law of contract - sydney.edu.au 2016-17/lpab... · redgrave said that the rest arose from other...

LAW OF CONTRACT

LPAB – Summer 2016/2017

Week 7

Alex Kuklik

Lecture 7Vitiating Circumstances

• (a) Misrepresentation

– Text: Radan & Gooley, Chapter 14

– *Balfour & Clark v Hollandia (1978) 18 SASR 241 (R&G(C) [14.2])

– *Edgington v Fitzmaurice (1885) 29 Ch D 459 (R&G(C) [14.3])

– *Smith v Land and House Property Corp (1884) 28 Ch D 7 (R&G(C) [14.4])

– *Redgrave v Hurd (1881) 20 Ch D 1 (R&G(C) [14.5])

– *Nicholas v Thompson [1924] VLR 554 (R&G(C) [14.6])

• (b) Mistake


• (1) Common Mistake

– McRae v Commonwealth Disposals Commission (1951) 84 CLR 377 (R&G(C) [16.2])

– Bell v Lever Brothers [1932] AC 161 (R&G(C) [16.3])

Vitiating Factors• (2) Mutual Mistake

• (3) Unilateral Mistake

– Taylor v Johnson (1983) 151 CLR 422 (R&G(C) [16.7])

– Cundy v Lindsay (1878) 3 App Cas 459

– Lewis v Averay [1972] 1 QB 198

• (c) Duress


– Universe Tankships Inc of Monrovia v International Transport Workers

Federation [1983] 1 AC 366

– Barton v Armstrong [1976] AC 104

– Crescendo Management Pty Ltd v Westpac Banking Corp (1988) 19 NSWLR 40

– North Ocean Shipping Co v Hyundai [1979] QB 705

– *ANZ v Karam (2005) 64 NSWLR 149

Vitiating Factors

Aims and Objectives

This lecture (and the next) deals with the topic of vitiating factors. This topic relates to factors that affect the quality of the consent given to the entry into a contract. In most cases the consequence of the relevant factor is that the contract is voidable. In some situations, such as of mistake at common law, the contract will be void as from the very beginning (ab initio).

The distinction between voidable and void ab initio has particular consequences for the rights of third parties to the contract who have innocently acquired property that has in the meantime passed between the parties to the contract. This lecture deals with three vitiating factors, misrepresentation, mistake and duress.

Vitiating FactorsMisrepresentation

• Pre-contractual representations may become part of the contract of a contract that is subsequently made, or a collateral contract (as we have seen in previous lectures).

• If such statements are not contractual terms, they may be misrepresentations.

• For a pre-contractual statement to constitute a misrepresentation at common law, it must be a false statement of fact that induces the representee to enter into the contract.

• A misrepresentation may give a right to rescission (the right to rescind the contract).

• The plaintiff must show that before the contract was entered into, representor directly or indirectly made a false statement of fact which was intended to induce the representee to make the contract, and it did in fact operate to induce the representee to make the contract. However, it need not be the sole inducement.


• Prior to the fusion of common law and equity, both had jurisdiction over misrepresentation, and rescission was available on a much more liberal basis in equity than at law, and the common law courts could award damages for fraudulent misrepresentation, that equity usually did not. Now the differences are largely historical.

• Types of misrepresentation:

– Fraudulent (damages available)

– Innocent (rescission available but not damages)

– Negligent (i.e. negligent misstatements since: Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465.

• A misrepresentations may also give rise to a statutory remedy, such as under the ACL, or because allowing the representor to rely upon the misrepresentations is unconscionable of unfair.


• Elements:

– A statement of fact.

– That is false.

– It must have been intended to induce and did actually induce the entry into the contract.

– Materiality (is this a separate element)?

Vitiating FactorsMisrepresentation – statement of fact

• It must be a statement of past or present fact.

• Traditionally it did not apply to a mistake of law, but this may no longer hold. And even if it does, there are qualifications.

• Advertising ‘puffery’ cannot amount to a misrepresentation.

• Promises or assurances as to the future are not statements of fact for the purpose of misrepresentations.

Vitiating FactorsMisrepresentation – Statement of fact

Balfour & Clark v Hollandia (1978) 18 SASR 241 (R&G(C) [14.2])

• Couple bought a house from defendant. The defendant’s agent said that they could borrow from the group with a minimum deposit and get a two year loan. Also said that after two years they could rollover the loan with Hindmarsh Building Society for up to 90% of the value.

