(ii) Establishing Economic Duress

In DSND Subsea Ltd v PGS Offshore Technology AS⁸⁸ Dyson J identified three ingredients of economic duress, namely: (i) pressure, the practical effect of which is compulsion on, or lack of practical choice for, the victim; (ii) which is illegitimate; and (iii) which is a significant cause of inducing the claimant to act. The independent relevance of these three elements is unclear and the ingredients have been described as not constituting a ‘precise analytic tool’.^{[1] [2]} Indeed, the first ingredient is properly treated as the conclusion: economic duress operates as a ground of restitution or a vitiating factor for contract because the victim had no practical choice. ^[3] It follows that there are two key ingredients of economic duress: illegitimate pressure^[4] and causation.^[5]

(1) Illegitimate Pressure

Although it is now clear that illegitimate pressure constitutes the first ingredient of economic duress, it is a matter of some controversy what needs to be shown to establish illegitimacy. The approach advocated in this book is that pressure is illegitimate simply by proof that the defendant’s conduct is either intrinsically unlawful or a threat to do an unlawful act, such as breaching a contract or committing a tort. With the recognition, however, of lawful act duress,^[6] something else will need to be proved to establish that the pressure was illegitimate. Of course, if the cases which recognize lawful act duress are considered either to be wrong, or to involve an application of the distinct equitable ground of undue pressure,^{[7] [8] [9]} it is not necessary to identify anything beyond the unlawful threat or pressure to establish that the pressure is illegitimate. Indeed, as Lords Wilberforce and Simon recognized in Barton v Armstrong,⁹⁵ whether a threat is illegitimate simply depends on whether it is ‘one of a kind which the law does not regard as legitimate’, rather than identifying a variety of factors to assess legitimacy.

But, if something else needs to be shown to prove illegitimacy of pressure, it is unclear what that additional element is. In DSND Subsea Ltd v PGS Offshore Technology AS⁹⁶ Dyson J did identify various factors to assist in the identification of illegitimate pressure, including: an actual or threatened breach of contract; the defendant’s good or bad faith; whether the victim had a realistic practical alternative but to submit; whether the victim protested; and whether the victim had confirmed or sought to rely on the contract. These factors have been described by David Donaldson QC^[10] as not being exhaustive and the weight to be attached to each factor depended on the circumstances of each case.^[11] Whilst some of these factors are undoubtedly relevant to establishing economic duress, they are preferably treated as relevant to whether the pressure caused the claimant to act, rather than specifically to the characterization of the pressure as illegitimate.^[12] The problem with the approach adopted by Dyson J is that he uses factors involving the consequences of the pressure to determine whether the pressure is illegitimate. It is much more appropriate to characterize the threat or pressure at the time it is made or exerted, and preferably simply by reference to whether it is unlawful, and then determine the effect of this pressure on the claimant by reference to factors which relate to causation.

The specific identification of the defendant’s good or bad faith as a factor relevant to the illegitimacy of the threat is a matter of particular concern.^[13] Bad faith is a notoriously vague concept, but Birks suggested that a defendant would be acting in bad faith if he or she ‘intended to exploit the claimant’s weakness rather than to solve financial or other problems of the defendant’.^{[14] [15]} In Huyton v Peter Cremer,¹⁰² although Mance J did not dismiss this test, he considered its significance to be contentious. It is an unsatisfactory test of illegitimacy for three reasons.

(1) It would be very difficult for the claimant to show what the motive of the defendant was in making the threat.

