Even when all the formal elements of a contract have been complied with, the law acknowledges human foibles which cause us to make mistakes, act unethically towards one another or unfairly use an advantage or knowledge against another. Therefore, rules have been formulated to counteract the effect of these human failings. Factors which will impair the legal validity of contracts include:
- undue influence
Although these factors will often overlap, they will be dealt with in separate articles. This article deals with the doctrine of duress.
What is duress?
In a situation of duress, the free will of a party to a contract is overborne by coercion, vitiating their ability to give consent. In other words, illegitimate pressure is placed on a party which causes them to enter into a contract. This coercion could involve:
- duress to the person - actual or threatened acts of violence or deprivation of liberty to the person or their loved ones and associates;
- duress to goods – unlawful taking, detention, damaging or destruction of a person’s goods; or
- economic duress – threats to a person’s economic well-being, business or trade.
It’s important to distinguish illegitimate pressure constituting economic duress from legitimate commercial pressure coming from a stronger bargaining position. For example, simply threatening not to renew contracts is lawful and therefore legitimate pressure. On the other hand, threats which amount to blackmail constitute duress. Whilst the illegitimacy of pressure may often be obvious, there are many grey areas when it comes to hard-nosed commercial negotiation.
What happens if a contract is affected by duress?
If a contract is affected by duress but otherwise contains all the required elements of a contract, it will be voidable. This means the innocent party can elect either to rescind the contract or to affirm it and be bound by it unconditionally.