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Contract I ± Essay Term II
STUDENT: ADAM FERRIS TUTOR: I-SAN TIAW TUTORIAL GROUP: N
Julie¶s junk ltd. currently wishes to sell four cars that are no longer in their possession to another company. In order for the Julie¶s Junk to be able to sell the cars it is necessary to prove that a contract for the sale of the cars was never validly formed, or that the contract is void or voidable. It is clear that an offer was made and t his was accepted. It is also clear that there was sufficient consideration in the form of the payment and an intention to create legal relations. Therefore, Julie¶s junk ltd. cannot recover possession of the cars or seek a n alternative remedy unless another course of action is ta ken. In this situation there are three t hree possibilities possibilities that would render this contract voidable. These are: economic economic duress, lawful act duress and actual undue influence. I would look at each one in turn and assess whether it is possible for Julie¶s Junk to be released from this contract and sell the cars to Wonderful Wheels ltd. or seek another remedy. r emedy. If economic duress can be proved then the contract for the sale of the four cars between Julie¶s Junk ltd. and Dastardly deals ltd. can be set aside. The doctrine of economic duress has only been r ecognised by UK courts relatively recently following the case of Occidental Worldwide Investment Investment Corp. v Skibs A/s Avanti [1976] 1 Lloyd's Rep. 293. In this case Kerr J states that there are some tests that need to be satisfied in or der that economic duress is considered a valid clai m. From his explicit statements and from the cases cited in his judgment, it became clear that the clai mant would have have to protest, and a nd consider the contract closed and binding in order for t he contract to apply. There were a lso hints that there were a number of other tests. The position was made clearer by the judgments in Pao On v Lau Yiu Long [1980] [1980] AC 614 (PC) . The tests mentioned here are: Did the claimant protest?; Did the claimant have a practical legal alternative?; Was independent independent legal advice a dvice sought for the contract?; Did t he claimant act properly to avoid renegotiation? renegotiation? DSDN DSDN Subsea Ltd. v. Petroleum Geo-Services ASA [2000] BLR 530 added in the factor that economic duress must
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be a µsignificant factor¶ in the claimant¶s motives when entering into the contract. I will now examine whether or not the circumstances of the case at hand qualify in these respects. Firstly, economic duress needs to be a µsignificant¶ reason for Julie¶s Junk ltd. contracting to sell the cars. The company¶s position was that these cars needed to be sold quickly in order to avoid bankruptcy. bankruptcy. Self-perpetuation is surely the core inter est of every business body and as such would have to be considered as a significant factor. However, as the second reason for the acceptance of the contract is a considerable one, this may prove to be a flaw in the clai m. Given that the courts are reluctant to grant economic duress as a valid claim in business situations as seen in the Occidental case, cas e, it may be difficult to prove pr ove that economic reasons were significant enough for this purpose. Secondly, we need to look at whether Julie¶s Junk ltd. had a practical a lternative. In the case of B&S of B&S Contracts and Design ltd v. Victor Green Publications Ltd [1984] ICR 419 it was decided that a company contracting with another to erect some stands had no practical practical alternative than to a gree to their demands for more money when they demanded another £4500. In reality they could have tried to find a nother company, company, but risk breaking cla uses in their contract with clients. However, this is clearly deemed not practical. It is not practical for Julie¶s Junk ltd. to wait for another buyer to appear given their dire financial situation. Of course in reality t hey could have waited and risked insolvency, in the same was as Victor Green Publications could have tried to find another party to complete the stands, but this is not µa practical alternat ive¶. As the company¶s solvency is at stake sta ke and money is needed to avoid ba nkruptcy, the sale seems to be the only practical option. As regards obtaining adequate legal advice for the contract, both parties involved are specialists in this area of tra de and used to entering into such contracts, therefore adequate legal advice is assumed to have been sought. The main issue of concern, as set out in the Pao On case, is whether whether or not Julie¶s Junk ltd. protested before they accepted t he contract. As is evident, Julie¶s Junk did not protest at t he time, they merely considered their options and then entered into the t he contract. As this is one of the t he key criteria, stipulated in the Occidental case, this may prove to be a pitfall in a claim of economic duress. I will also make the public policy point that judges are reluctant to grant economic economic duress as a valid claim because economic pressure is an inevitable part of the commercial environment. Lax restrictions on economic duress would mean an easy escape from any business contract that turned unfavourable for one party. For the reasons that it may be hard to prove that economic duress was a significant factor, that there were no protests at the time of acceptance a nd that judges judges are reluctant to
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allow flimsy claims of economic duress I would advise Julia¶s Junk ltd. that an economic duress claim would fail. The second possible escape from the contract is a lawful act of duress. Not only is lawful act duress rare and difficult to prove, but one of the main requirements is t hat the lawful act was the t he sole reason for one party entering into the contract. It is stated that a la wful act may be considered as duress in certain circumstances in the case of M utual utual Finance Ltd v. John Wetton & Sons Ltd. [1937] 2 All ER 657 , 657 , however the previously mentioned restriction is implied. This is clearly not the case here, as Julie¶s Junk ltd. had considerable economic motives for entering the contract as well. Therefore, a claim for legal act duress would not be successful. The final possibility for setting the contract aside is a claim for undue influence. Presumed undue influence takes place where some sort of special relationship of trust has been breached. In the case of this business transaction it is clear that this does not apply. We therefore need to examine actual undue influence. As per Williams per Williams v. Bayley (1866) LR 1 HL 200, undue pressure occurs when one party exerts a sort of unfair pressure over another and coerces them into entering into a contract. This seems to be what has occurred to Julie¶s Junk ltd. The boundaries for the equitable clai m of undue influence are less ce c ertain than those t hose for a duress claim. The case of Allcard Allcard v. Skinner [1887] All ER 90 confirms that there must be evidence of an unfair influence, which usually benefits one party. Dastardly Deals have certainly coerced Julie¶s Junk Ltd. into entering into the contract and in an unfair manner. It is difficult to predict the outcome of such an equitable claim, however Julie¶s Junk Ltd. appear to have a reasonable r easonable claim. In conclusion, the course of action that is most likely to succeed in allowing Julie¶s Junk Ltd. to sell the cars to Wonderful Wheels Ltd. is a claim of actual undue influence.
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