• (2) As Burrows correctly asserts, this test ‘reverses traditional contract values in that bad faith in breaking a contract has traditionally been afforded no importance (it does not, for example, affect the measure of damages) precisely because the selfinterested pursuit of profit is regarded as acceptable provided the innocent party is compensated for loss’.^{1 3} It follows that, since the defendant’s motive in breaking a contract to obtain profit has no effect on the assessment of damages, there is no reason why a different approach should be adopted where the defendant threatens to break a contract to obtain profit.
• (3) By emphasizing the defendant’s motives for making the threat, rather than considering the effect of the threat on the claimant, the test of bad faith is inconsistent with the majority of the other grounds of restitution which are claimant-oriented, in the sense that they are concerned with the effect of the particular ground on the claimant. This is true of mistake, for example, where we are only concerned with the question whether the claimant was mistaken, without any need to consider whether the defendant was at fault. Similarly, with duress of the person and property, where we are only concerned with whether the effect of the duress was to remove the claimant’s autonomy to exercise a free choice as to whether or not to transfer a benefit the defendant. There is no reason why this approach should not be adopted in the context of economic duress as well.

The test of good and bad faith has rarely been applied in the cases. In CTN Cash and Carry Ltdv Gallaher Ltd^{[16] [17]} one reason for the failure of the claimant to establish economic duress was because the defendant had acted in good faith in claiming that the claimant was required to pay for goods which had been stolen. But the real reason why the claim failed in that case was because the defendant’s threat to withdraw credit facilities was not a threat to do an unlawful act. In those cases where the threat was to commit a lawful act and duress was established,^[18] the court did emphasize the improper conduct of the defendant, but that is preferably explained as relevant to establish unconscionability, which is an essential feature of the distinct equitable ground of undue pressure.^[19]

Further, bad faith cannot be used to explain all the cases where economic duress has been recognized, since in a number of them restitution on the basis of economic duress was awarded even though there was nothing to suggest bad faith on the part of the defendant.^[20] Consequently, bad faith should be rejected as a test to determine whether the defendant’s threat was illegitimate.

It has also been suggested that the defendant might be considered to have exerted illegitimate pressure where the terms proposed by him or her are substantively unfair.^[21] As with the test of bad faith, this is inherently uncertain. To determine whether there was substantive unfairness it would be necessary to engage in a detailed analysis of all of the surrounding circumstances and the nature of the relationship between the parties. There is a danger that such an approach would result in unpredictability which is unacceptable in the context of commercial disputes. In addition, this test lacks any clear judicial support.

The danger of establishing illegitimate pressure without specific reference to the unlawfulness of the defendant’s conduct, creates unacceptable uncertainty.^[22] In the sphere of commercial transactions in particular, any test which is inherently uncertain and provides any scope for judicial value judgment^[23] must be rejected as unworkable. Consequently, it is more appropriate to treat a threat as illegitimate simply because it was unlawful, such as where the pressure involves the non-performance or threat of nonperformance of a contract.

(2) Causation

Once illegitimate pressure has been identified it is then necessary to determine whether the pressure was sufficiently serious to deprive the claimant of a free choice when deciding whether or not to enter into a contract with the defendant, or to renegotiate an existing contract or simply to transfer a benefit to the defendant. This requires consideration of whether the illegitimate pressure was a sufficient cause of the claimant’s actions. The test which has been adopted for determining whether the pressure was a sufficient cause has sometimes been expressed by asking whether the threats coerced the claimant’s will so as to vitiate his or her consent.^[24] The most important statement of this coerced will principle can be found in the judgment of Lord Scarman in Pao On v Lau Yiu Long:^[25]

In determining whether there was a coercion of will such that there was no true consent, it is material to inquire whether the person alleged to have been coerced did or did not protest; whether, at the time he was allegedly coerced into making the contract, he did or did not have an alternative course open to him such as an adequate legal remedy; whether he was independently advised; and whether after entering the contract he took steps to avoid it. All these matters are... relevant in determining whether he acted voluntarily or not.^[26]

It is the final sentence which identifies the essential concern of the coerced will principle. If the claimant’s will was coerced then he or she did not act voluntarily, but this will only be the case where the pressure was a sufficient cause of the claimant’s actions. What Lord Scarman is doing in this dictum is to identify factors which should be taken into account when determining whether the illegitimate pressure exerted by the defendant really can be regarded as a sufficient cause of the claimant’s conduct, so that it is possible to conclude that the claimant did not freely choose to transact with the defendant.

