This transcription has been taken from the book ‘An Introduction to the Law of Contract’ Third Edition by Stephen Graw.
Transcribed by Michael Byers, Editor-In-Chief, Mikiverse Law for the purpose of spreading education, awareness and conversation throughout the community.
12.1 The Concept of Duress
12.1.2 Duress Generally
In its commonly understood meaning, the word “duress” indicates some form of pressure exerted by one party to act in a particular way. Such pressure can be against the person of the other party, or against his or her property or economic well-being. Whatever the form, the aim of the duress will be to force that party to do something which might not otherwise have been done and to do it, usually, for the benefit of the person exerting the pressure.
12.1.2 The Legal Meaning
In its legal sense, “duress” has an almost identical meaning. It is pressure exerted by one party to coerce another to contract on particular terms. However, because “duress” in law gives the party coerced access to remedies which can affect contractual “rights”, duress in its legal sense has a much narrower meaning than its everyday counterpart.
Specifically, duress in law must consist of such pressure as would cause a reasonable person, exercising that ordinary degree of firmness which the law demands of us all, to do something which he or she would not do otherwise. That is not to say that the duress must totally “override” the will of the person being coerced—that is not necessary. As Lord Simon of Glaisdale said in Lynch v Director of Public Prosecutions (Northern Ireland) [1975] AC 653 at 695, “the will [is] deflected not destroyed”. What this means is that the person acting under duress will know what he or she is doing but will do it unwillingly or, as McHugh JA put it in Crescendo Management v Westpac (1988) 19 NSWLR 40 (at 46), he or she “chooses to submit to the demand or pressure rather than take an alternative course of action”. This, of course, brings into question the nature and extent of the pressure that must be applied before a plea of duress becomes a credible option with a real possibility of success.
12.1.3 Legitimate and Illegitimate Pressure
The law recognises that pressure can be both legitimate and illegitimate and that only illegitimate pressure constitutes duress. This is because virtually all contracts are entered into under some form of pressure (for example, “you accept my terms or we wont deal”) but that is the way in which business operates. Such “commercial pressure”, even when it is fairly extreme, is regarded as legitimate, and accordingly, a plea of duress will not succeed if the only pressure is pressure of that sort. See, for example:
Smith v William Charlick Ltd (1924) 34 CLR 38
Facts: The plaintiff, a miller, bought wheat from the Wheat Harvest Board. After the wheat had been delivered and paid for, the Board, even though it claimed no legal right to do it, demanded additional payment intimating that if it were not forthcoming it would refuse to supply any more wheat. As the board was the sole supplier of wheat in South Australia, the plaintiff paid under protest and then sued to recover the payment on the grounds that it had been made under duress.
Held: The action failed. The pressure was mere commercial pressure, not duress. If it was not, therefore, a ground upon which the contract could be set aside (but see now “economic duress” at 12.6* below). Starke J (at 70) said:
“the buyers chose to pay a further sum for wheat already sold to them rather than to be shut out from further trade...The money was, no doubt, paid unwillingly...but it was, nevertheless paid voluntarily, in the legal sense, and with full knowledge of the facts and without any unlawful compulsion, extortion, undue influence, or the abuse of any duty.”
For a plea of duress to succeed, therefore, the party coerced must be able to point to some evidence of illegitimate pressure, a threat or some form of actual violence, that induced the decision to contract.
12.1.4 Resistible and Irresistible Pressure
As well as being illegitimate, the pressure must also be irresistible. This merely means that it must be such that it would not be reasonable to expect a person, possessed only of that ordinary degree of firmness adverted to earlier, to resist it.
Accordingly, threats from someone incapable of carrying them out or threats which would result in a minor inconvenience only cannot constitute duress. Further, as will be seen at 12.5* below, duress of goods traditionally gave no right to relief. The reasoning was that such pressure was capable of being, and was expected to be, resisted.
As a result, successful pleas of duress have been historically confined to instances of duress of the person and they are relatively rare. More recently, a concept of “economic duress” has gained acceptance, and through it, pleas of duress may become more common. Economic duress is dealt with at 12.6* below.
