Duress and Undue Influence - Descriptions & Cases
The Definition of Duress and Undue Influence and their Differences
Both duress and undue influence arise when one party in a contract acts in a way they would not otherwise have acted because other parties have pressured them to do so.
Duress can be seen as a more severe and direct tier of undue influence. The court outlines the three possible types:
- Economic Duress
- Physical Duress
- Psychological Duress
Undue influence arises where two parties already had a relationship with each other and it is this relationship that one party uses to his advantage to make the other sign an unfavourable contract.
Economic duress was first recognised in 1979 in the case of North Ocean Shipping v Hyundai Construction Co. While the contract for a ship's construction was agreed to uninfluenced by both parties, the terms of the contract were modified so that the price of the ship was raised by 10%.
North Ocean Shipping (the buyers) had no choice but to accept the unfavourable modification because they could not risk delaying the acquisition of their new ship - they had been already negotiating with an oil company who wanted to charter it.
The courts ruled that the company had indeed been under economic duress, and had they claimed their money back sooner (they waited 8 months) they would have been entitled to it (but they received nothing instead).
Three requirements should be satisfied in order for to establish actionable economic duress.
- Illegitimate pressure
- Factual causation
- Objective causation
Physical or Psychological Duress
Physical and psychological duress cover any time that someone is forced to sign a contract because his personal wellbeing is threatened.
In Barton v Armstrong, Barton threatened to kill Barton if he did not sign a contract, and this contract was later dismissed by the courts under the doctrine of duress.
Similarly, threats to someone's property or family for failure of not entering any particular contract constitutes psychological duress.
Put simply, undue influence can be described more of as unfair persuasion rather than a 'you have no choice but to do what I tell you' level of influence.
There are two different kinds of undue influence: actual and presumed undue influence.
Actual Undue Influence
- This is where the victim of the influence provides evidence against the defendant.
- The claimant must provide enough evidence to prove the acts which unduly influenced them into signing the contract(s).
- Instances where people have threatened to end a relationship if something isn't signed or where a person is constantly harassed by someone else and eventually gives showed undue influence.
- There is no precise legal definition of 'undue influence' which is in use in order to allow a good degree of flexibility when the courts deal with the issue.
Famously, Lord Nicholls in the case of Royal Bank of Scotland v Etridge is quoted to say:
"Undue influence is one of the grounds of relief developed by the courts of equity as a court of conscience. The objective is to ensure that the influence of one person over another is not abused..." On the subject of what the court's role is.
He then said the following on the subject of the legal definition of undue influence:
"The circumstances in which one person acquires influence over another, and the manner in which influence may be exercised, vary too widely to permit of any more specific criterion."
Presumed Undue Influence
- No need for proof of improper influence but:
- Must prove that there was a relationship which when looking at what happened implies undue influence occurred. These relationships are generally fiduciary (based on trust) and include parent-child, doctor-patient and solicitor-client relationships.
- Must be clearly in the favour of the person being trusted and in the disfavour of the person doing the trusting (the fiduciary position).
For relationships that do not necessarily result in one party being in a fiduciary position but sometimes can lead to it, the claimant must help to establish whether or not this was indeed the case in her particular relationship. For example, not all wives will trust their husband to deal with all financial matters and so it must be established that a wife does so if she wishes to appear unduly influenced by her husband on a financial matter.
- Contracts are only binding (i.e. obligate each party to fulfill their conditions) if all the parties of the contract agree to it voluntarily.
- If that is not the case and undue influence or duress was used, then the contract can be made void or forced modifications made by the court.
- These modifications will be made to favour the abused party's wishes.
You Should Now Know...
- What is duress?
- What is undue influence?
- What is the difference between the two?
- What is presumed undue influence?
- What is actual undue influence?
Now Learn the Important Contract Law Cases!
- Contract Law Cases - Allcard v Skinner
- Contract Law Cases - Bisset v Wilkinson
- Contract Law Cases - Smith v Hughes
- Contract Law Cases: Adams v Lindsell
- Contract Law Cases - Esso Petroleum Co Ltd v Mardon ...
- Contract Law Cases: Fibrosa Spolka Akcyjna v Fairbar...
- Contract Law Cases - Carlill vs Smoke Ball Company