Economic Duress

Usually you have to analyze consideration first

Unlawful act duress
1. Illegitimate pressure--including crimes and torts, threatened breach of
contract can be illegitimate pressure.
“Generally”, a threatened breach of contract may constitute duress, “particularly” if
the party making the threat knows that there would be a breach of contract(Kolmar
Group AG v Traxpo Enterprises Pvt Ltd ).

1. But compare genuine disputes over existing contractual obligations leading to a

settlement agreement (e.g. A demand 100$ from B, B mistakenly believed that
they were under no obligation to pay--a threat not to pay-->then under the
settlement agreement, B pay A 50$-->likely no duress)
2. Practical alternative
1. As outlined by Burrows LJ in Times Travel, the third element to be
established in order to succeed in a claim for economic duress is that the
claimant must have had no reasonable alternative to giving into the threat.
2. In Pao On, where C could have seek legal remedy through litigation,
there was reasonable alternatives.
3. Atlantic Baron: need to use the tank so suing it not practical alternative

4. In B &S Contracts and Design, Kerr LJ stated that: “it will only
constitute duress if the consequences of a refusal would be serious and
immediate so that there is no reasonable alternative open.”

5. Party has (NO) practicable alternative

1. Here, XXX may argue that they had no practicable alternatives.
Considering…(they would’ve caused grave damage to
reputation/exposed to heavy claims in damage)/they provided a
reasonable, alternative course of action to XXX, being...

2. However, XXX may contend that XXX had the alternative to …/the
alternative is not practicable...

6. Causation
Whether the pressure was a significant cause of …
1. To add onto Goff J’s analysis of economic pressure, as a significant cause to
induce the other party to contract, Huyton SA outlines that for economic
duress, XXX must show that “but for” the illegitimate pressure by XXX,
the agreement would not have been made.

2. Pao On outlines several factors to determine whether the pressure is decisive to

 the agreement, including 1) Whether XXX protested, 2) Whether XXX had
practicable alternatives, 3) Whether XXX was independently advised, 4)
Whether XXX took steps to avoid the contract after contracting (eg. Don’t
return their emails)
1. Mention factors that benefit your argument

3. Presently…. , and hence, the pressure likely was / was not a significant
cause of …
Stricter test of causation compared with other forms of duress
1. Pressure must be “significant cause”:
(The Evia Luck)
2. Possibly “but for” test applies:
Kolmar Group AG

On the other hand, Mance J observed in Huyton SA v Peter Cremer, a

simple application of the ‘but for’ test ‘could lead too readily to relief being
granted’. But it is important to note that Mance J also had regard to the
other elements of an economic duress claim, in particular the availability of
alternative forms of redress. Thus it may be that it is these other elements
that will keep the doctrine of economic duress within reasonable bounds
and that there is no need to depart from the more traditional ‘but for’ test in
this context.

3. Whether these formulations provide for a different test (and if

so which formulation applies) left open by HKCA:
Esquire (Electronics) Ltd v Hong Kong and Shanghai
Banking Corp Ltd

Lawful act duress

1. Two situations where the lawful act can be duress
1. D use knowledge of criminal activity of P to obtain personal benefit
(blackmailing)
2. Def who is civilly liable to pl, deliberately manoeuvres pl into position of
vulnerability by illegitimate means to force pl to waive claim--(Times
Travel:came very close to (b), but no manipulation--P’s position is the result of market)

Progress Bulk Carriers Ltd v Tube City (lawful act duress succeeded)
C chartered vessel to D then sought to provide diff vessel. C originally said
they would compensate def but at last minute, reneged and required def to
waive claims, otherwise would not provide [Link] was economic duress
since C manoeuvre D into vulnerable position by initial breaking of
contract and misleading conduct in negotiations.

HK position: Lawful act economic duress exists under HK law: Fine Vision
Opportunity III Ltd v Xinyuan Real Estate Co Ltd

The remaining two requirements are same as above.

