Duress, Undue influence and Unconscionability of Contracts

Duress, Undue influence and Unconscionability of Contracts
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Introduction
Duress, undue influence, and unconscionable contracts are the key terms in this evaluation.
Duress and undue influence are among the vitiating factors in contracts1. Vitiating factors such as
duress and undue influence are said to be circumstances that can impede the enforceability of an
agreement2. A vitiating factor according to Unlocking Contracts is one that may work to annul
on otherwise authentically formed contract (one that follows all rules of formation)3. Out of their
adverse effects on contracts, they may render them void or voidable. Freedom of contract is one
element that courts try to preserve. One of the most fundamental elements of this freedom is that
agreement should be by voluntary means. Securing a contract should be by no means by force or
coercion. In any case elements of compulsion are proved in the procurement of a contract, the
law allows the setting aside of the contract at the expense of the perpetrator, to relieve the
afflicted party of any duty or obligation under the contract. Coercion could lead to an actionable
claim, either in common law or in equity. Duress under common law means the use of actual
violence and or threats of violence. Traditionally, it was linked to real or adequately real
intimidation and threats of vitiating the consent of the other party and as a result, preventing him
or her from acting with free will when procuring the contract4. Undue influence, on the other
hand, was developed under equity to cater for areas when improper pressure was used to prevent
a party from exercising free will while contracting5. Unconscionable contracts are those that are
as a result of unfair bargains involving one party taking advantage of the other when procuring a
1 Jill Poole, Casebook On Contract Law (Oxford University Press 2016).
2 Peter MacDonald Eggers, Vitiation Of Contractual Consent (Taylor & Francis 2016).
3 Chris Turner, Unlocking Contract Law (4th edn, Routledge 2014).
4 Chris Turner, Unlocking Contract Law (4th edn, Routledge 2014).
5 Nelson Enonchong, Duress, Undue Influence And Unconscionable Dealing (Sweet and Maxwell 2006).
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deal6,7. This paper is going to evaluate the appropriateness of duress and undue influence against
the law on unconscionable contracts.
The two concepts of duress and undue influence are related in that they deal with situations
where a person enters into a contract which he should probably not have done so8. Duress and
undue influence are two vitiating factors that are often exploited by one party to take advantage
of the other in agreements. This concept of unconscionable contracts is derivation of equity
courts to extend the doctrine of undue influence and was explained by Lord Dening in the case of
David C. Builder ltd. v. Rees9.
In the case, the builders were under duress (threat of not getting paid at all) and the acceptance of
the reduced amount was as a result of their financial position which the respondent was aware of
and taken advantage of. The conclusion was that an acceptance arising from a threat cannot be
interpreted as a settlement. In this case, the contract by Rees was unconscionable (unfair) to the
builders. The ruling by Lord Denning was very appropriate in such as case, one of the general
roles of the law of contract is protecting the interests of the weaker part. The builders were the
weak part and Rees knowing that they had financial constraints decided to exploit them and still
went ahead to manipulate the contract to appear as if they had accepted to be paid the reduced
amount. In this particular case, it is right to say that the action of duress was appropriate in
nullifying the contract as the contract was itself unfair to one of the parties.
Unconscionable contracts are exploitative and should be eradicated by law10. The doctrine of
unconscionable dealing focusses on relationships and involves a party failing to preserve the
6 Richard D Taylor and Damian Taylor, Contract Law (Oxford University Press 2013).
7 Larry A DiMatteo and Martin Hogg, Comparative Contract Law (Oxford University Press 2016).
8 (Study.com) <https://study.com/academy/lesson/duress-and-undue-influence-in-contract-enforcement-krysa-v-
paine.html> accessed 12 April 2019.
9 D & C Builders v Rees [1966] 2 EWCA QB 617
10 Rick Bigwood, Exploitative Contracts (Oxford Univ Press 2003).
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interests of the other between transactions. What can be leant here is that the defendant has a
protective responsibility towards the complainant. When the D cannot append or adjust what
would else be seen as seamlessly acceptable behavior on the functionalist notion of free
economical bargaining, under the substantial notion of contract, and even more precisely failing
to desist from taking gain of the plaintiff’s position of weakness to benefit self is what infringes
the responsibility above. This is what Rick Bigwood suggests to be an exploitative behavior as
the defendant consciously turns the power resulting from the vulnerable position of the
complainant to his advantage in the face of responsibility at hand11. Treating contracts procured
via duress and undue influence as void and voidable is essential in law to prevent the exploitative
behavior in unconscionable contracts.
The laws against unconscionable bargains are very important in disregarding contracts procured
using external pressure and interference. The ideologies relating to undue influence and
unconscionable bargains are closely related and should be fused within an all-incorporating
doctrine of unconscionably. The two doctrines have common features of dissimilarity in the
bargaining position, transactional disparity and unfair conduct on the defendant’ side.12
According to the decision of Mason J in Commercial Bank of Australia Ltd v Amadio13,
“In [undue influence] the will of the innocent party is not independent and voluntary because it is
overborne. In [unconscionable conduct cases] the will of the innocent party, even if independent
and voluntary, is the result of the disadvantageous posit ion in which he is placed and of the
other party unconscientiously taking advantage of that position.”
11 Rick Bigwood, Exploitative Contracts (Oxford Univ Press 2003).
12 D Capper “Undue Influence and Unconscionability: A Rationalisation”, (1998) 114 LQR 479
13Commercial Bank of Australia Ltd v Amadio (1985) 15 CLR 447, (High Court of Australia).
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