of the illegitimate/unacceptable pressure of the other party

⇒ What is the meaning of illegitimate / unacceptable / improper pressure?

• As mentioned above, the common law traditionally had a narrow view on the meaning of unaccetable pressure and only violence/threat of violence to the person could amount to this type of wrongful pressure
• BUT, society changes, and duress expanded so the type of pressure regarded as unacceptable increased and the defence grew. Unacceptable pressure grew to include threats to someone’s property and more recently included certain threats to the economic interests of others
• Not all threats are wrongful e.g. if the police threaten to give a ticket unless a motorist moves – “In the standard case, a threat is wrongful because the threatened action is wrongful” – and when the threatened action is unlawful there has to be a causal link between that action and the claimant’s actions

⇒ Economic duress is the unlawful use of economic pressure and/or threats intended to overcome the free will of a person, in order to force him or her to an involuntary agreement or to do something that he or she would not otherwise do

⇒ There was an early attempt to create economic duress in Stilk v Myrick in 1809, but this did not happen

⇒ In Skearte v Beale (1840) it was held that threats to goods can be economic duress, but the court was still unwilling to create a doctrine of economic duress

⇒ The Siboen & The Sibotre case [1976] developed economic duress

⇒ Initially there were two requirements needed for a finding of economic duress:

• Coercion of the will (NOW it needs to be shown that there was a lack of practical choice)
• Illegitimate pressure

⇒ Lord Scarman in Pao On v Lau Yiu Long said that “duress, whatever form it takes, is a coercion of the will as to vitiate consent”

• However, it is now seen that duress does not vitiate consent, but vitiates the freedom of choice

⇒ Coercion of the will began to be criticised by academics who stated that it didn’t really represent what was happening in cases because it sounds like they have NO will, when actually they do have a choice but the innocent party chooses the lesser of the two evils

• So, the requirement of coercion of the will got refined through case law to a requirement of lack of practical choice i.e. it must be shown that due to the unacceptable pressure of one party the other party was left with no real option but to accept the contract
• Atlas Express Ltd v Kafco (Importers and Distributors) ltd [1989]: Kafco had no realistic alternative but to pay extra for a quantity of goods and this amounted to economic duress

⇒ DSND v. Petroleum Geo Services ASA [2000] BLR 530 per Dyson J. defined it as: "Pressure, (a) whose practical effect is that there is compulsion on, or lack of practical choice for, the victim, (b) which is illegitimate, and (c) which is a significant cause inducing the claimant to enter into the contract."

• So here you can see that Dyson J added a 3rd requirement to what unacceptable pressure is: a requirement of causation, where the pressure was “a significant cause” of the claimant entering into the contract

⇒ In The Universal Sentinel [1983] Lord Scarman discussed what was illegitimate in economic duress:

• Unlawful threat e.g. a threat to injure/damage property
• A lawful threat, but the pressure is illegitimate

⇒ Economic pressure does not have to be illegal (criminal offence) nor does it have to be unlawful (not a crime) (e.g. threatening to breach a contract unless you get more money – B&S Contract Case)

⇒ A threat to not perform the contract might NOT be illegitimate e.g. Williams v Roffey

⇒ An example of a lawful threat amounting to economic duress can be seen in CTN Cash & Carry Ltd v Gallagher Ltd [1994]. Also see is Progress Bulk Carriers v Tube City [2012]

⇒ Other cases include B&S Contract v Victor Green [1984] and Barton v Armstrong [1976]

⇒ Dyson argued a 3rd requirement (as mentioned above) that pressure needs to be the "significant cause" of signing the contract

⇒ It is also argued there could be a fourth requirement: you need to show there was a protest when entering the contract or shortly after (although, note, the existence of this requirement is debateable)

⇒ Arguably, economic duress is still developing e.g. see the case of "R" v HM Attorney General [2003], where it was found there was no economic duress due to the importance of maintaining national security

⇒ Undue influence is a defence to potential contractual liability

⇒ If you can show there has been undue influence the contract is voidable (same as Duress)

⇒ The scope of the doctrine of undue influence is unclear/uncertain

• “No Court has ever attempted to define undue influence.” (Allcard v. Skinner (1887) 36 Ch.D 145 at 183 per Lindley LJ)
• However, Lindley J did give some guidance on the meaning of undue influence, but it was quite vague/general: he said undue influence involves “some unfair and improper conduct, some coercion from outside, some overreaching, some form of cheating and generally, though not always, some personal advantage obtained by a donee placed in some close and confidential relation to the donor.”

