Economic Duress in Contract Law: Case Analysis and Criteria

This report analyzes economic duress in contract law, including case studies and criteria for determining its existence. It also discusses the requirements for a valid contract.

Contract Law

Table of Contents
INTRODUCTION ..........................................................................................................................3
TASK ..............................................................................................................................................3
Economic Distress.......................................................................................................................3
Leyland Daf Ltd v Automotive Products plc..............................................................................4
Atlas Express Ltd v Kafco Ltd [1989]........................................................................................4
Criteria for economic duress.......................................................................................................5
CONCLUSION ...............................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
Contract law is a general agreement which is made between the parties as in order to
make the parties being binding in an agreement for performance of any act which is important
for the future transactions. This use to protect and bind the parties in the agreement as it is
enforceable by law. There are so many rights and remedies that are available in the contract
law,and also with that no party is allowed to create any kind of illegal activity or threat, coercion
in contract1. This report will generally cover the case laws and their comparison as according to
all the activities and with that the general comparison of economic duress.
TASK
Economic Distress
This is a commercial pressure which is being given by one party who is in dominant
position in the contract as with the strong bargaining power and the other party has no favourable
option left there then accepting the conditions of the contract made between them. The company
at all the time when use to make illegitimate pressure with which they can pertains and make all
the important issues and the changes begin framed some of the major illegitimate pressure are
like, the other party threatens to make the breach of contract, they have being sought to generally
rely on the contract. Any kind of illegal demand in the contract can a;so be termed ad the major
issue on it. Economic distress termed as contract in which other party is:
 Threaten the other party for cancel the contract.
 Made so much pressure in order to perform the act.
 Create unreasonable payment and amount to be fixed by their own wish2.
All such issues use to create a major stressful situation in which they make a force and
threat on the other party for competing and fulling the contract. The remedy is being given by the
court for all such situation are enforced only when the economic distress is being proved
between the parties and they were provided the Recession or Damages as the primary remedy
for all such acts. Court also use to terminate all such contract which impose threat, fear and
1 Hesselink M, 'Democratic Contract Law' (2015) 11 European Review of Contract Law
2 Duxbury R, Contract Law (2019)

compulsion on any party. Thus, no contract can be made between the parties with any kind of
force and if there seems that in that contract there is general breach and threat regarding to the
commercialisation is seen it will create an overpowering impact on the parties.
Leyland Daf Ltd v Automotive Products plc Facts- Their was a contract made between the parties on which they use to frame a
dealing regarding the transportation and administrative receivership. Leyland use to
supply all the automotive supply parts to the company. As their were first allotment and
giving of share has taken place and after that Leyland refused that he is not going to
supply another goods containment, until the time the payment of the further goods is
being given to him. And for this the automotive company filed suit for breaking the
contract and not providing the goods and forcing them under economic duress to pay the
amount.
 Issue- Is Leyland liable for keeping the goods and the services within them at the time of
fulfilment of act3.
Is there is any kind of breach made in the contract framed between the parties.
Is there is abuse of dominant position in this case. Judgement- Court held that, although the goods cannot be taken from another place and
this cannot be sourced from different location. Leyland had promised earlier for the
payment of the money but Automotive were not doing any kind of unjust or unreasonable
activity in it. As they were asking about the money which for the activity which is
performed earlier and as buy analysing the Leyland to face difficulty in stemming the
amount as he has taken action against them shows insolvency of Leyland towards the
payment of the money in the contract. Thus, Automotive will not be held liable and they
had not abused their dominant position in the contract. As section 234 of Insolvency act
1986 provides the exclusive ownership and the jurisdiction made for the contract4.
3 Grundmann S, 'The Future Of Contract Law' (2017) 7 European Review of Contract Law
4 Bix B, Contract Law (Ashgate/Dartmouth 2016)

