![]() In certain circumstances, threats to commit lawful acts can amount to duress if coupled with an illegitimate demand. Whether or not a party was acting in good or bad faith will be taken into account by the court. On the other hand, if a party sought to profit from the uncertain economic climate by falsely overstating its financial difficulties and threatened not to perform unless the other party (whom it knew would suffer if it failed to perform) varied the terms of the contract, that may be viewed as illegitimate pressure. ensuring that the job is completed rather than the party becoming insolvent and not finishing the job) and will be enforceable. Indeed, the courts have recognised that a variation pursuant to which one party is paid more to carry out an existing contractual obligation, can bring about practical benefits (e.g. If a party were to state that, if the terms of the contract remain unchanged, it would become insolvent and thereafter be unable to perform, that is unlikely to be regarded as a threat, but rather a statement of the inevitable. regarding price, minimum payment obligations or time for delivery). This is important as the economy gradually emerges from lockdown.Īs a result of COVID-19 many parties have found themselves unable to comply with their contractual obligations, and will, when seeking to renegotiate terms to recommence operations post-lockdown, effectively be threatening to breach the contract unless the other party agrees to different terms (e.g. ![]() However, a threat to break a contract if a demand is not met may not always be treated as illegitimate. In broad terms, the party who wants to declare a contract void must show (i) that the pressure they were put under was illegitimate, and (ii) it was that pressure which caused them to enter into the contract or agree the variation.Ī threat to commit a crime, or a tort will always be treated as illegitimate. However, there are a few general principles which may provide some guidance. Given that (a) the doctrine of economic duress is, by the standards of the English common law, relatively new, and (b) the courts have maintained a fluid approach to cases based on their particular facts, there are no precise rules to this doctrine. declare it void and treat itself as no longer bound by its terms). However, the courts recognise that there may be certain circumstances where a party should be relieved from its obligation to perform because of threats it was subjected to at the time of entering into the contract or at the time of agreeing to variations to an existing contract.Įnglish law recognises three forms of duress, each of which, if proved, may enable a party to rescind a contract (i.e. ![]() ![]() DuressĪs a general rule, English law seeks to hold parties to the terms of the deals they have agreed and the courts will be slow to interfere with contracts arising out of commercial negotiations. This note considers whether a variation, or a new contract, might be challenged because of the level and/or nature of pressure exerted by one contracting party over the other. Our first note in this series considered the basic requirements for a legally binding variation to a contract. ![]()
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