Obligation Law Assignment: Differences in Duress and Undue Influence

This assignment delves into the core legal concepts of duress, undue influence, and bargaining power within the realm of obligation law. It begins by differentiating between duress, which involves actual or threatened violence or economic pressure, and undue influence, which arises from the exploitation of a dominant position in a relationship. The assignment provides a detailed comparison of the two concepts, highlighting their distinctions and overlapping areas. Furthermore, it examines the concept of bargaining power, its implications for contract law, and the doctrine of inequality of bargaining power. The assignment references key case laws such as North Ocean Shipping Co Ltd v Hyundai Construction Co Ltd, Lloyd’s Bank Ltd v Bundy, Commercial Bank of Australia Ltd v Amadio, and Garcia v National Australia Bank Ltd, to illustrate the application of these legal principles. The analysis also touches upon the concept of unconscionable conduct and its judicial interpretations, emphasizing the role of equity in addressing situations where one party is at a disadvantage.

Obligation Law
Civil Law
5/6/2019
xxxxx
xxxxxxx

Answer 1-
Difference between Duress and Undue influence-
In general, Duress stands for actual or threatened violence, restriction of freedom of a person
or acquaintances or creating pressure coercively to enter into contract. In specific context of
economic Duress , it is threat of economic loss rather than mental or physical violence.
Duress is usually practiced so as attain defence to a contract. A contract will be held void if
there is presence of Duress. It does not involve any kind of relationship between contracting
parties. In North Ocean Shipping co Ltd v Hyundai Construction Co Ltd , due to
devaluation in the price of dollars, Hyundai Shipbuilders denied delivery of ships ordered to
North ocean ship shipping company by adjusting price due to 10% devaluation of dollar .
Court held it as a case of Economic Duress , as here there is pressure by Hyundai Ltd1.
Whereas, forceful consent of weaker party In a contract due to the influence of stronger party
is called Undue Influence. It does not involve direct threat as in case of Duress which can be
physical and mental and involved direct violence. Undue influence involves excessive
pressure due to dominant party on the inferior party of contract. Undue Influence usually
involves relationship between contracting parties in which on party is at dominant position.
As in Lloyd’s Bank Ltd v Bundy(1974) case , where Lloyd Bank took Undue Influence of
My Bundy’s only asset (farmhouse) by not disclosing the financial condition of his son’s
company which was guaranteed by Mr. Bundy’s farmhouse. It was held that here Lloyd Bank
is at dominating position and exposed Mr Bundy to large amount without letting him know
about company’s financial condition. The contract then held voidable by court as it was
unfair and bank brought pressure to bear.
Sometimes it is found that both Duress and Undue Influence has overlapping meaning or
there exists a opaque distinction between both as Undue Influence can also categorise as
Duress where also a person can be threatened using violence by a known person or any
acquaintance2.
Duress am Undue Influence both have threat , damage and loss related provision which
causes thread-line differences between the two. However in more specific relevance Duress
does not mind mutual consent and undermines meeting of minds. It has option for one party
1 Chenoy Ceil, 'Contractual Free Will: Doctrines Of Economic Duress & Undue Influence' [2015] SSRN
Electronic Journal.
2 Robert Flannigan, 'Presumed Undue Influence: The False Partition From Fiduciary Accountability'
[2015] SSRN Electronic Journal.

to withdraw from the contract. Where as Undue Influence empathises on Consent which can
be influenced but present.

Answer 2-
Bargaining Power is ability of individual to impose influence. In general context of
contracts , it is given as relative power of parties in order to put influence over each other to
get desired consequences. In daily life it can be understood while bargaining between buyer
and seller to get the deal in the domain of own interests. As it is mentioned to be relative so it
gives birth to Doctrine of Inequality of bargaining power means that one person may have
more ability to find better alternatives to particular deal than other. Relative differences of
bargaining power sometimes are the consequences of lack of knowledge, lack of transparency
in provision, unawareness about consequences. It was held in Commercial Bank of
Australia Ltd v Amadio that no one will practice or let anyone impose superior bargaining
tactics if they have adequate k knowledge and awareness about consequences and held the
verdict in favour of Amadios who were illiterate and not aware about the consequences of
guaranteeing property against loan. Also it was held in Garcia v National Australia Bank
Ltd3. where married couple advanced a loan on their joint property and after the dissolution
of marriage wife declared all the guarantees against the loan to be ineffective. Court also held
that appellant has right to declare that none of the guarantee bound her as there was potential
of undue influence of husband.And had speculations that wife’s actions can be influenced in
the interest of husband. Unconscionable conducts does not has any legislative definition, so it
needs judicial interpretation using various case laws and contemporary circumstances. It was
given implicitly in Garcia v National Australia Bank Ltd. that whenever one party is
placed under special disadvantage due to some unavoidable conditions or circumstances, then
equity may intervene to set aside unconscionable bargains4. There are many judicial
interpretation in which wives or some other member of family has been put into undue
influence by other family members or acquaintances where intervenes equity to set aside
unconscionable bargains or agreements.
3 Holger Janusch, 'The Interaction Effects Of Bargaining Power: The Interplay Between Veto Power,
Asymmetric Interdependence, Reputation, And Audience Costs' (2018) 34 Negotiation Journal.
4 Chris van Uffelen, Offices = (Braun 2010).

References
Ceil C, 'Contractual Free Will: Doctrines Of Economic Duress & Undue
Influence' [2015] SSRN Electronic Journal
Flannigan R, 'Presumed Undue Influence: The False Partition From Fiduciary
Accountability' [2015] SSRN Electronic Journal
Janusch H, 'The Interaction Effects Of Bargaining Power: The Interplay
Between Veto Power, Asymmetric Interdependence, Reputation, And
Audience Costs' (2018) 34 Negotiation Journal
Uffelen C, Offices = (Braun 2010)