Atlas Express Ltd v Kafco Ltd [1989]. Facts- Kafco was a well known company deals with the importing the goods and the
basket ware has made a contract with Atlas about selling and also delivering all the
imported baskets to Atlas retailer store. They made a dealing that there will be about
£440 net worth but sometimes their use to be less then this and as after few days, a
representative form Kafco premises came up with empty truck and he made an agreement
that they will have to fix the contract of £440 as their minimum amount otherwise the
truck will be left unloaded. And this created an immense pressure in Kafco as they were
in huge loss if such type of conditions use to take place and the Atlas were sabotaging all
the agreements in between them and signed the agreement due to compelling. Lateron,
Kafco denied to pay the amount and Art;as filed a suit against them. Issue- Whether the signature made between them is under duress even when the contract
was being honoured. Judgement- Court held that Kafco is not being liable for payment to be made to Atlas. As
there is much evidence which proves that all the agreement were being made in economic
duress as their was no alternative left with them and the person was not being made to
frame and maintain all the elements other then accepting the conditions which were given
by the party, as that will create a major loss being suffered to him. Kafco has not
accepted any kind of terms and conditions in the contract as he earlier denied for all that
and it was not his consent to make that thing happen. Their was a duress being made by
the party and Kafco is not being liable for any such thing5.
Criteria for economic duress
In all the economic duress it is important to maintain all the essential elements with
which the court can consider it as an important claim they are like:
 There must be an existing contract which is being served in the party for their benefits.
And both the parties will have to agree on all the condition s and the nature ion which the
contract is being made.
5 Constitutional Law. Impairment Of Contract. Effect Of State Statute On Municipal
Franchise Contract' (2019) 29 The Yale Law Journal

 When there is any kind of threat which is being given to the other party as this generally
serves out the areas in which the one party which is in dominant position tries to threaten
the other party without any nature and issue.
 The acceptance of the contract is mainly due to the duress which is being made between
the, as it is being generalised that in all such cases and methods where this is being
analysed that all the contract is being accepted with major threats and issues as in order to
implement the nature and the working.
 There should be illegal threat and intimidation which is being given by the party in order
to induce the other party from all the issues and the changes that are being served.
 One of the party is compelled to do an act and they use to make the loss and damage to
he other party with that force.6
As when these cases are generally being compared their can be seen that in Kafco's case
there is an economic duress seen and analysed by the court as it was generally proven that Kafco
was left with no choice except to accept that contract and to hear all the thongs in order to protect
their company and its working. And all such coercion for commercial transaction which is made
for compelling the person to for an act is being treated as the economic duress. Whereas, their is
no such thing being seen in other case as Leyalnd was being compelled to pay the earlier amount
for all the goods that were being transferred to him by automotive. And they were just forcing
him to pay all the prior amount which was pending and the denial of Leyland shows the
insolvency of him to frame the contract and to provide all the amount. Thus their will not be any
kind of economic duress in it. And these cases provides out the true meaning tend the method for
the economic duress clause and the requirements being
6 Howells G, 'European Contract Law Reform And European Consumer Law – Two
Related But Distinct Regimes' (2018) 7 European Review of Contract Law

CONCLUSION
From this above report it is concluded that, contract law is the enforced agreement made
between the parties in order to frame the binding contract between them. Their are general
requirements which are being made in it through which the contract can be made like the consent
of the person its nature and acceptance and many more. Furthermore, it is also analysed that
Economic duress is mainly the threat or coercion is being made in all the contract or commercial
transaction in order to complete the contracts and to make all the work according to their own
means. Furthermore, it is also analysed that no such duress is being taken in record if it is made
for completing the transaction and is fair and reasonable.

REFERENCES
Books and Journals
'Constitutional Law. Impairment Of Contract. Effect Of State Statute On Municipal Franchise
Contract' (2019) 29 The Yale Law Journal
Bix B, Contract Law (Ashgate/Dartmouth 2016)
Duxbury R, Contract Law (2019)
Grundmann S, 'The Future Of Contract Law' (2017) 7 European Review of Contract Law
Hesselink M, 'Democratic Contract Law' (2015) 11 European Review of Contract Law
Howells G, 'European Contract Law Reform And European Consumer Law – Two Related But
Distinct Regimes' (2018) 7 European Review of Contract Law