Iniquitous pressure in English law
Encyclopedia
| "If a man fails to fulfil an agreed contract - unless he had contracted to do something forbidden by law or decree, or gave his consent under some inquitous pressure, or was involuntarily prevented from fulfilling his contract because of some unlooked-for accident - an action for such an unfulfilled agreement should be brought in the tribal courts, if the parties have not previously been able to reconcile their differences before arbitrators (their neighbours, that is)." |
| Plato Plato Plato , was a Classical Greek philosopher, mathematician, student of Socrates, writer of philosophical dialogues, and founder of the Academy in Athens, the first institution of higher learning in the Western world. Along with his mentor, Socrates, and his student, Aristotle, Plato helped to lay the... , The Laws, Book 11, §23, Contracts. |
Unconscionability in English law is a field of contract law
English contract law
English contract law is a body of law regulating contracts in England and Wales. With its roots in the lex mercatoria and the activism of the judiciary during the industrial revolution, it shares a heritage with countries across the Commonwealth , and the United States...
and the law of trusts, which precludes the enforcement of consent based obligations. "Inequality of bargaining power
Inequality of bargaining power
Inequality of bargaining power is a concept used in social sciences and humanities, particularly law and economics to denote the situation where freedom of contract ceases to be real and markets fail....
" is another term used to express essentially the same idea for the same area of law, which can in turn be further broken down into cases on duress
Duress
In jurisprudence, duress or coercion refers to a situation whereby a person performs an act as a result of violence, threat or other pressure against the person. Black's Law Dictionary defines duress as "any unlawful threat or coercion used... to induce another to act [or not act] in a manner...
, undue influence
Undue influence
Undue influence is an equitable doctrine that involves one person taking advantage of a position of power over another person. It is where free will to bargain is not possible.-Undue influence in contract law:...
and exploitation of weakness. In these cases, where someone's consent to a bargain was only procured through duress, out of undue influence or under severe external pressure that another person exploited, courts have felt it was unconscionable (ie, contrary to good conscience) to enforce agreements. Any transfers of goods or money may be claimed back in restitution
Restitution
The law of restitution is the law of gains-based recovery. It is to be contrasted with the law of compensation, which is the law of loss-based recovery. Obligations to make restitution and obligations to pay compensation are each a type of legal response to events in the real world. When a court...
on the basis of unjust enrichment
Unjust enrichment
Unjust enrichment is a legal term denoting a particular type of causative event in which one party is unjustly enriched at the expense of another, and an obligation to make restitution arises, regardless of liability for wrongdoing.Definition:...
subject to certain defences.
Considerable controversy is still present over whether "iniquitous pressure" must actually be exercised by a defendant in order for a consent based obligation to be voidable. While seems clear that in cases of undue influence the pressure need not come from the person who may lose the contract it is open to debate whether circumstances exist where an obligation should be voidable simply because the person was pressured by circumstances wholly outside a defendant's control.
One of the most prominent cases in this area is Lloyds Bank Ltd v Bundy
Lloyds Bank Ltd v Bundy
Lloyds Bank Ltd v Bundy [1974] is a landmark case in English contract law, on undue influence. It is remarkable for the judgment of Lord Denning MR who advanced that English law should adopt the approach developing in some American jurisdictions that all impairments of autonomy could be collected...
where Lord Denning MR advocated that there be a general principle to govern this entire area. He called the concept "inequality of bargaining power
Inequality of bargaining power
Inequality of bargaining power is a concept used in social sciences and humanities, particularly law and economics to denote the situation where freedom of contract ceases to be real and markets fail....
", while the American case espousing an equivalent doctrine, Williams v. Walker-Thomas Furniture Co.
Williams v. Walker-Thomas Furniture Co.
Williams v. Walker-Thomas Furniture Co., 350 F.2d 445 , was a court opinion, written by Judge J. Skelly Wright, that had a definitive discussion of unconscionability as a defense to enforcement of contracts in American contract law. As a staple of first-year law school contract law courses, it has...
termed the issue one of "unconscionability". Note that Lord Denning's approach was later rejected by the House of Lords in National Westminster Bank v Morgan
History
- James v Morgan (1663) 83 Eng Rep 323 refused to enforce contract calculating purchase price of horse based upon 2 pence for first nail in horse’s shoes, doubled for each of additional 31 nails.
- Vernon v BethellVernon v BethellVernon v Bethell is an English property law case, where it was affirmed that there could be no clog on the equity of redemption. In justifying this rule, Lord Henley made the famous observation that,...
