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Duress

1. Duress occurs when the stronger party exerts illegitimate pressure on the other party (the victims) so as to procure a contract. Duress is illegitimate pressure exerted by a dominant party to coerce a waker party to consent to a contract against that partys will. In other words the weaker party does not have real freedom to choose whether or not to enter into the contract. 1.1) Need to distinguish between acceptable hard bargaining and illegitimate pressure. To establish duress, victim bears the ounce of prove and shoe there was a) illegitimate pressure b) which impaired the victims consent 1.1)1. Universe Tankshios Inc of Monrovia v International Transport works Federation 1.1)1.1. Pressure is illegitimate if it consists of unlawful threats or amounts to unconscionable conduct 1.1)1.2. Impaired consent arises from absence of choice. 1.1)2. Commercial pressure is not duress [Smith v William Charlick Ltd] where the defendant demanded additional payment with a threat to withhold or endanger future wheat sales. The court held that the payment was made unwillingly... it was nevertheless, paid voluntarily, in the legal sense and without any unlawful compulsion, extortion, undue influence or abuse of any duty. 2. Duress to the person 2.1) Duress to the person involves actual or threatened violence to, or actual or threatened confinement (false imprisonment in tort sense) of the innocent party corced, or a close relative or associate of the innocent party. In other words, the act or threat must be both unlawful and directed towards obtaining the innocent partys assent to a contract. 2.2) Duress must contribute to victims decision to sign, and need not be the sole reason. [Barton v Armstrong]. The onus falls upon the party accused to demonstrate that duress was not a contributing factor in the innocent partys assent. The contract was therefore voidable as threat was one reason for execution of deed. 3. Duress of goods 3.1) Duress of goods involves a situation where one party unlawfully seizes, detains, damages or destroys the goods of the weaker party, or threatens to do so. Contract entered into may be rescinded. [The Sibeon v The

3.2)

Sibotre] stated that if a weaker partyshould be compelled to sign a..contract for a nominal but legally sufficient consideration under an imminent threat of having his house burnt down or a valuable picture slashed, though without any threat of physical violence to anyone, the law should not uphold that agreementif the contract is void the consideration would be recoverable. If it is voidable, equity could rescind the contract and order the return of the consideration. The modern approach is illustrated by [Hawker Pacific Pty Ltd v Helicopter Charter Pty Ltd] The defendant knew the good was needed urgently for the plaintiff but the defendant withheld the good and induce the plaintiff to sign a document in which the plaintiff agreed to pay and release the defendant from any further liability. The contract therefore voidable because no reasonable alternative but to sign.

4. Economic duress 4.1) Economic duress is a recent invention of the law. It involves a situation where a threat was made by the dominant party to prejudice the innocent partys economic interests, and that dominant partys threat was made to procure a contract with the innocent party. If proved, this form of duress will render the contract voidable at the option of the innocent party, provide the partys free will to resist the threat was impaired. 4.2) To establish economic duress, the following test outlined in [Crescendo Management v Westpac] McHigh JA stated a) Whether any applied pressure actually induced the innocent party to enter into the contract; if so b) Whether the pressure go beyond what was legitimate. Presure will be illegitimate if it consists of unlawful threats to amounts to unconscionable conduct. In other words, Commercial pressure is not duress [Smith v William Charlick Ltd], without amounting to unconscionable or unlawful conduct, would not constitute economic duress. 4.3) Issue of timing 4.3)1. In [North Ocean Shipping Co Ltd v Hundai] case, the court found that the contract was voidable; the excess could be recovered for economic duress, because there was a case to answer on the issue of economic duress. However, the plaintiff had waited nine months before making any claims, given the delay on the part of the plaintiff, the court refused to rescind the contract and found that the delay in action had actually affirmed the varied contract. 5. Undue Influence 5.1) Undue influence may be defined as where the dominant party uses influence that she/he has over the weaker party to obtain some benefit