*The references to both 12.5 & 6 mentioned above can be located in a later portion of the chapter transcribed above. I have included the references in order to stay faithful to the Author’s work. These sections may or may not be transcribed at some later date.
Taken from: “An Introduction to the Law of Contract”, Stephen Graw, Third Edition.
1.1.1 What is a Contract?
Various writers have attempted to define what is meant by the term “contract”. The words they have used have differed but the essence of each definition has remained basically the same. In all cases certain key elements stand out. The following are always included:
(a) the need for a promise or promise;
(b) the need for the promise or promises to be between two or more legally capable persons (called “parties to the contract”);
(c) the need for the promises to create an obligation; and
(d) the need for that obligation to be enforceable at law.
The essentials of any contract, therefore, are the rights, duties and liabilities that arise from the promise or promises made by the parties. The law does not lay down any comprehensive set of rights, duties and liabilities; it merely sets out parameters within which the parties’ agreement must fall if it is to be enforceable. In other words, the law of contract is not concerned so much with the specifics of the obligation (these will differ from agreement to agreement), but with the mechanics involved in and the principles regulating the formulation, performance, continuance, and discharge of the parties’ individually created obligations.
Therefore, when a court is called upon to intervene in a contractual dispute, it does two things:
1. It applies the law of contract to see whether the agreement is a contract at all, and if so, whether it is legally valid and enforceable.
2. If it decides that there is a valid contract, it interprets the words of that contract to determine the true nature and extent of what the parties have really agreed to.
Only after both steps have been taken can a court properly adjudicate on the dispute. What we have in contract then is something which exists in no other area of the law—a situation where the parties create the obligations and liabilities that will form the substance of their relationship and the courts then enforce those individually agreed obligations and liabilities as legally binding. The sole restraint on the parties’ freedom of contract is the fact that their agreement must not go outside the general parameters of principle that form what we know as the law of contract. Provided those principles are adhered to, the agreement will be enforced.
| Signed for and on behalf of the COMMONWEALTH OF AUSTRALIA represented by the Department of the Treasury | |||||
| by | |||||
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| Ken Henry | /s/ Ken Henry | ||||
| Name of Signatory | Signature | ||||
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| in the presence of: | |||||
| Sharon McCluskey | /s/ Sharon McCluskey | ||||
| Name of witness | | Signature of witness | | ||
| By: | /s/ Neil Castles | | |
| Name: | Neil Castles | ||
| | Title: | Acting Chief Executive | |
| By: | /s/ Andrew Fraser | | |
| Name: | Andrew Fraser | ||
| | Title: | Treasurer | |
| By: | /s/ Pamela Kendall | | |
| Name: | Pamela Kendall | ||
| | Title: | Director | |
| By: | /s/ Gordon Youl | | |
| Name: | Gordon Youl | ||
| | Title: | Director | |
| By: | /s/ Daniel de la Cruz | | |
| Name: | Daniel de la Cruz | ||
| | Title: | Director | |
| By: | /s/ Teresa Radzinski | | |
| Name: | Teresa Radzinski | ||
| | Title: | Managing Director | |
| cc: | UBS Limited |
| Citigroup Global Markets Inc. | |
| Citigroup Global Markets Limited | |
| Deutsche Bank AG, London Branch | |
| Deutsche Bank Securities Inc. | |
| Australia and New Zealand Banking Group Limited | |
| Commonwealth Bank of Australia | |
| J.P. Morgan Securities Inc. | |
| J.P. Morgan Securities Limited | |
| Macquarie Bank Limited London Branch | |
| Macquarie Capital (USA) Inc. | |
| National Australia Bank Limited | |
| Nomura International plc | |
| Nomura Securities International, Inc. | |
| Royal Bank of Canada Europe Limited | |
| The Royal Bank of Scotland plc | |
| The Toronto-Dominion Bank | |
| Westpac Banking Corporation |