So, if the emphasis is on causation, what test of causation should be adopted? This raises a crucial question of policy as to whether restitution for economic duress should be defined restrictively or widely. In the most common situation of economic duress, where the defendant threatens to breach a contract, the apparent policy of the courts is to adopt a restrictive interpretation of economic duress due to a fear of unsettling commercial transactions.^{[27] [28]} So, for example, in The Universe Sentinel,¹¹⁵ Lord Brandon said that only ‘severe economic pressure could amount to duress in law’.^[29] This restrictive approach should be reflected in the test for causation. There are four possible tests of causation which might be applicable:

• (a) the illegitimate pressure was the sole cause of the claimant’s actions;
• (b) the pressure was a contributory cause of the claimant’s actions;
• (c) the ‘but for’ test of causation;
• (d) no reasonable alternative.
• (a) The Illegitimate Pressure Was the Sole Cause of the Claimant’s Actions

This test would be unworkable, since it would be virtually impossible to prove that the claimant was only influenced by the pressure and nothing else. In addition, there is no obvious reason why restitutionary relief should be denied to the claimant simply because he or she was influenced in doing what the defendant demanded by factors other than the pressure, even though these factors might have had only a minor influence on the claimant’s decision to transact with the defendant.

(b) The Pressure Was a Contributory Cause of the Claimant’s Actions

According to this test of causation it would be sufficient that the threats were a cause of the claimant’s actions, without necessarily being the ‘but for’ cause. This test has received some support in the academic literature^{[30] [31]} and it has been implicitly recognized in certain key cases where the test in Barton v Armstrong¹¹⁸ was assumed to be applicable to economic duress.^[32] But this test of causation is surely inappropriate in the context of economic duress, since it does not follow from the fact that the pressure contributed to the claimant’s actions that it necessarily had a sufficiently serious effect on the claimant, as should be required if economic duress is to be restrictively interpreted as policy suggests it should be. Also, the Barton v Armstrong test probably incorporates a presumption that the pressure was a cause of the claimant’s acts, with the burden of rebutting this being placed on the defendant.^[33] This too is inappropriate in respect of economic duress, where such a presumption would result in economic duress being too easily established. The Barton v Armstrong presumption is justifiable where the pressure is particularly serious, as where the defendant’s threats relate to the person or even property, making it acceptable to presume that those threats influenced the claimant’s conduct, since this is highly likely to have been the case. But commercial or economic pressure is of a very different kind, especially because the claimant is more likely to have been influenced by other factors when deciding what the appropriate course of action should be.

Even though the contributory cause test is inappropriate to determine whether the illegitimate pressure caused the claimant to make a contract with the defendant, where the illegitimate pressure caused the claimant to make a non-contractual transfer of a benefit to the defendant, a stronger case can be made for the recognition of a test of causation which is easier to satisfy,^[34] because it is not necessary to set aside a contract before seeking restitution. Different tests are adopted in the law of mistake, for example, so that it is more difficult to set a contract aside for mistake than to seek restitution of a non-contractual transfer made by mistake.^[35] Similarly, the test of causation for a spontaneous mistake is the ‘but for’ test, whereas the test of causation for a mistake induced by fraud is a contributory cause.^[36] Where the claimant has transferred a benefit to the defendant as the result of illegitimate pressure, it might be thought that the closer analogy is with fraud than a spontaneous mistake. But, even though it is argued here that illegitimate pressure involves unlawful pressure, this cannot be considered to be analogous to fraud, unlike possibly duress of the person and even goods,^[37] so a contributory cause test should not suffice for economic duress and it is not necessary to distinguish between tests of duress in the contractual and non-contractual contexts. No such distinction is recognized in the case law, although that is primarily because most of the cases where restitutionary claims are involved arise where the illegitimate pressure has resulted in the claimant entering into a contract with the defendant.