under a contract. The doctrine is derived from equity, and the principle that the stronger part should not be allowed to enjoy the profits of a fraud or other wrongful act. Unlike Duress, it need not involve an unlawful act. Whereas duress concerns illegitimate pressure by way of threats undue influence relates to the exploitation of a relationship of influence. 5.2) Aries where ascendant party takes improper advantage of position of dominance over the dependent party. Two classes of undue influence presumed undue influence and actual undue influence. 5.2)1. Presumed undue influence 5.2)1.1. where the relationship between the parties is such as to give rise to a person of undue influence called presumptive relationships. In certain situation involving a contract between parties in a fiduciary relationship, undue influence will be presumed. The consequence is that the stronger party bears the burden of proving the absence of pressure. In other words, in certain special relationships there is a rebuttable presumption of influence in favour of the stronger party. Recognised special relationships include: a) parent and child; (archer v Hudson) 1844 b) trustee and beneficiary; Hylton v Hylton (1754) c) solicitor and client; Dowsett v reid d) doctor and patient; Wheeler v Sargeant e) religious adviser and disciple. Allcard v Skinner In other relationships, no such presumption: account and client, fiduciary relationships, husband and wife. These relationships do not give rise to the presumption. 5.2)1.2. In other words, where there is no such relationship, it is possible to plead undue influence by virtue of the fact that a relationship involved a high degree of trust and confidence. [Johnson v Buttress] & [Barclays Bank plc v OBrien] where history of friendship gave rise to a relationship of dependence so that undue influence was presumed. If this can be established, then the presumption of influence applies and the onus of disproving abuse of the influence passes to the dominant party. [westmelton v Archer and Schulmen]. 5.2)1.3. The lack of independent advice to the weaker party, before signing the contract, is highly relevant. In [Lloyds Bank v Bundy] case, the relationship of bankers and customers may be found to be a relationship of influence, the court held that, there existed a special relationship that imposed upon the plaintiff a fiduciary duty to ensure that the defendant formed an independent and informed judgement, before committing to the proposed contract. On other words, the bank should have advised the customer to obtain independent advice before signing the loan documents. The stronger party may rebut the

presumption of influence by showing that: a) full disclosure of all material facts was made; b) the consideration was adequate; c) the weaker party received independent advice. 5.2)2. Actual undue influence / Undue influence on the facts 5.2)2.1. To be successful in such a plea, it must be able to establish an undermining of the weaker partys independence of decision making. In other word, it must establish an actual influence on the mind of the weaker party at the time of contract. [Garcia v NAB] 5.2)2.2. Where no special relationship exists, the burden rests on the weaker party to establish that (see above Johnson v Buttress) a) there was an appropriately influential relationship; b) that the stronger party exercised undue influence motivated the weaker party to enter into the contract c) that the undue influence motivated the weaker party to entre into the contract d) the weaker party act promptly in purposing to avoid the contract. 5.2)2.3. [Farmers Co-op executors & trustee v Perks], a wife transferred her interest in farm, used to be jointly owned by herself and her husband, to the husband. There had been a long history of family violence by the husband against the wife. It was held that a relationship of influence existed and the presumption that the wife transferred the property as result of her husbands undue influence was not rebutted. Moreover, it was held there was evidence that established that the transfer resulted from actual undue influence. 5.2)2.4. Again issue of timing Allcard v Skinner the court held that there was a right of rescission because of actual undue influence. However, rescission was not granted because the plaintiff had not acted within a reasonable time, despite receiving some legal advice not long after she had left the convent. 6. Misleading or deceptive conduct statutory approach 6.1) Se 18 (1) ACL provides a person must not, in trade, or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive. 6.2) Remedies for breach of s 18 include damages o compensate for loss (sec 236) and court orders to void or vary contract or to refund money or return property (sec 237) 6.3) Types of conduct caught 6.3)1. misleading or deceptive conduct means to lead into error. Erroe occurs

when a person is led to believe things that are not true or correct 6.3)2. Puffs may be misleading if reasonably specific [Campomar sociedad limitada v Nike international limited]. In [Demagogue v Ramensky], Black CJ set out the approach to be adopted when determining whether conduct is misleading or deceptive; it should be determined in the light of all the relevant circumstances constituted by acts, omissions, statements or silence. Gibbs CJ also noted in [Parkdale Custom v Puxu Pty Ltd] the conduct of a defendant must be viewed as a whole. It would be wrong to select some words or act which alone would likely to mislead. 6.3)3. misstatements of law 6.3)4. Opinions, predictions and promises 6.3)5. failure to qualify statement 6.3)6. Silence can be a misrepresentation where there is an obligation to disclose facts [Henjo Investmnets v Collins Marrickville] 6.4) Features of sec 18 6.4)1. falut is not required for conduct to be misleading or deceptive 6.4)2. innocent misrepresentation may contravene s 18 enabling a claim for damages 6.4)3. Requirement of casual connection between conduct and deception 6.4)4. Post contractual misrepresentation can be misleading 6.4)5. no requirement to show inducement

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