The buyer paid a sum demanded by the seller who threatened otherwise to withdraw the credit facilities it provided to the buyer. The sum was not in fact due, but the demand had been made honestly. The buyer said the agreement was voidable for duress.
Held: Duress was not available when the action threatened was lawful. The common law does not recognise the doctrine of inequality of bargaining power in commercial dealings. It was necessary to focus on the distinctive features of the individual case and then to ask whether it amounted to a case of duress. Three characteristics here assisted the court in its decision. First, the dispute did not concern a protected relationship and did not arise in the context of dealings between a supplier and a customer. It arose in the context of arms length commercial dealings between two trading companies. Secondly, the defendants were in law entitled to refuse to enter into any future contracts with the plaintiffs for any reason whatsoever, or for no reason at all. Because a decision not to deal with the plaintiffs in the future would have been lawful, it was also lawful for them to threaten the plaintiffs that they would no longer grant them credit, when demanding payment of an invoice which was alleged to be due. The third, and critically important characteristic was that the defendant bona fide thought that the sum was owed and that therefore, when exerting commercial pressure in order to obtain payment, were not motivated by malice or anything which could be described as ‘bad faith’.
Steyn LJ approved the dicta of Professor Birk: ‘It is tolerably clear that, at least where they [the judges] can be confident of a general consensus in favour of their evaluation, the courts are willing to apply a standard of impropriety rather than technical unlawfulness’.
Judges:
Steyn LJ
Citations:
[1993] EWCA Civ 19, [1994] 4 All ER 714
Links:
Jurisdiction:
England and Wales
Citing:
Cited – Thorne v Motor Trade Association HL 1937
The House confirmed a declaration granted as to validity of a rule of association notwithstanding the absence of any dispute. The House considered the nature of the threat required to establish a defence of duress.
Lord Wright observed that the . .
Cited – Mutual Finance Ltd v John Wetton and Sons Ltd 1937
A relative of a forger gave a guarantee in circumstances where the forger had been threatened with prosecution. He now pleaded economic duress.
Held: The guarantee should be set aside. The court considered the distinction between dures and . .
Cited – Pao On and Others v Lau Yiu Long and Others PC 9-Apr-1979
(Hong Kong) The board was asked whether a contract of guarantee had been obtained by duress.
Held: Lord Scarman said: ‘Duress, whatever form it takes, is a coercion of the will so as to vitiate consent. Their Lordships agree with the . .
Cited – Universe Tankships Inc of Monrovia v International Transport Workers Federation HL 1-Apr-1981
A ship belonging to the appellants had been blacked by the defendant union. Negotiations to clear the threat resulted in payment by the appellants to a welfare fund of the defendant. The company sought its refund saying that it had been paid under . .
Cited by:
Cited – Jones v Morgan CA 28-Jun-2001
The claimant appealed against an order refusing him enforcement an agreement for the purchase of a one half share in a property. The judge had found the agreement to be unconscionable.
Held: The appeal was dismissed. The judge had wrongly . .
Cited – Progress Bulk Carriers Ltd v Tube City IMS Llc ComC 17-Feb-2012
The claimant sought to set aside an arbitration saying that the arbitrator had misapplied the test for economic duress. . .
Lists of cited by and citing cases may be incomplete.
Contract
Updated: 27 October 2022; Ref: scu.262596