• Two months later they complained that there had been a fraudulent misrepresentation by the agent who knew that they couldn’t afford the loan with Hindmarsh. They sought to set aside the purchase.

• Was the agent’s statement of assurance about the future or a statement about a present fact?


• Balfour & Clark v Hollandia (1978) 18 SASR 241 (R&G(C) [14.2])

Held:

• Statement by agent regarding the future availability of a roll-over loan was a statement of present fact because it misrepresented the bank’s current lending policy.

• Also held to be a statement of the agent’s current state of knowledge of the policy.

• Tense of the expression of the statement is not determinative: even though expressed in the future conditional tense - grammar is not decisive. It is really representative of a present fact.


• Balfour & Clark v Hollandia (1978) 18 SASR 241 (R&G(C) [14.2])

Held:

• Statement can be as to the present existence of an intention, belief or state of knowledge on the part of the promisor.

• It is a question of substance or effect, not merely one of grammar

Vitiating FactorsMisrepresentation – statement of intention

*Edgington v Fitzmaurice (1885) 29 Ch D 459 (R&G(C) [14.3])

• Fitzmaurice and others issued a prospectus for debenture subscriptions. The document referred to a recent purchase of property and stated that the company was raising capital to develop and renovate the new property. Other information in the document implied that the debenture holders would be given a charge over the property.

• Edgington invested £1500.

• The bonds created no charge over the property and the board used the money to pay existing debts rather than to develop the property.

• Was there a misrepresentation?

Vitiating FactorsMisrepresentation – statement of intention

*Edgington v Fitzmaurice (1885) 29 Ch D 459 (R&G(C) [14.3])

• A mere suggestion as to a possible use of money is not a misrepresentation.

• But “the state of a man’s mind is as much a fact as the state of his digestion.” It is difficult to prove what the state of a person’s mind is at a particular time, but if it can be ascertained, it is as much a fact as anything else.

• False statement of intention can be a misrepresentation. Here the true object of the directors was not that which they stated in the circular.

• Did it induce the plaintiff to pay? It will be material if it was actively present in his mind when he decided to pay the money. Even if he also made a mistake himself. Here it was material and it influenced him.

Vitiating FactorsMisrepresentation - opinion

*Smith v Land and House Property Corp (1884) 28 Ch D 7 (R&G(C) [14.4])

• Smith listed a hotel for sale and engaged an auctioneer. It was promoted as having a ‘most desirable tenant’ paying rent of £400. It was passed in, but the Corp made an offer and exchanged. Before completion it was revealed that the tenant was bankrupt and had been paying rent irregularly. They refused to complete on the basis that they would not have entered into the agreement had they known the truth about the tenant.

• Was the auctioneer’s opinion about the tenant capable of being a misrepresentation?

Vitiating Factors• Misrepresentation - opinion


• Statement of opinion may amount to statement of fact, if the facts are known only to one party, because he impliedly states that the facts would justify the opinion.

• It is different if they both have same knowledge of the facts.

• Here, the owner knows everything and the purchaser nothing. But what does ‘most desirable tenant’ mean? It is not a guarantee that the tenant will continue to pay rent.

• But it is an assertion that nothing has occurred in the relations between landlord and tenant which would make the tenant unsatisfactory. That is an assertion of a specific fact. Here it was a misrepresentation.

Vitiating FactorsMisrepresentation - opinion


• Did it induce the purchase? Although authorities can assist, it is a question of fact to be decided in the circumstances of the particular case. Here the chairman gave evidence that it did induce him to purchase. The judge believed him and the Court, whilst it may not have been convinced, decided not to differ from the judge, who saw the witness and believed him.

Vitiating Factors• Misrepresentation - falsity

• The representation must be false. This generally requires some positive statement or conduct by the representor. This may be as little as a nod or wink or shake of the head, but there is generally no obligation on a person to disclose facts.

• However, if it is an agreement uberrimae fidei (utmost good faith) then there may be an obligation to disclose material facts.

• Entry into insurance contracts requires the insured to disclose all facts that are material to the insurer’s decision to accept the risk. This is now regulated by ss 21, 22 of the Insurance Contracts Act 1984 (Cth).

• If a statement is only partially true or a distortion of the truth, the failure to disclose the whole truth will be a misrepresentation.

