Economic Duress

3710 WordsMay 8, 201315 Pages
Introduction A contract is voidable or vitiate under several situations, economic duress is one of the examples. Economic duress is a vitiating factor in a contract as it is a common law defense. When there happens to be an economic duress in a contract, the party can make the contract voidable if the requirements are fulfilled. One needs to be noted that the contract is only voidable instead of being voided completely. A contract has no legal force or effect at all if it is being voided. However, a contract that is voidable simply means that the contract is still legally binding until avoided by the party. The affected party may cancel the contract and claim for remedies. Kerr J proposed that the contract can be set aside when there is…show more content…
Pressure is a natural part of the bargaining process. See discussion by Tipping J in Attorney-General for England and Wales v R [2002] 2 NZLR 91, para 62. However, with the changing of the society, the courts feel that there is a need to expand the doctrine to protect the victim who has a lower bargaining power. It is clearly unfair for one party to be forced to enter into a contract by an illegitimate pressure. The doctrine of economic duress was first recognized in the case of The Sibeon and The Sibotre. Occidental Worldwide Investment Corporation v Skibs [1976] 1 Lloyds Rep 293 However, the doctrine of economic duress is still developing through case laws as this doctrine has been established for over two decades only. Hence, there are some problems in this doctrine as it is still developing. What amounts to Economic Duress? Pao On v Lau Yiu Long [1980] AC 614 is the leading case in the doctrine of economic duress. This case has technically established the doctrine of economic duress. Lord Scarman in this case has stated the requirements that amounts to economic duress. Firstly, it must be proven that there is an illegitimate pressure exerted by the party to the victim. Secondly, it is the illegitimate pressure that causes the victim to enter into the contract. Lastly, the victim has no practical choice other than agree with it. This case was then being affirmed in the case of DSND Subsea Ltd v Petroleum Geo Services ASA
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