3. Remedy: recission; Bar to recission
If the delay doesn’t bar the recission: It’s argued that the present case can be distinguished from the
Atlantic Baron. Although P wait for...but it’s necessary for P to keep a good relationship with D
during....to ensure...
Undue Influence

Step 1 (after the topic sentence)

Undue influence is an equitable doctrine that can render the contract voidable. The
issue is
whether the innocent party can raise the presumed undue influence so that the BOP
shifted on the stronger party to show that P exercised free and independent
judgement in entering into the contract.(e.g. received independent legal advice,
though it’s neither conclusive nor necessary: Inche Noriah v Shaik Allie Bin
Omar)
Two requirements for presumed undue influence:
1. Relationship of trust
1. The first is the existence of a relationship between A and B by virtue
of which B reposed trust and confidence in A, or as a matter of law
to have done so (Nature Resorts).
2. A relationship between parties is a key part to establish presumed
undue influence, in which the claimant must show both influence
existed and that it had been exercised (Howes v Bishop).
1. In that the claimant has to prove that they had “no means of
forming independent judgement” (Bank of Montreal v
Stuart)

1. Relationships that fall under Class 2A are those where “the law
presumes, irrebuttably, that A had influence over B” (Etridge)
1. These include: parent and child, guardian and ward, religious
advisor and disciple (Allcard), doctor and patient, solicitor
and client, fiancés
2. These DON'T include: husband and wife (Ulrich), employer
and employee, fiduciary relationships (those that give rise to
duty of disclosure, like agents)
Allcard v Skinner: Although there was no explicit pressure, but P was absolutely in the power of
the lady superior and she cannot seek external advice due to the rule.
2. Transaction not readily explicable on ordinary motives
1. The second requirement being that the transaction must be one
which “calls for explanation” or one which “is not readily
explainable by the relationship between parties” (Nature
Resorts)
1. Note: “call for explanation” is not the same as “manifest
disadvantage”. A substantial transaction may call for
explanation, even if the claiming party indirectly benefits
 from the influence. (Macklin v Dowsett)
2. But the disadvantage is relevant in establishing the
presumption

Step 2 If the presumed undue influence cannot be established, try to establish

actual undue influence

1. “Actual undue influence refers to where the person alleging undue influence
relies on direct proof (of A’s conduct, within a relationship with B, which
led to B not exercising a free and independent judgment)”: Nature
Resorts

2. Li Sau Ying: when the relationship and the call for explanation has been
satisfied, often the court will be satisfied on the balance of probabilities that
there was actual undue(of X the other party can put foward evidence to
counter that inference, and the court have to assess all the evidence as a
whole).

Third party undue influence

A contracts with B because of the undue influence of C
A can rescind as against B if(any of these):
1. B has notice of undue influence, or
2. C was acting as B’s agent, or
3. B is a volunteer (ie where B provided no consideration)
Step 1: whether the D was put on notice
The notice can be either actual or constructive. B is put on notice where
1. B has knowledge of facts indicative of impropriety (Bank of New
South Wales v Rogers), or
2. B is aware that relationship between A and C is a non-commercial one
(Etridge).

In Etridge, the proof that wife placed trust and confidence in husband and that
wife confers substantial advantage to husband usually not sufficient for court to
draw inference of actual undue influence. Because conferring adv for husband’s
business is readily explicable.
1. But there could be UI if husband had taken unfair adv of his influence--
such as giving inaccurate explanaions to his business or prefer his own
interest over the wife.
2. Hasidic jews couple is an exception, where the wife recieved servitute
education and never question husband’s decision

Step 2: if so, whether D took reasonable steps to bring A

to understanding of implications of transaction?

For examples, explaining transaction and risks in separate meeting with wife, or
requiring wife obtain independent legal advice and solicitor confirms that they have
duly advised wife.

Li Sau Ying: If the bank was not specifically aware of their relationship, it’s not
obliged to inquire. Also the P was adviced in relation to the mortgage.

Unconscionability

Step 1: (after the topic sentence)

Unconscionability is an equitable doctrine as basis for regarding contract voidable.
But unfairness in terms(Pigott) or inequality in bargaining power(Amadio) are not
themselves sufficient to establish unconscionability, although the are relevant
factors.