Vitiating Factors• Misrepresentation - falsity

– e,g, a statement from a vendor that property was ‘fully leased’ was held to be a misrepresentation in circumstances where several tenants had given notice, even if strictly true: Dimmock v Hallett (1866) LR 2 Ch App 21

• If a statement is true at the time, but becomes false due to a change in circumstances, the maker of the statement has to disclose the changed circumstances because the time at which the representation is to be evaluated is when the representee enters into the contract: Brownline v Campbell [1880] 5 App Cas 925

Vitiating FactorsMisrepresentation - inducement

*Redgrave v Hurd (1881) 20 Ch D 1 (R&G(C) [14.5])

• Redgrave, a solicitor, placed an ad for a partner ‘who would not object to purchase the advertiser’s suburban residence, suitable for a family, value £1,600. Redgrave told Hurd that the practice was making £300 – 400 per annum over the previous 3 years. When Hurd asked for accounts, they showed that it was making £200. Redgrave said that the rest arose from other business that had not been included in the summary, and he gave him some other books and diaries. Hurd perused these but did not look at them closely.

• After he paid a deposit and moved in, Hurd realised that the practice was worthless and that the other business didn’t bring in much at all. He gave up possession and refused to complete.

• At trial it was held that there was a fraudulent misrepresentation, but that Hurd had not relied upon it because he had been careless in giving up his opportunity to check the books properly.

Vitiating Factors• Misrepresentation - inducement

*Redgrave v Hurd (1881) 20 Ch D 1 (R&G(C) [14.5])

On appeal:

• What if the promisee fails to take up a reasonable opportunity to verify the accuracy of the representation? Does she still rely upon the representation?

• Here, Yes.

• It isn’t an answer to say that he had the means to find out that the representation was false and didn’t avail himself of them.

• There will be a misrepresentation unless it can be shown that the representee had knowledge of facts contrary to the representation, or that he clearly did not rely upon it.

• Could have discovered the truth vs did discover the truth.

Vitiating Factors• Misrepresentation - materiality

*Nicholas v Thompson [1924] VLR 554 (R&G(C) [14.6])

• Nicholas agreed to buy Thompson’s interest in an investment scheme involving film development process. Thompson told Nicholas that he had been offered a large amount of money for the investment, but that he had turned it down.

• After the contract was executed Nicholas found out that this statement was false and sued.

• Did the statement involve a material fact so that it was capable of inducing entry into the contract?

Vitiating Factors• Misrepresentation - materiality

*Nicholas v Thompson [1924] VLR 554 (R&G(C) [14.6])

• Materiality may go to evidence of whether statement was made for purpose of inducing entry in the contract and whether it did in fact induce entry into the contract, but it is not a separate element.

• Here it was material, because it operated on the mind of the representee.

Vitiating Factors• Mistake

– Mistake as to a fundamental matter may operate to render the contract void or avoidable.

Vitiating Factors• Common Mistake

– If the parties have reached agreement but have made the same mistake as to a fundamental fact, they have made a common mistake.

• Mutual mistake

– If parties are at cross-purposes in that they are mistaken as to a fundamental part of the contract – No contract. i,e, offer and acceptance are for different things.

• Unilateral mistake

– One party is mistaken and the other party is aware of the mistake and in some way responsible for it. It must be fundamental.

• Non est factum

– Party signs a document that is substantially different to what she thinks it is.

Vitiating Factors

• For mistake to affect the validity of a contract it must be an operative mistake.

• Effect:

– At common law the effect of mistake is to make the contract void ab initio.

– If not void, in equity the contract may be voidable, subject to requirement to rescind.

– Rectification is also possible if the mistake relates to the recording of the terms of the contract.

Vitiating FactorsCommon Mistake

• There can be a common mistake as to:

– Absence of the subject matter of the contract In essence this is a total failure of consideration.

– Quality of subject matter of the agreement


• Is contract void because of a common mistake of the parties?

• If the parties have reached agreement but have made the same mistake as to a fundamental fact, they have made a common mistake. The validity of the contract depends upon the type of mistake made.

• If the subject matter of the contract has been destroyed (prior to agreement), the contract will be void ab initio.

• But if the subject matter of the contract never existedP.


• McRae v Commonwealth Disposals Commission (1951) 84 CLR 377 (R&G(C) [16.2])

• After WWII. Disposals Commission invited tender for purchase of oil tanker on reef near PNG. McRae successfully bid on the tender. McRae then went to considerable expense to locate the tanker but it was not found at that location. McRae sued for misrepresentation and breach of contract. Commission argued that there was a common mistake.

• No common mistake. The Commission made an assumption about existence of the tanker, but McRae did not make such an assumption, but relied on Commission’s statement. Knew nothing except what they were told.