- Earl of Chesterfield v Janssen (1751) 28 Eng Rep 82, 100, unconscionability "may be apparent from the intrinsic nature and subject of the bargain itself; such as no man in his senses and not under a delusion would make on the one hand, and as no honest man would accept on the other; which are unequitable and unconscientious bargains, and of such even the common law take notice . . . .”
Physical threats
Duress has been defined as a "threat of harm made to compel a person to do something against his or her will or judgment; esp., a wrongful threat made by one person to compel a manifestation of seeming assent by another person to a transaction without real volition." An example is in Barton v ArmstrongBarton v Armstrong
Barton v Armstrong [1973] is an English contract law case relating to duress. It held that a person who agrees to a contract under physical duress may avoid the contract, even if the duress was not the main reason for agreeing to the bargain.-Facts:...
, a decision of the Privy Council. Armstrong threatened to kill Barton if he did not sign a contract, so the court set the contract aside. An innocent party wishing to set aside a contract for duress to the person need only to prove that the threat was made and that it was a reason for entry into the contract; the onus of proof then shifts to the other party to prove that the threat had no effect in causing the party to enter into the contract. There can also be duress to goods and sometimes, the concept of 'economic duress' is used to vitiate contracts.
- Barton v ArmstrongBarton v ArmstrongBarton v Armstrong [1973] is an English contract law case relating to duress. It held that a person who agrees to a contract under physical duress may avoid the contract, even if the duress was not the main reason for agreeing to the bargain.-Facts:...
[1976] AC 104
Economic duress
- The Atlantic Baron or North Ocean Shipping Co Ltd v Hyundai Construction Co LtdNorth Ocean Shipping Co Ltd v Hyundai Construction Co LtdNorth Ocean Shipping Co Ltd v Hyundai Construction Co Ltd [1979] QB 705 is an English contract law case relating to duress.-Facts:Hyundai were shipbuilders. The price of ships was payable in five instalments, and the builders had agreed to a reverse letter of credit, for repayment of instalments in...
[1979] QB 705 - Pao On v Lau Yiu LongPao On v Lau Yiu LongPao On v Lau Yiu Long [1979] is an contract law appeal case from the Court of Appeal of Hong Kong decided by the Privy Council, concerning duress.-Facts:...
[1980] AC 614 - Universe Tankships Inc of Monrovia v International Transport Workers' FederationUniverse Tankships Inc of Monrovia v International Transport Workers' FederationUniverse Tankships Inc of Monrovia v International Transport Workers’ Federation [1982] 2 All ER 67 is an English contract law case relating to duress.-Facts:...
[1982] 2 All ER 67 - Atlas Express Ltd v KafcoAtlas Express Ltd v KafcoAtlas Express v Kafco Ltd [1989] QB 833 is an English contract law case relating to duress.-Facts:Kafco Ltd had a contract to supply Woolworths with baskets. They had a ‘trading agreement’ with Atlas Express for at least six months to do the deliveries. Atlas Express realised it had underestimated...
[1989] QB 833
- CTN Cash and Carry Ltd v Gallaher LtdCTN Cash and Carry Ltd v Gallaher LtdCTN Cash and Carry Ltd v Gallaher Ltd [1993] is an English contract law case relating to duress. It raised the question whether an act could be considered to be economic duress if the act would in any event be lawful.-Facts:...
[1994] 4 All ER 714, lawful act duress? - Alec Lobb (Garages) Ltd v Total Oil (Great Britain) LtdAlec Lobb (Garages) Ltd v Total Oil (Great Britain) LtdAlec Lobb Garages Ltd v Total Oil Ltd [1984] is an English contract law case relating to undue influence.-Facts:Mr Lobb was the managing director of a small petrol station in South Street, Brain-tree, Essex. It had to buy petrol only from Total Oil. In 1969 he was in financial difficulty...
[1984] EWCA Civ 2, [1983] 1 WLR 87, 94, refusal to waive existing contractual obligations is not duress, because there is no wrongful threat.
Consideration
- Pinnel's CasePinnel's CasePinnel's Case 5 Co. Rep. 117a, also known as Penny v Cole, is an important case in English contract law, on the doctrine of part performance. In it, Sir Edward Coke opined that a part payment of a debt could not extinguish the obligation to pay the whole.-Facts:The plaintiff sued the defendant for...
(1602) 5 Co. Rep. 117a - Stilk v MyrickStilk v MyrickStilk v Myrick [1809] is an English contract law case of the High Court on the subject of consideration. In his verdict, the judge, Lord Ellenborough decided that in cases where an individual was bound to do a duty under an existing contract, that duty could not be considered valid consideration...