Step 2: state the requirements

1. Contract is voidable on the basis of unconscionability where a party has a
special disability or is in a position of special disadvantage in dealing with the
other party so that there is inequality;
1. poverty, sickness, age, illiteracy, inexperience, lack education

1. and that disability was known to the other party

1. actual or constructive knowledge. Sufficient if D was aware of
possibility that P has disadvantage or is aware of facts that would raise
that possibility in the mind of any reasonable person.

2. who unconscientiously takes advantage of their superior position in

obtaining the assent of the weaker party to the contract(Commonwealth v
Amadio, accepted in Ming Shiu Chung)
1. whether def explained transaction to enable pl to form judgement
2. whether def ensured pl obtained legal advice
3. whether any benefits of transaction to pl (more disad to P, more
unconscionable)
In Amadio, the bank manager acted unconscientiously because he knew
1. (1)no person other than the son will explain the document to Amadio
(no reasonable basis for assuming they had adequate advice) and
2. (2)Amadio’s ages poor English
3. (3)the Amadio will face serious consequence if the mortgage needed to
be enforced;
4. (4)the poor financial status of son’s business.
In Piggott, the D acted unconscionably to procure Miss P to sign the terms that
couldn’t be accepted by Mr P.
In Lo Wo v Cheung Chan Ka Joseph, the D acted unconscionably because
 1. aware of special disability: age, inexperience (simple country folks)
2. misleading statements (the highest price we can offer)
3. unfair tactics (dangling the cashes)
4. serious disad terms for P
5. no independent advice

Unconscionable Contract Ordinance

1. (cap 458)
The prerequisites for the application of s.5:
[Link] for sale of goods or supply of services,
[Link] party deals as consumer (and see s 3)
[Link] (or part of contract) unconscionable in the circumstances relating to
contract at time it was made

Court’s powers where s.5 applies(Consequence):

[Link] to enforce contract
[Link] contract without unconscionable part
3,Limit application of, or revise or alter, any unconscionable part
2. s6 factors whether unconscionable
1. parties respective bargaining power
2. whether terms not reasonably necessary for protection of
legitimate interests of other party
3. whether consumer could understand documents
4. whether undue influence or pressure exerted
5. market price of contract

Relevant case law: Chang Pin Yin v Bank of Singarpore:The factors listed in s.6 are not to be
applies mechanically, and other factors can be taken into account.
For example, the clauses exempting bank from liability were unconscionable. While it’s reasonable
to have provisions in the contract to the effect that the bank's not going to be liable merely
because the customer suffers losses on their investments, it's not reasonable where there's
blanket protection given to the bank.

Standards of contractual duty and Classification of

the terms
Standards of duty
o Usually strict liability (liable regardless of fault or intent)
o Sales of goods: merchantable quality

Classification of terms
If the parties designed a term as condition:
o There will be a strong presumption that the term is what the
parties designated. Nonetheless, the express classification
of a term as a “condition” is not dispositive. According to
Schuler v Wickman, if a term can be broken in a way
which will cause only trifling loss (if any), the court may hold
that its breach does not justify termination, and will not
 classify as a condition.

o Generally, only if there is a contradiction(HK Fir Shipping) or

when the contract says all terms/no terms are conditions will
the court reject the designation (Rice v Great Yarmouth)

o Contradiction: for example, if the contract says there will be

a remedy in case of a breach of the condition - if condition
then terminate after breach = cant have remedy.

If the parties didn’t say anything about the nature of the terms:
o In Grand China Logistics Holding (Group), Hamblen LJ
stated that ‘the modern English law approach to the
classification of contractual terms is that a term is
innominate unless it is clear that it is intended to be a
condition or a warranty’.

o General tests as to whether term is a condition still come to

play:

o Importance of term to promisee; whether term goes to the

root of the contract

Breach of contract

Anticipatory breach

When one party indicates that they are unwilling or unable to

perform the obligation, and the proposed breach, it occurs would
give rise to a right to terminate.