• McRae v Commonwealth Disposals Commission (1951) 84 CLR 377 (R&G(C) [16.2])

• The parties did not proceed on a common assumption as to the existence of the tanker so as to justify that the correctness of the assumption was intended to be a condition precedent to the creation of the contractual obligations.

• McRae simply relied upon the assurance that there was a tanker.

• Conduct of the Commission was such that it was implied that it had promised that the tanker existed. Any mistake was induced by the servants of the Commission, who recklessly asserted that the tanker was there.

• Different if subject matter of contract has been destroyed at time of contract and neither party knows – then void ab initio.


Bell v Lever Brothers [1932] AC 161 (R&G(C) [16.3])

• Bell and Snelling were appointed to senior position in Niger Co (a subsidiary of Lever). The employment contract contained a term that they would not make secret profits from their position.

• They were made redundant and negotiated compensation payouts.

• Later Lever found out that they had engaged in anti-competitive arrangements with a competitor during their employment. They made secret profits. Lever sued for the return of the severance payout.

• Was there a common mistake as to the terms of the agreement, and a unilateral mistake in their failure to disclose their conduct when negotiating the payouts?


Bell v Lever Brothers [1932] AC 161 (R&G(C) [16.3])

• There was no mistake as to the existence or nature of the employment agreements, which formed the basis of the payouts.

• Ignorance of facts which affected the quality of the subject matter of the agreement do not justify rescission of the agreement.

• There is no duty to disclose past breaches of duty under service contracts, meaning that innocent concealment did not amount to unilateral mistake.

• In agreeing the termination payout, the parties each got what they bargained for.

Vitiating FactorsMutual Mistake

• A mutual mistake arises where parties are at cross-purposes with each other, in the sense that they are mistaken as to a fundamental part of the contract. In such cases there is no consensus ad idem.

• If one or other of the meanings of the contract can be objectively ascribed to the parties, then it will be enforced. If the test for reasonableness cannot be satisfied, then there is no contract.

• This is closely associated with the concept of a lack of contract for failure of contractual intention.

Vitiating FactorsMutual Mistake

*Raffles v Wichelhaus (1864) 159 ER 375

• Vendor thought that goods were being shipped on the Peerlessleaving Bombay in December. Buyer thought that the goods were being shipped on another ship called the Peerless, leaving Bombay in October. The goods went on the December ship, but the buyer refused to payP

• The Court held that there was no consensus ad idem and no contract.

Vitiating FactorsUnilateral Mistake as to terms of a contract

• A unilateral mistake arises where only one party is mistaken and the other party is aware of, and to some extent responsible for the mistake.

• The mistake must be fundamental or material.

• In some circumstances it will be voidable and in others it will be void.


Taylor v Johnson (1983) 151 CLR 422 (R&G(C) [16.7])

• Johnson granted Taylor and option to purchase two adjoining lots of land for $15,000. Taylor exercised the option and entered into the agreement. Later Johnson refused to complete, arguing that she mistakenly believed that the purchase price was $15,000 per acre.

• Had a unilateral mistake been established?


Taylor v Johnson (1983) 151 CLR 422 (R&G(C) [16.7])

• Unilateral mistake as to the effect of a fundamental term can make the contract voidable if the other party is aware that the first party is under a serious misapprehension and deliberately sets out to ensure that the first party does not become aware of his mistake.

• Here Johnson was mistaken as to a fundamental term (price) and the Taylors deliberately set out to ensure that she did not become aware of the mistake.

– He said that he did not have a copy of the option to show her.

– Avoided discussing the price after he enquiry.

• Voidable in equity, but not void at common law.

Vitiating FactorsUnilateral Mistake as to identity of party

• Cundy v Lindsay (1878) 3 App Cas 459

• If a party is mistaken as to the identity of the other party and has been led into this mistake by the other party, the agreement will be void.

• If a party is mistaken as to the identity of the party and can show that the identity of the other party was a material factor in entering in to the contract, it will be void.


Lewis v Avery [1972] 1 QB 198

• The plaintiff advertised a car for £450. He sold it to a rogueimpersonating Richard Greene (famous actor).

• He was convinced because the rogue had a studio pass with his pictureand the name on it. The rogue gave him a cheque. The rogue sold thecar to the defendant [Averay] and disappeared.

• The cheque was dishonoured (as it had been stolen).

• The plaintiff alleged that since there was a mistake as to identity, thecontract between him and the rogue never existed. Thus, the title neverpassed, and the car still belongs to him. He sought damages from thedefendant who had the car.