⇒ Undue influence involves some form of influence

• One party having the power to influence the other party to the contract

⇒ Influence is not necessarily improper/unacceptable

• We all have the ability to influence others, without it being wrong
• Undue influence, like duress, is to do with improper pressure
• Influence itself is not enough to provide a defence, the influence must be undue/illegitimate/improper

⇒ There is a big debate as to what is meant by ‘undue’ in undue influence

⇒ Niersmans v. Pesticcio [2004] EWCA Civ 372 at [2] per Mummery L.J: “Fundamental misconceptions persist” about this “200 years old” doctrine. There is “a need for a wider understanding, both in and outside the legal profession” about what is meant by undue influence

⇒ On a general level there are 3 meanings of undue:

• 1) It relates to the amount of influence
• 2) Undue influence isn’t so much concerned with the amount of the influence one has over the other party, but the way one uses that influence over the party
• 3) The word undue refers to both the 1st and 2nd meaning

⇒ There is a huge debate about which of the three meanings is correct

⇒ Professor Birks and Professor Chin sparked the debate in their seminal paper ‘On the Nature of Undue Influence’:

• Their view was that ‘undue’ means there is too much pressure and NOT about how that pressure is used
• This view was accepted by a number of Court of Appeal cases e.g. Hammond v Osborne [2002] EWCA Civ. 885

⇒ However, the view of Birks and Chin on the meaning of undue was not supported in all Court of Appeal cases:

• Portman Building Society v. Dusangh [2000] 2 All E.R. (Comm) 221 at 233 per Ward L.J: Ward said that he does “not find it necessary to resolve this debate” as to whether Birks and Chin are right or wrong
• Dunbar Bank plc v. Nadeem [1998] 3 All E.R. 876: the Court of Appea took an unconscionability-based approach (the second approach) that the meaning of undue is about the way in which the party uses their influence

⇒ Royal Bank of Scotland v Etridge (no.2) [2001] UKHL 44 is the leading case on undue influence from the House of Lords

• Lord Nicholls gives an extensive discussion on undue influence, but does not specifically address the issue of Birks and Chin
• However, Lord Nicholls seems to suggest that undue influence requires something more than just the amount of pressure – it is a much more complicated doctrine
• Therefore, you could conclude that the meaning of 'undue' includes both the amount of pressure and the way in which it is used – this supports meaning 3 (above)
• The case also said there is a distinction between actual and presumed undue influence (see below)

⇒ “It is impossible to define, and difficult even to describe, at what point influence becomes, in the eye of the law, undue.” (Bank of Scotland v. Bennett [1997] 3 F.C.R. 193 at 216, James Munby QC)

⇒ Excessive influence depends on context (Bank of Scotland v. Bennett [1997] 3 FCR 193) and public policy (Mutual Finance v. John Wetton [1937] 2 KB 389)

⇒ Lord Nicholls in Royal Bank of Scotland v Etridge (no.2) [2001] gave a good starting point as to its meaning. He identified two categories of cases with excessive influence:

• “The first comprises overt acts of improper pressure or coercion such as unlawful threats”
• “The second form arises out of a relationship between two persons where one has acquired over another a measure of influence, or ascendancy, of which the ascendant person then takes unfair advantage”

⇒ The courts of equity, through doctrine of undue influence, were prepared to regulate pressure in relational contracts

⇒ Issue for the court was deciding what pressure was acceptable and what was not – the judges have disagreed on this:

• On one end of the spectrum you have relationships where you have a duress type of pressure
• On the other end of the spectrum there are cases like Bank of Montreal v Stewart, where the husband's will completely overbore the will of his wife: she “had no will of her own” and had no “means of forming an independent judgement even if she had desired to do so”

⇒ In relational undue influence the court has often distinguished between actual undue influence and presumed undue influence (Barclays Bank plc v. O’Brien [1994])

⇒ These are cases where you can prove undue influence

⇒ The difficulty of actual undue influence is that a lot of this type of pressure takes place in private so it is often difficult to prove it

⇒ Not many cases have proven ACTUAL undue influence

⇒ Its meaning is seen in CIBC v. Pitt [1994]

• The Court of Appeal created categories of undue influence:
• Class 1 = actual undue influence
• Class 2A = presumed undue influence (influence in relationships which will always appear to show presumption of undue influence)
• Class 2B = presumed undue influence (influence in relationships which means that undue influence should be presumed)

⇒ The courts of equity recognised the difficulty of actually proving undue influence quite early on, so they developed the concept of presumed undue influence...