Two options for the innocent party

o Accept the repudiation and terminate immediately
(Hochster)
o Keep the contract on foot (subject to some exceptions)

Step 1: whether there was repudiation?

The general test (see good notes 1002 Anticipatory

Breach, how to establish anticipatory breach):
o Renunciation
o No express refusal (Universal v Citati, also see Chau Keh
 Lung below)
o Did something that makes their performance impossible
(Universal v Citati)

Issue: Whether the non-payment constitutes repudiation?

 Firstly, whether the non-payment is a breach of condition or
serious breach of intermediate terms? Yesrepudiation
 Secondly, if not, do the circumstances of breach show an
intention not to be bound to future obligations?
Yesperspective breach (Creatiles v To’s)

Step 2: whether the repudiation was accepted?

(can only be accepted?)

Issue: Whether there was repudiation (supplied the general

and whether the repudiation has been accepted?
test above)
 1: any repudiation?
 (note in Chao Keh Lung there was no repudiation on the
part of D because he still have time to get 30,000 shares)
 Repudiation is words or conduct evincing an intention not to
perform, or express declaration that party is or will be
unable to perform their obligations under the contract in
some essential respect(i.e. breach of condition/serious
breach of intermediate term)
 Short of an express refusal or declaration, the test is
whether the actions of the party are such as to lead a
reasonable person to conclude that they no longer intend to
be bound by the contract.

 2: acceptance of the repudiation

 On the facts of Chau Keh Lung, the non-payment of P is
not an unequivocal acceptance of the repudiation
(there’re other potential reasons for non-payment, also they
didn’t confirm that D has sold the shares to other party)

Option 1: Keeping the contract on foot

Affirmation:
o When the innocent party to a breach is entitled to
termination, they may give up their right to terminate and
elect to affirm the contract (The Kanchenjunga).
Affirmation is unequivocal act indicating that the innocent
party has elected to proceed with the contract. Generally,
affirmation can only occur if innocent party has knowledge
of facts giving rise to breach: Peyman v Lanjani.

o But there may still be affirmation (even without such

knowledge) if a reasonable time has passed: Kosmar v
Syndicate.
 o Merely requesting other party to perform does not
necessarily mean there is affirmation: Yukong Line v
Rendsburg.

o Where delay in termination, there is no implicit affirmation

of contract unless the delay is consistent only with
affirmation (Cheung Ching Ping v Allcom, where P wrote
to D to enquire the status government approvals. P hadn’t
affirmed the contract and were entitled to terminate).

Issue: Where repudiation not accepted, 2 possible

scenarios
 The repudiatory party may retract repudiation and perform
when the time for performance arrivesno damages for
the innocent parties.
 That is because you have to terminate first before you can
sue for damages for anticipatory breach.
 If the contract was frustrated before the time of
performance arrivesno breach (Avery v Bowden).

Elect to keep the contract on foot

Generally, the innocent party may elect to continue with
performance of contract (White and Carter, where P displayed
the ads and sue for the price when D no longer want the renewed
contract).

But the innocent party is not entitled to continue when:

 The performance by innocent party is dependent on
cooperation of party in breach (Hounslow London
Borough Council v Twickenham).
 Or, the innocent party has no legitimate interest in
completing the contract. The damages are adequate and
keeping contract alive is wholly/extremely unreasonable or
perverse (Isabella Shipowner v Shagang Shipping,
where where shipowner was entitled to kept the contract (D
didn’t want the ship anymore) on for for 9 months, but if he
kept the contract for 7 years, that’s unreasonable).

Option 2: Seek immediate remedy

Elect to discharge
● If the innocent party wants to terminate, there have to be
words or conducts clearly and unequivocally convey to the
other party that the innocent party is treating the contract
at an end (Vitol SA).
 Loss the right to terminate
 Delay
 (see good note 1002 loss the right to terminate)

Statute
s.13 SOGO

■ The innocent party may elect to treat the breach of condition as a breach
of warranty, and not as a repudiatory breach
■ Innocent party may treat the breach as a breach of warranty, but the term
will continue being a condition (Wallis v Pratt)
■ TLDR: Same effect as affirmation

Actual Breach

Step 1: whether there is right to terminate

Classification of terms

Establish the breaches

For actual breach, the test for repudiation is whether there is a
breach condition or serious breach of innominate terms.

