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STUDENT: ADAM FERRIS

TUTOR: I-SAN TIAW

TUTORIAL GROUP: N

Julie¶s junk ltd. currently wishes to sell four cars that are no longer in their possession to
another company. In order for the Julie¶s Junk to be able to sell the cars it is necessary to
prove that a contract for the sale of the cars was never validly formed, or that the contract is
void or voidable. It is clear that an offer was made and this was accepted. It is also clear that
there was sufficient consideration in the form of the payment and an intention to create legal
relations. Therefore, Julie¶s junk ltd. cannot recover possession of the cars or seek an
alternative remedy unless another course of action is taken. In this situation there are three
possibilities that would render this contract voidable. These are: economic duress, lawful act
duress and actual undue influence. I would look at each one in turn and assess whether it is
possible for Julie¶s Junk to be released from this contract and sell the cars to Wonderful
Wheels ltd. or seek another remedy.

If economic duress can be proved then the contract for the sale of the four cars
between Julie¶s Junk ltd. and Dastardly deals ltd. can be set aside. The doctrine of economic
duress has only been recognised by UK courts relatively recently following the case of
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!"#$In this
case Kerr J states that there are some tests that need to be satisfied in order that economic
duress is considered a valid claim. From his explicit statements and from the cases cited in
his judgment, it became clear that the claimant would have to protest, and consider the
contract closed and binding in order for the contract to apply. There were also hints that there
were a number of other tests. The position was made clearer by the judgments in %
ã
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&
()*+,%- The tests mentioned here are: Did the claimant protest?;
Did the claimant have a practical legal alternative?; Was independent legal advice sought for
the contract?; Did the claimant act properly to avoid renegotiation? ../&
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1
#***2"3$*added in the factor that economic duress must
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be a µsignificant factor¶ in the claimant¶s motives when entering into the contract. I will now
examine whether or not the circumstances of the case at hand qualify in these respects.

Firstly, economic duress needs to be a µsignificant¶ reason for Julie¶s Junk ltd.
contracting to sell the cars. The company¶s position was that these cars needed to be sold
quickly in order to avoid bankruptcy. Self-perpetuation is surely the core interest of every
business body and as such would have to be considered as a significant factor. However, as
the second reason for the acceptance of the contract is a considerable one, this may prove to
be a flaw in the claim. Given that the courts are reluctant to grant economic duress as a valid
claim in business situations as seen in the Occidental case, it may be difficult to prove that
economic reasons were significant enough for this purpose. Secondly, we need to look at
whether Julie¶s Junk ltd. had a practical alternative. In the case of 24
 .
(
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)+ "+it was decided that a company
contracting with another to erect some stands had no practical alternative than to agree to
their demands for more money when they demanded another £4500. In reality they could
have tried to find another company, but risk breaking clauses in their contract with clients.
However, this is clearly deemed not practical. It is not practical for Julie¶s Junk ltd. to wait
for another buyer to appear given their dire financial situation. Of course in reality they could
have waited and risked insolvency, in the same was as Victor Green Publications could have
tried to find another party to complete the stands, but this is not µa practical alternative¶. As
the company¶s solvency is at stake and money is needed to avoid bankruptcy, the sale seems
to be the only practical option.

As regards obtaining adequate legal advice for the contract, both parties involved are
specialists in this area of trade and used to entering into such contracts, therefore adequate
legal advice is assumed to have been sought. The main issue of concern, as set out in the Pao
On case, is whether or not Julie¶s Junk ltd. protested before they accepted the contract. As is
evident, Julie¶s Junk did not protest at the time, they merely considered their options and then
entered into the contract. As this is one of the key criteria, stipulated in the Occidental case,
this may prove to be a pitfall in a claim of economic duress. I will also make the public policy
point that judges are reluctant to grant economic duress as a valid claim because economic
pressure is an inevitable part of the commercial environment. Lax restrictions on economic
duress would mean an easy escape from any business contract that turned unfavourable for
one party. For the reasons that it may be hard to prove that economic duress was a significant
factor, that there were no protests at the time of acceptance and that judges are reluctant to
 Ú

allow flimsy claims of economic duress I would advise Julia¶s Junk ltd. that an economic
duress claim would fail.

The second possible escape from the contract is a lawful act of duress. Not only is
lawful act duress rare and difficult to prove, but one of the main requirements is that the
lawful act was the sole reason for one party entering into the contract. It is stated that a lawful
act may be considered as duress in certain circumstances in the case of ž&&6
 
7
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4
$#9"3, however the previously mentioned restriction
is implied. This is clearly not the case here, as Julie¶s Junk ltd. had considerable economic
motives for entering the contract as well. Therefore, a claim for legal act duress would not be
successful.

The final possibility for setting the contract aside is a claim for undue influence.
Presumed undue influence takes place where some sort of special relationship of trust has
been breached. In the case of this business transaction it is clear that this does not apply. We
therefore need to examine actual undue influence. As per

2  ,)-":
#**;undue pressure occurs when one party exerts a sort of unfair pressure over another and
coerces them into entering into a contract. This seems to be what has occurred to Julie¶s Junk
ltd. The boundaries for the equitable claim of undue influence are less certain than those for a
duress claim. The case of  
))9"*confirms that there must be
evidence of an unfair influence, which usually benefits one party. Dastardly Deals have
certainly coerced Julie¶s Junk Ltd. into entering into the contract and in an unfair manner. It
is difficult to predict the outcome of such an equitable claim, however Julie¶s Junk Ltd.
appear to have a reasonable claim.

In conclusion, the course of action that is most likely to succeed in allowing Julie¶s
Junk Ltd. to sell the cars to Wonderful Wheels Ltd. is a claim of actual undue influence.

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