(c) The ‘But For’ Test of Causation

The preferable test of causation is therefore the ‘but for’ test, where it must be shown that the claimant would not have acted in the way which he or she did if the defendant had not exerted the pressure. This test of causation was specifically recognized by Mance J in Huyton v Peter Cremer.^[38] Its recognition means that a different test of causation is adopted for economic duress than for duress of the person or goods, but this is justifiable because economic pressure tends to be much less blameworthy than pressure involving interference with the person or property. For example, economic duress usually takes the form of a threat to break a contract. Although such a threat is unlawful, it lacks the serious wrongfulness of threats to interfere with the person or property. Consequently, something else needs to be established beyond the wrongfulness of the threat before restitution should be awarded, and that extra element is proof that, had the threat not been made, the claimant would not have acted in the way which he or she did. This stricter test of causation also fulfils the policy of the law which seeks to restrict liability for duress in commercial transactions.

Birks rejected the ‘but for’ test of causation because it involves ‘an impossible and inscrutable inquiry into the metaphysics of the will’.^[39] But, as long as the test of causation is not confined to showing that the pressure was the sole reason for the claimant’s actions, it is a test which is perfectly workable, particularly because the courts have identified a number of factors to assist in determining whether the pressure was indeed a ‘but for’ cause of the claimant’s actions. Also, this test of causation is not unique to economic duress, since it has also been recognized as applying in the context of spontaneous mistakes,¹²⁷ where it operates perfectly satisfactorily. But the most important argument in favour of the ‘but for’ test of causation is that it accords with the notion of coercion of the will. For it will only be possible to conclude that a claimant’s will has been coerced by the pressure where, but for the pressure, the claimant would not have acted as he or she did. It is only in this situation that it can be concluded that the claimant had no free choice as to whether or not to submit to the pressure exerted by the defendant.

The application of the ‘but for’ test of causation is illustrated by the decision of the Privy Council in Pao On v Lau Yiu Long.¹²⁸ In this case the claimant had agreed to sell its shares in a private company to a public company in exchange for shares in the public company. To ensure that it did not suffer from a fall in the value of the shares in this public company, the claimant entered into a subsidiary agreement with the defendant, who was a majority shareholder in the public company, whereby the defendant agreed to buy a majority of the allotted shares at $2.50 a share. The purpose of this subsidiary agreement was to ensure that the claimant would not suffer any loss if the value of the shares fell below $2.50. Surprisingly, the claimant had failed to realize that the effect of the agreement was such that, if the shares increased in value, the defendant would benefit since it would still be able to purchase the shares at $2.50 each. Consequently, the claimant refused to perform the main agreement unless the defendant agreed to cancel the subsidiary agreement and replace it with a guarantee to indemnify the claimant against loss. The defendant submitted to this threat because it feared that the public would lose confidence in the public company if it did not complete the agreement quickly. After the shares had been allotted, their value dropped rapidly and the claimant sought to enforce the defendant’s promise to indemnify it against this loss. The defendant argued that the guarantee was voidable for economic duress, but this claim failed because it could not be shown that the commercial pressure to which the defendant had been subjected by the claimant caused it to sign the guarantee. This conclusion was reached by reference to a number of different factors, the most important of which was that the defendant had taken a calculated risk that the value of the shares would not fall.¹²⁹ Since this was a purely commercial decision it was concluded that the claimant’s threats had not caused the defendant to do as the claimant demanded. Presumably the claimant’s threats were taken into account by the defendant when deciding whether to agree to the guarantee, but it could not be shown that it was the ‘but for’ cause of the defendant’s action.

In Pao On and the later case of The Universe Sentinel¹³⁰ Lord Scarman identified a number of factors which might be used to determine, as he put it, whether the claimant had no choice but to submit to the defendant’s demands. These factors include protesting about the validity of the demand, either at the time of entering the contract or making the payment or shortly afterwards,¹³¹ the failure to obtain independent advice and a declaration by the claimant that he or she would go to law to recover money paid or property transferred as a result of the duress.¹³² But Lord Scarman emphasized that these are merely evidential factors, so if any are absent it does not mean that the claimant necessarily did exercise a free choice. So, for example, if the claimant failed to protest about the validity of the defendant’s demand it does not follow that he or she must have

Barclays Bank Ltd v WJ Simms, Son and Cooke (Southern) Ltd [1980] QB 677. See p 171, above.