[1809] EWHC KB J58 - Foakes v Beer (1884) 9 App Cas 605
- D & C Builders Ltd v Rees [1965] 2 QB 617
- Williams v Roffey Bros & Nicholls (Contractors) LtdWilliams v Roffey Bros & Nicholls (Contractors) LtdWilliams v Roffey Bros & Nicholls Ltd [1989] is a leading English contract law case, which decided that in varying a contract, the court will be quick to find consideration, if "factual benefits" are given from one to another party.-Facts:...
[1991] 1 QB 1
Undue influence
Undue influence is an equitable doctrine that involves one person taking advantage of a position of power over another person. The law presumes that in certain classes of special relationship, such as between parent and child, or solicitor and client, there will be a special risk of one party unduly influencing their conduct and motives for contracting. As an equitable doctrine, the court has the discretion to vitiate such a contract. When no special relationship exists, the general rule is whether there was a relationship of such trust and confidence that it should give rise to such a presumption.- Allcard v SkinnerAllcard v SkinnerAllcard v Skinner 36 Ch D 145 is an English contract law case dealing with undue influence. It is one of the leading cases in the area and in English unjust enrichment law.-Facts:...
(1887) 36 Ch D 145
Actual undue influence
- Williams v BayleyWilliams v BayleyWilliams v Bayley LR 1 HL 200 is an English contract law case relating to undue influence.-Facts:Mr Bayley’s son forged his father’s signature on promissory notes and gave them to Mr Williams...
(1886) LR 1 HL 200, Bayley's son forged his father's signature on promissory notes and gave them to Williams. Williams threatened Bayley with criminal prosecution, so Bayley made an equitable mortgage to get back the notes. House of Lords upheld the cancellation of the agreement. - Bank of Montreal v Stuart 1911] AC 120, 136) and the transaction resulted from that influence.
- Mutual Finance ltd v John Wetton and Sons Ltd [1937] 2 KB 389
- BCCI v Aboody [1992] 4 All ER 955
- CIBC Mortgages plc v Pitt [1993] 4 All ER 433
Presumed undue influence
- Tate v WilliamsonTate v WilliamsonTate v Williamson LR 2 Ch App 55 is an English contract law case relating to undue influence.-Facts:The defendant became the financial adviser to an Oxford University undergraduate who sold him his estate for half its value and then drank himself to death, aged 24...
(1886) LR 2 Ch App 55 - Barclays Bank plc v O'BrienBarclays Bank plc v O'BrienBarclays Bank plc v O’Brien [1993] is an English contract law case relating to undue influence. It set out the basic categories of undue influence as,* actual undue influence* presumed undue influence from a special relationship...
[1993] 4 All ER 417 - Royal Bank of Scotland v Etridge (No 2) [2001] UKHL 41
- Thompson v Foy [2009] EWHC 1076 (Ch)
Exploitation or Unconscionable Bargain
- Earl of Chesterfield v Janssen (1751) 2 Ves Sen 125, equity intervenes to relieve against unconscionable bargains
- Earl of Aylesford v Morris (1873) LR 8 Ch App 484
- Fry v LaneFry v LaneFry v Lane 40 Ch D 312 is an English contract law case relating to exploitation of weakness, allowing escape from a contract.-Facts:...
(1888) 40 Ch D 312 - Cresswell v PotterCresswell v PotterCresswell v Potter [1978] 1 WLR 255 is an English contract law case relating to exploitation of weakness allowing escape from a contract.-Facts:...
[1978] 1 WLR 255 - The MedinaThe MedinaThe Medina 2 PD 5 is an English contract law case, regarding the voidability of an agreement and a restitutionary award where the court finds that agreement is procured under extortionate circumstances.-Facts:...
(1876) 2 PD 5 - Alec Lobb Garages Ltd v Total Oil (GB) Ltd [1985] 1 WLR 173
- Backhouse v Backhouse [1978] 1 WLR 243, 251, Balcombe J could not fit in an intelligent woman into the Fry v LaneFry v LaneFry v Lane 40 Ch D 312 is an English contract law case relating to exploitation of weakness, allowing escape from a contract.-Facts:...
criteria but citing Bundy said, obiter dicta, that entering a contract without independent advice because of ‘great emotional strain’ could be another way the law could develop. - Burmah Oil Co Ltd v Governor of the Bank of England (1981) noted 125 Sol Jo 528, the Bank bought Burmah Oil's shares in BP on request from Burmah, who was very financially embarrassed because the share price had fallen and Burmah's borrowings were structured on the basis that BP shares would be higher. It looked like Burmah may collapse, and the Bank did not want BP shares to go foreign. But after, Burmah claimed the Bank to unfair advantage of bargaining power inequality in buying the shares and making a profit. Walton J doubted Lord Denning MR's principle. Note that Burmah was always advised by expert lawyers and merchant bankers and would have got no better price elsewhere (because selling such a large block of shares would depress the price).