⇒ There are situations where the court would presume there had been undue influence

⇒ In presumed undue influence cases, the other party has to prove that there WASN’T undue influence (so there is a reversal of the burden of proof)

⇒ This concept of presumed undue influence was innovative for the protection of people subject to influence

⇒ Traditionally there are two requirements for when the court will presume undue influence:

• 1) There had to be a relationship of trust and confidence
• 2) The transaction had to be to the manifest disadvantage of the party subject to the influence
• So, the court will presume undue influence if these 2 requirements are present, unless the other party can presume that there was not undue influence

⇒ 1) How do we know the relationship is of trust and confidence?

• Relationships of trust and confidence divided into 2 categories: 2a relationships and 2b relationships
• A 2a category of relationships, are relationships which the courts automatically regarded/presumed as relationships of trusts and confidence e.g. parent/child relationship. Interestingly, a husband/wife relationship is NOT a 2a relationship, but engaged couple ARE 2a relationships
• A 2b relationship is a relationship not in the 2a category where one person is in the position/able to put a dominant pressure on the other person to do something

⇒ 2a Relationships:

• In Royal Bank of Scotland v Etridge (no.2) [2001] it was said that relationships give rise to a presumption of influence (not necessarily undue influence) “where one person is legally presumed to repose trust and confidence in the other” (i.e. in 2a relationships) E.g. Parent/minor child (Bainbrigge v Browne (1881)), doctor/patient (Radcliffe v Price (1902)) and solicitor/client (Wright v Carter (1903))
• Also see the case of Allcard v Skinner (1887)

⇒ 2b Relationships:

• A 2b relationship is a relationship not in the 2a category where one person is in the position/able to put a dominant pressure on the other person to do something
• The burden of proof shifts to the defendant to prove there had not been undue influence
• Most of these are husband an wife cases as they surprisingly do not fall under the 2a category

⇒ 2) How do we know what is a manifest disadvantage?

• Traditionally, for the court to presume undue influence the transaction/contract in question had to be for the manifest disadvantage of the party subject to the influence. What is meant by manifest diadvantage?
• The concept that there needs to be a manifest disadvantage arises from Lord Scarman in National Westminster Bank plc v Morgan [1985]
• Royal Bank of Scotland v Etridge (No 2) [2001] refined the requirement of a finding of manifest disadvantage, stating that all that is needed is a finding of a suspicious transaction i.e. the court said that they will presume undue influence where there is a relationship of trust and confidence and the transaction is suspicious
• However, the phrase manifest disadvantage was still used in Leeder v Stevens [2005]
• See the case of Hewett v First Plus Financial Group Plc [2010]

⇒ Rebutting the presumption

• The other party can prove that there was not undue influence by rebutting the presumption
• If the accused party can prove that the other party had sought independent advice this MAY emancipate them from undue influence

⇒ Causation

• If you can prove that the other party would have entered the contract regardless of the undue influence this is NOT a defence to emancipating yourself from undue influence E.g. UCB Corporate Services v Williams [2002] EWCA Civ 555 said that using undue influence can not be defended in this way

⇒ Remedies

• The primary remedy in a finding of undue influence is that the court will refuse to enforce the agreement
• There may also be rescission (Allcard v Skinner 1887): this will set aside the contract

⇒ Unconscionable bargains very RARELY used in England and Wales. In Australia and New Zealand it is frequently used

⇒ Three requirements:

• The party seeking relief must have been at a serious/special disadvantage e.g. drunk / illiterate / mentally incapable
• That special disadvantage must be exploited in a morally culpable way
• The transaction must be oppressive/overreaching
• These requirements were confirmed in Alec Lobb v. Total Oil [1983]