Whether there is right to terminate?

If not, the innocent party is only entitled to damages

Special Issue: wrongful termination

Damages

Step 1: type of the damages

Assessed at the time of breach (Johnson v Agnew)/when

performance should have been made (Millet v Van Heck)

The remedy of damages is to put the plaintiff economically in the

position they would’ve been if the contract was performed
(Victoria Laundry).

Expectation damages
o Difference in values approach (See Good note 1002)
 o Cost of cure

Reliance damages

o It may be more preferable for the claiming party to recover

on the reliance measure rather than the expectation
measure where
o The loss of profit is hard to prove or speculative
 Under McRae v CDC, the plaintiff was entitled to recover
damages for expenses incurred and wasted (i.e. travelling
cost, value of coal, crew wages, etc.) in reliance on
commission’s promise that a tanker existed at specified
positions (when it did not actually exist)
o The bargain was a losing one for the [Claiming party] (promisee
plaintiff)
 However, [Claiming party]’s expenditure is recoverable
only when the likely gross profit of [Breaching party] is at
least equal to their expenditure. (Establish that the deal is a
bad bargain only if breaching party’s GROSS profit > your
expenditure /when expectation measure is negative)
o Nonetheless the burden of proof lies with [Breaching party] to
show that their likely gross profit does not exceed [Claiming
party]’s expenditure (showing deal is not a bad bargain for
promisee/plaintiff)

Expenses before contract formation:

● As evinced in Anglia v Reed, the claimant may recover expenses incurred before contract
formation if it was foreseeable by the parties that the expenses could be wasted in the
event of a breach. Here, it can be contested that [Party name] will be entitled to recover
their expenses incurred before contract formation, as both parties had foreseen the expenses
could be wasted in the event of a breach.

Cannot place party in better position:

● Under Haulage v Middleton, the reliance measure cannot put a party in a better position
than if the contract had been properly carried out(P would not get fixtures back even if
there were no breach). The same could be said here, XXX
● Distinguishing Haulage and Anglia: It was equally likely to be wasted if there had been
no breach, because the plaintiffs wanted to get the defendant out and could terminate the
licence at quite short notice. A high risk of waste was from the very first inherent in the
nature of the contract itself, breach or no breach.

Restitution damages

● Under the restitution measure of damages, [Claiming party] may be able to recover the
 value of any benefit conferred on the promisor under the contract prior to its termination.

● If benefit conferred to BP = money paid:

○ However, as established in Giles v Edwards, [Claiming party] can only recover
the benefit conferred if there is a total failure of consideration (no performance,
you’ve gotten nothing promised to you by promisor), if the benefit consists of
money.

o The situation in which a claimant will prefer restitution measures is where they have
entered into a bad bargain.

○ Suppose a party enters into a contract under which he pays £500 for goods that are
worth only £300. In breach of contract, the defendant fails to supply the goods. In
such a case the claimant is not confined to the protection of his performance
interest (£300) but can claim the return of his £500 on the ground that it was paid
for a consideration which totally failed → McKendrick explanation

● If benefit conferred to BP = goods / services:

○ From Colburn, [Claiming party] may recover the reasonable value of
[goods/service delivered] under a contractual claim or restitutionary claim. (no
need for total failure of consideration) (Restitutionary claim = quantum meruit /
quantum valebat claim)The same could be said for [Claiming party]
○ Here, where XXX…
● Under Lodder, a claimant may recover a sum in excess of the contract price under a
restitutionary claim. The same could be said for [Claiming party] here, where XXX…
(contractor wrongfully excluded from site after part performance had been rendered entitled
to treat agreement as at an end and to recover on quantum meruit work and labour done and
materials supplied even if he would not have turned a profit on the project.)

