Summary of Duress and Undue influence

Duress, Undue influence, and unconscionable bargains – Summary from Contract Law By Jill Poole


• The first of the recognised doctrines is the doctrine of duress which takes the form of some form of coercion or threat to the person, property, or to a person’s financial interests (economic duress). The doctrine of economic duress now acts as the primary mechanism to prevent promises obtained by extortion from being enforceable but it is comparatively new doctrine that is still being developed.

• To establish economic duress it must be established that there is some illegitimate pressure or threat, which amounts to a significant cause inducing the claimant to contract because the claimant has no real practical choice other than to agree. In addition, the victim of duress will need to protest at the time or shorty thereafter. However, the exact meaning of these ingredients is unclear, particularly the meaning of illegitimate pressure and the effect of so called lawful act duress.

• Undue influence is an equitable doctrine which can arise in two ways – actual undue influence (which is similar to duress because it arises from illegitimate pressure and abuse exerted by one party over the other) and circumstances where there is an evidential presumption that influence has been exercise which may become an evidential presumption of undue influence where there is something in the transaction “which is suspicious or calls for an explanation” (I.. of such a size or nature as to raise suspicions). In the case of presumptive undue influence, the conclusion of influence may arise automatically in the case of certain types of protected relationships but needs to established on the facts in other cases on the basis that there is a relationship of trust and confidence between the particular parties. Where undue influence is established as between the contracting parties, the victim can have the transaction set aside.

• Where a wife gives security in order to support the debts of her husband (I.e., her contract Is with the lender – someone other than the person exercising the influence), the leader will be affected by the actions of the person exercising the undue influence (e.g. her husband) where that lender is fixed with constructive notice of that other’s undue influence. This will occur where the lender is “put on enquiry” (and may occur in all cases where a wife stands surety for her husband’s debts and not for any joint purposes). Lenders are required to take precise steps (involving ensuring that the practical implications of the proposed transaction have been explained to the wife) or they risk losing their security.

• Parliament has had a role to play in terms of regulating substantive, unfairness, including a new provision in the consider credit act 1974 (introduced by the CCA 2006) enabling the courts to interfere in “unfair credit agreements” (ss 140A-D CCA 1974). There is also considerable existing European-led legislation to protect consumers. In addition, the unfairness commercial practices directive will be implemented in 2008.