A general principle?
- Lloyds Bank Ltd v BundyLloyds Bank Ltd v BundyLloyds Bank Ltd v Bundy [1974] is a landmark case in English contract law, on undue influence. It is remarkable for the judgment of Lord Denning MR who advanced that English law should adopt the approach developing in some American jurisdictions that all impairments of autonomy could be collected...
[1975] QB 326 - National Westminster Bank plc v Morgan [1985] AC 686, 698
Statutory regulation
- Unfair Contract Terms Act 1977Unfair Contract Terms Act 1977The Unfair Contract Terms Act 1977 is an Act of Parliament of the United Kingdom which regulates contracts by restricting the operation and legality of some contract terms. It extends to nearly all forms of contract and one of its most important functions is limiting the applicability of...
- Unfair Terms in Consumer Contracts Regulations 1999Unfair Terms in Consumer Contracts Regulations 1999The Unfair Terms in Consumer Contracts Regulations 1999 is a UK statutory instrument, which implements the EU Unfair Consumer Contract Terms Directive into domestic law.Implemented under the European Communities Act 1972. See also, L95 OJ 29...
- Unfair Contract Terms BillUnfair Contract Terms BillThe Unfair Contract Terms Bill is a proposed Act of Parliament of the United Kingdom, which would consolidate two existing pieces of consumer protection legislation, the Unfair Contract Terms Act 1977 and the Unfair Terms in Consumer Contracts Regulations 1999 into one Act...
See also
- English contract lawEnglish contract lawEnglish contract law is a body of law regulating contracts in England and Wales. With its roots in the lex mercatoria and the activism of the judiciary during the industrial revolution, it shares a heritage with countries across the Commonwealth , and the United States...
- English unjust enrichment lawEnglish unjust enrichment lawEnglish unjust enrichment law is a developing area of law in unjust enrichment. Traditionally, work on unjust enrichment has been dealt with under the title of "restitution". Restitution is a gain-based remedy, the opposite of compensation, as a loss-based remedy...
- Duress (contract law)
- Undue influenceUndue influenceUndue influence is an equitable doctrine that involves one person taking advantage of a position of power over another person. It is where free will to bargain is not possible.-Undue influence in contract law:...
- Economic tort
- Baird Textile Holdings Ltd v Marks & Spencer plc
- Laters v Min Ltd 412 Mass 64, 587 NE 2d 231 (1992)
- Fairbanks v. Snow, 145 Mass. 153 (1887) Holmes J held that a married woman who signed a promissory note could not avoid the contract if her husband had been threatened, but she had not been aware. "No doubt if the defendant's hand had been forcibly taken and compelled to hold the pen and write her name, and the note had been carried off and delivered, the signature and delivery would not have been her acts; and if the signature and delivery had not been her arts for whatever reason, no contract would have been made, whether the plaintiff knew the facts or not. There sometimes still is shown an inclination to put all cases of duress upon this ground. Barry v. Equitable Life Assurance Sue., 59 N. Y. 587. 591. But duress, like fraud, rarely, if ever, becomes material as such, except on the footing that a contract or conveyance has been made which the party wishes to avoid. It is well settled that where, as usual, the so-called duress consists only of threats the contract is only voidable."
- Vegelahn v. GuntnerVegelahn v. GuntnerVegelahn v. Guntner, 167 Mass. 92 is a United States labor law decision from the Supreme Judicial Court of Massachusetts. It is noted for its famous dissent, written by Oliver Wendell Holmes, Jr., rather than its majority opinion.-Facts:...
167 Mass. 92, 107 (1896) Holmes J, "The word "threats" often is used as if, when it appeared that threats had been made, it appeared that unlawful conduct had begun. But it depends on what you threaten. As a general rule, even if subject to some exceptions, what you may do in a certain event you may threaten to do, that is, give warning of your intention to do in that event, and thus allow the other person the chance of avoiding the consequences." - United States v. Bethlehem Steel Corp., 315 U.S. 289, 300 (1942) (“The word duress implies feebleness on one side, overpowering strength on the other.”