Unfair Exploitation: Duress

In part one of this series we looked at undue influence. In the second part of this series, we focus on another form of unfair exploitation – duress.

Duress and undue influence are fundamentally different legal concepts even though, at first sight, they seem similar. Both doctrines exist to prevent the consequences of an unlawfully exploitative deal, but with duress cases the factual circumstances are different from those in undue influence cases.

The legal definition of duress

The law of duress will help where someone (“the victim”) is forced to do something he does not want to do as a result of threats or coercion from someone (“the coercer”). It sometimes arises as a defence in criminal matters, but in this post, we only focus on the impact of duress in civil transactions, such as gifts and contracts.

In part one of this series, we explained the types of conduct which amount to undue influence and how the amount of pressure required to demonstrate it must go beyond ordinary persuasion.

In cases of duress, it is necessary to go further still. The key question is whether the coercion in any given case is sufficient to force the victim to do something only because there’s an imminent threat of harm to them, which the victim has reason to believe will be carried out if he does not do what is demanded.

Obviously, threats of violence to the victim or someone close to him will amount to duress, as will a threat of imprisonment, but the categories are not closed, and duress can also occur in cases of extreme economic pressure.

The emphasis is on the seriousness of the threat and its impact on the victim. The conduct threatened must amount to something that would be unlawful if carried out. The victim must have a reasonable belief that he has no practical alternative but to do what the coercer wants.

The whole basis of this type of case is not that the victim is unfairly persuaded to change his mind, but that the coercion meant that the victim never really consented to the transaction in the first place. Free will is not undermined, but is prevented from operating at all, because the victim did not really have a choice.

Where a claim is based on economic duress, it is essentially the same: the victim must have been forced to enter into a transaction because he had no practical alternative.

Practical examples of duress

The classic case of duress is where the coercer threatens physical harm to the victim or someone close to him if he does not agree to sign a contract or give the coercer money or another asset. Threats to withhold food or medicine, or to put an elderly person into a care home, fall into the same category.

Economic duress may occur where one party to a contract threatens to breach the contract unless the other party agrees to different, less favourable terms to them. For example, there is a contract between Party A and Party B for Party B to provide components to Party A who in turn has agreed to make a product for Party C using said components. At the last moment, Party B demands an extra payment from Party A not included in their contract before Party B will deliver the components, knowing full well that Party A will be under pressure to make said payment to ensure it in turn does not breach its own contract with Party C.

Equally, a threat to reveal valuable, sensitive commercial information unless money is paid, or some other benefit provided, may also amount to economic duress.

What is the difference between commercial bargaining and economic duress?

There is no single answer to this question and in all cases of unfair exploitation, the Court will look at all the circumstances of the case. Not every hardnosed deal which is disadvantageous to one party is the result of duress. If Party A lends money to Party B but then falls on hard times and is desperate for money, Party A may be forced to accept repayment of less than the whole sum due from Party B. This may or may not amount to economic duress. Much will depend on what Party B knew about Party A’s financial background, the amounts at stake and numerous other details of the case.   One relevant consideration might be the availability of other financial help to Party A, just as in a supply contract, the availability of components from another supplier would be relevant.

For many years, it was thought that the claimant in a case of economic duress must show that the threat made was to do something unlawful, but in recent years, the Courts have taken a broader view, suggesting that both the nature of (i) the pressure and (ii) the demand will be considered.

Any form of unlawful action will automatically be regarded as illegitimate, but on the other hand, the fact that the threat is lawful does not automatically make the pressure legitimate. For example, if a blackmailer threatened to reveal compromising information to a third party unless he was paid, the coercer might well have the right to reveal the information, or even a moral duty to do so, but the demand for money would make the pressure unlawful.

 The importance of protest

An important element in a case of duress is that it must be clear that the victim did not want to do what was demanded of him and protested, either at the time or shortly afterwards, even though the transaction may not come to light immediately, or indeed until after the death of the victim.

Another relevant factor might be the availability of independent advice.  Later in this series, we’ll explore the relevance of professional negligence claims in this area.

What has to be proven in a case of duress?

As in all cases involving unfair exploitation, the person challenging the transaction must demonstrate the facts of what happened. In a case of duress, the challenger also must demonstrate the nature of the threat why this amounted to duress in relation to this particular victim, and that the victim protested. This can involve quite deep investigations into the background of the victim and the transaction in question, particularly where the victim has died.

If it is possible to prove duress, the Court will prevent the coercer from enforcing the challenged transaction and will set it aside. It may be difficult, however, for the Court to put the parties back where they were before the transaction occurred if, for example, the property has been dissipated or sold to an innocent third party. In these circumstances, damages may be the only available remedy, and it may then be necessary to provide valuation evidence to show the value of what was lost.

Does ‘duress’ require a relationship between the parties?

One major difference between undue influence and duress is that there need not be any particular type of relationship between the parties, or indeed any relationship at all, but this does not mean to say that duress cannot occur where there is an existing relationship, whether personal, commercial or professional, or where the coercer is a trustee.

In all, except very simple circumstances, the underlying facts of a case may be very complex and although undue influence and duress are different, it occasionally happens that both legal concepts are involved in a single case involving unlawful pressure, which turns into coercion. In these circumstances, it may be necessary to present both arguments to the Court in order to ensure that all the bases are covered. The Court can only decide the case which is in front of it. Therefore, as the bases of the two concepts are so different, failure to prove duress, even if there was evidence of undue influence, might prevent the Court from making a finding in the victim’s favour if a claim for undue influence had not been raised and vice versa.

There will, however, only be one award of compensation for the losses that have in fact been incurred.

Cases of duress are much less common than cases of undue influence, but in the next post in this series we will turn to deal with a more common form of unfair exploitation – breach of trust.

If you have concerns about unfair exploitation, either undue influence or duress – whether involving financial transactions, wills, or other suspect arrangements – taking early action is crucial. Edmonds Marshall McMahon has extensive experience in uncovering and challenging exploitative conduct. 

Contact us today to discuss how we can help you protect your rights or those of a vulnerable person.

Written by Julie Bond and edited by Liina Tulk.