Lord Denning:

"When two parties have come to a contract - or rather what appears, on the face of it, to be a contract - the fact that one party is mistaken as to the identity of the other does not mean that there is no contract, or that the contract is a nullity and void from the beginning. It only means that the contract is voidable, that is, liable to be set aside at the instance of the mistaken person, so long as he does so before third parties have in good faith acquired rights under it.“

• So, in this case, the contract was voidable, but then a third-party became involved and thus there is a bar to rescission.



Lord Denning:

• The difference with face to face mistakes is that even if you're wrong to the actual identity, you are still contracting with this person standing in front of you, so you can't say you were contracting with someone else and therefore there was no consensus.

"When a dealing is had between a seller like Mr. Lewis and a person who is actually there present before him, then the presumption in law is that there is a contract, even though there is a fraudulent impersonation by the buyer representing himself as a different man than he is. There is a contract and with the very person there, who is present in person, liable no doubt to be avoided for fraud, but still a good contract under which title can pass unless and until it is avoided."

Vitiating FactorsNon est factum

• If a party, without carelessness, signs a document that is substantially different to what she believes it to be, can claim non estfactum (it is not my deed). If successful, this renders the agreement void ab initio.

• You must show that the mistake relates to the fundamental nature of the document, not merely to its contents.

• This principle is in effect an exception to the signature rule.

• In assessing non est factum, the Court is balancing competing policy considerations – the importance of protecting the signature rule vs injustice of holding someone to a contract if they did not have a consenting mind.

Vitiating FactorsDuress

• Text: Radan & Gooley, Chapter 17

• Universe Tankships Inc of Monrovia v International Transport Workers

Federation [1983] 1 AC 366 (R&G(C) [17.2])

• Barton v Armstrong [1976] AC 104 (R&G(C) [17.3])

• Crescendo Management Pty Ltd v Westpac Banking Corp (1988) 19 NSWLR 40 (R&G(C) [17.4])

• North Ocean Shipping Co v Hyundai [1979] QB 705 (R&G(C) [17.4])

• Illegitimate pressure or threats to force another party to enter into the agreement.

• 3 types:

– Duress of the person

– Duress of goods

– Economic duress.


• Legitimacy of the pressure can be looked at from two aspects:

– The nature of the pressure.

– The nature of the demand that the pressure is applied to support

• The threat of unlawful action will generally be regarded as illegitimate.

• But just because the threat is lawful does not necessarily make the pressure legitimate.


Universe Tankships Inc of Monrovia v International Transport Workers


• ITWF placed a black ban on a ship because it did not have a certificate. This stranded the ship and potentially would inflict heavy losses on owner.

• Owner agreed to pay $80,000 in back pay for crew plus $6,480 for welfare fund. Owner tried to recover these amounts, but abandoned the larger one. Pressed for the smaller amount on the basis of duress.


Universe Tankships Inc of Monrovia v International Transport Workers


• 2 elements:

– Pressure amounting to compulsion of the will the victim –practical effect of the pressure is that there is absence of choice.

– Illegitimacy of the pressure – lawfulness

• Contract is voidable and can be rescinded

• Here the majority held that union black ban was illegitimate. Therefore duress was established.

Vitiating FactorsDuress of the person

Barton v Armstrong [1976] AC 104 (R&G(C) [17.3])

• Death threats made to a party. Barton signed an agreement after having received death threats against him and his family as well as other provocations. Armstrong argued that he signed because he thought that the deal was favourable.

• If threats contributed to decision to enter into the agreement, then duress will be established (even if he may have done so any way).

• Doesn’t have to be the only reason.

• Must be a threat of physical harm.

• Agreement voidable.

Vitiating FactorsDuress - Economic

Crescendo Management Pty Ltd v Westpac Banking Corp (1988) 19 NSWLR 40 (R&G(C) [17.4])

• Hillbrink sold property and money was paid to Westpac, partly to pay down a mortgage and partly to be passed on to Hillbrink to purchase another property. The bank held all of the money in order to force Hillbrink to enter mortgages to secure debts of a related company. As he needed the money to complete the purchase, he signed the contract. They claimed that they signed under duress.


Crescendo Management Pty Ltd v Westpac Banking Corp (1988) 19 NSWLR 40

• Overwhelming pressure will not constitute economic duress unless it is unlawful or unconscionable.