Non-pecuniary loss

● General rule in law is that emotional losses are generally not recoverable.
○ In Addis v. Gramophone, a manager whose employment was wrongfully
terminated not entitled to damages for the ‘harsh and humiliating’ manner of his
dismissal
○ In Watts v Morrow, it was ruled that contract-breaker is not in general liable for
any distress / frustration / anxiety / displeasure / vexation / tension / aggravation
which his breach of contract may cause to the innocent party.
○ Here , [breaching party] is not responsible for [innocent party’s] [kind of non-
pecuniary damage]

● However, some examples are layed out in Farley v. Skinner where non-pencuniary losses
could be claimed

1. Physical inconvenience

● As evinced in Farley v Skinner / Hobbs, damages may be awarded for

physical inconveniences. Here, XXX (Hobbs: Family had to walk home
 under heavy rain for long distance due to railway company transporting
them to the wrong station)

2. Enjoyment is an important aspect:

● From Farley v Skinner / Jarvis v Swan, damages may be awarded for

non-pecuniary losses if it is an important purpose of the contract to
provide enjoyment or peace of mind. The purpose does not have to be
the entire object of the contract (Farley v Skinner). In the present case,
XXX (Jarvis: Claimant entitled to damages for disappointment suffered
when the entertainments provided were wholly inferior to those described
in the brochure) (In Farley the guy specifically told the surveyor to report
on aircraft noise that made it relating to the peacefulness of the
property)
● Reasonable care undertaken / no guarantees by D does not matter:
As established in Farley v Skinner, it also does not matter that the
defendant undertook reasonable care to affirm that peace of mind is not
disrupted and did not guarantee the achievement of a result. Presently,
XXX

3. Loss of Publicity and Reputation:

● In Marbe, it was held by the court that the innocent party was entitled to
damages for loss of publicity and reputation, as well as libel. (Marbe:
Plaintiff did not only want money, but also publicity and reputation,
which is the reason why she entered into the contract)

Step 2: causation

Where there are multiple causes, we look at whether breach was

an effective cause (County v Girozentrale). It’s possible to apply a
common sense approach to causation (March v E&M Stramare), or
“but for” test (Reg Glass v Rivers Locking Systems).

Step 3: remoteness

Starting Point: applying Hadley v Baxendale (if the issue is not contentious, then
this will be sufficient)
o Victoria Laundry: a boiler maker knows more than a deliverer. P can
recover losses of business for normal profits but cannot recover losses
arising from a highly lucrative contracts (D x have knowledge of the special
contract).
o Koufos : where there was a transportation of commercial quantity of goods,
 even the carrier ought reasonably contemplated that P would suffer losses if
the sugars were not delivered on time.

In the situations where the distinction between normal and special losses are not
straightforward, we may
o apply Parsons Livestock, where it was held that if the nature of the loss is
reasonably foreseeable, then D is fully liable for the whole extent of the
loss.

o But if it’s something that you can’t reasonably foresee, should the D be
fully liable? Bring in the assumption of liability test.

o Transfield shipping: It’s impossible for the charterer to quantify the loss of
profits on subsequent charter, while the losses caused by fluctuations of
market price. The latter is quantifiable, and the D assumed the liability of it.

Where necessary, then specifically consider whether D can reasonably be expected

to have assumed responsibility for loss in question (or use it as a cross-check after
applying Hadley v Baxendale, 2 methods should yield the same result)

 Richy Bright: The failure of Richly Bright to complete its own contract of
purchase is not something that can be fairly and reasonably considered as
rising naturally in the ordinary course of things from De Monsa's failure to
complete. Assumed responsibility: D didn’t know how many sub-sales up
there, cannot quantify the losses.

Step 4: Mitigation

If the P unreasonably fails to mitigate loss, P is not entitled to

recover loss that would not be suffered if there was mitigation.
o It’s unreasonable for the employee to decline alternative
employment after the wrongful dismissal
o Here, XXX has an alternative choice of same/better terms
being….