• Here pressure was unlawful because Westpac was not entitled to the money. The test is to ask whether any applied pressure induced the victim to enter into the contract and then to ask whether that pressure went beyond what the law is prepared to countenance as legitimate.

• It will be illegitimate if it consists of unlawful threats or unconscionable conduct. But the categories are not closed.

• But the Court held that Crescendo did not execute the mortgage as a result of the threat, because it was done before the pressure was applied


North Ocean Shipping Co v Hyundai [1979] QB 705 (R&G(C) [17.5])

• Hyundai agreed to build a tanker for a price in instalments. After a devaluation of the USD, Hyundai asked for more money to complete. North Ocean initially said no, but eventually referred the matter to arbitration to avoid delay. Hyundai refused arbitration and gave a final chance to agree the increase or it would terminate. North Ocean agreed but ‘reserved its rights’ After delivery it tried to claim back the increase.


North Ocean Shipping Co v Hyundai [1979] QB 705 (R&G(C) [17.5])

• The threat to break a contract can be duress.

• Even if consideration is paid for a contract under threat of breaking a previous contract, this can be economic duress, as there was no legal basis to do so (the contract did not allow this).

• The new contract is voidable and the excess monies can be recovered.

• After the duress stopped, did not take steps to avoid the contract for eight months and was therefore held to have affirmed the new agreement. It could no longer recover.

• Reserving its rights not good enough.


*ANZ v Karam (2005) 64 NSWLR 149

• In this case a family-owned business had borrowed money from the ANZ Bank. The bank obtained security over the assets of the company and the personal assets of the directors. The directors had been initially unaware that they were personally liable for the company's debts until they had requested further financial accommodation.

• Unknown to the directors, the bank had doubts about the enforceability of the original securities and had made the provision of further loans dependent on the directors executing additional documents acknowledging that they were personally liable for the company's debts. In addition, the directors, at the request of the bank, sold various properties to reduce the company's indebtedness.



• The directors sought relief in relation to the securities on the basis that they were:

– unjust under the Contracts Review Act 1980 (NSW); and

– unconscionable under the general law and should be varied or set aside; and

– and they also sought:

• damages against the bank in negligence;

• damages under s. 82 of the Trade Practices Act 1974 (Cth); and

• an order for equitable compensation.

• At first instance, Santow J held that the transactions should be set aside on a number of grounds including unconscionability and economic duress.



• However, on appeal the Court of Appeal overturned that decision.

• The Court of Appeal formed the view that the Bank’s conduct did not amount to the Amadio type of conduct (unconscionable conduct - see Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447) as the family members did not suffer from a ‘special disability’ or ‘special disadvantage’.

• The family members were in as good a position as the bank to form their own views about the financial position of the company and they couldn’t rely on the parlous financial state of the business as itself forming part of the illegitimate pressure.



• The Court of Appeal was also unable to say that there was economic duress. The directors understood the nature and effect of the action they were taking and there could be no question of their will being overborne by the bank. Their actions were driven by the need to obtain additional funds to keep the company going. The bank, for its part, wanted further security as the price for providing further credit to a company already in financial difficulty.

• The Court of appeal held that vagueness in the terms ‘economic duress’ can be avoided by treating the concept of “duress” as limited to threatened or actual unlawful conduct. The threat or conduct need not be directed to the person or property of the victim, but can be to the legitimate commercial and financial interests of the party.



• The Court of Appeal appears to be limiting duress to “threatened or unlawful conduct” [66]. Thus, a threat to the legitimate commercial and financial interests of a party would be sufficient to trigger an action in duress because it would amount to “unlawful” conduct.

• If the threat was not “unlawful”, then the weaker party may still be able to argue that it is unconscionable at common law or be caught under the unconscionability provisions in the Trade Practices Act. However, a mere difference in the comparative bargaining strength of the parties will not be enough.

Vitiating FactorsProblem

In February, Samson agrees to make crucial deliveries of Tara's specialty candles for the pre-Christmas trade for £1,000. Samson fails to make a number of deliveries and explains that this is because he had a small heart attack (from which he has recovered but must take it easier) and because petrol prices had increased by 300% because of international events. He tells Tara that unless she agrees to increase the price to £3,000 and reduce the number of deliveries by 40%, the deliveries would not be made. He adds: 'What we agreed just can't be done. I'll go bust or keel over and that's no use to you.' Tara reluctantly agrees as she feels she has no choice at this stage. Samson makes the deliveries. Advise Tara.

law of contract - sydney.edu.au 2016-17/lpab... · redgrave said that the rest arose from other...

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