• 128 [1980] AC 614. ¹²⁹ Ibid, 627. ¹³⁰ [1983] AC 366, 400.
• 131 See also The Siboen and The Sibotre [1976] 1 Lloyd’s LR 293, 336 (Kerr J).
• 132 In DSND Subsea Ltd vPGS Offshore Technology AS [2000] BLR 530, [131], Dyson J considered some of these factors to be relevant to the question whether the compulsion was illegitimate. They are preferably treated as relevant to whether the pressure caused the claimant to contract or to transfer a benefit.

acted voluntarily,^{133 134 *} since the claimant may fail to protest for a number of reasons, for example, because the defendant is not available when the claimant wished to protest, or because the defendant’s threats are such that the claimant is constrained from protesting. ⁴ As Lord Scarman memorably said in The Universe Sentinel:¹³ ‘The victim’s silence will not assist the bully, if the lack of any practicable choice but to submit is proved.’

(d) No Reasonable Alternative

There is one other factor which Lord Scarman emphasized in Pao On v Lau Yiu Long¹³⁶ as being relevant to the assessment of whether the pressure emanating from the defendant was a sufficient cause of the claimant’s actions, namely whether the claimant had a reasonable alternative course open to him or her rather than submit to the pressure.^{[40] [41] [42] [43] [44]} For, if the claimant did have an alternative course available, he or she should have taken that course rather than submit to the pressure. This factor is of such importance to the question of whether the claimant can rely on economic duress, that it should not be treated simply as an evidential factor to assist the court in determining whether the test of causation is satisfied, but it should be characterized as a rule of substance which must be established.^[45] Consequently, if the claimant did have a reasonable alternative than submit to the pressure, this in itself should prevent the claimant from relying on economic duress because, as a matter of law, the pressure will not have been a sufficient cause of the claimant’s actions. It does not automatically follow, however, that, just because there was no reasonable alternative open to the claimant but to submit, economic duress will have been established, since it will still be necessary to show that the threats were the ‘but for’ cause of the claimant’s actions, although it will be possible to prove this in most cases.

Despite the suggestion in some of the cases that the question of whether there was a reasonable alternative open to the claimant is a subjective test,^{[46] [47]} so that it is sufficient that the claimant thought that he or she had no choice but to submit to the pressure, the better view is that this is a matter which is to be assessed objectively, by reference to what the reasonable person would have done in the claimant’s position, because of the need to restrict the application of the economic duress doctrine. This objective approach was adopted in B and S Contracts and Design Ltd v Victor Green Publications Ltd,¹⁴⁰ where Kerr LJ recognized that a threat to break a contract ‘will only constitute duress if the consequences of a refusal would be serious and immediate so that there is no reasonable alternative open, such as by legal redress, obtaining an injunction, etc’.^[48]

The application of this ‘no reasonable alternative’ principle is illustrated by Hennessy v Craigmyle and Co Ltd.¹⁴² The claimant was unable to set aside an agreement, in which he had promised not to bring proceedings before an industrial tribunal in respect of his summary dismissal, because he had a real, albeit unattractive, alternative to signing the agreement, which was to make an immediate complaint to an industrial tribunal and draw social security benefit until his complaint was heard.

A case where there was held to be no reasonable alternative open to the claimant but to submit to the defendant’s demands is The Alev,¹ 3 where the owners of cargo which was being retained by ship-owners had no reasonable alternative but to pay money as demanded by the ship-owners. This was primarily because the only possible alternative course of action open to the claimants was to seek an injunction to restrain the threatened breach of contract, but this would have been of no practical use because the cargo and the ship-owners were outside the jurisdiction at the time, so this alternative course of action was objectively unreasonable.

Although the most usual alternative course of action open to the claimant is to resort to legal redress, other considerations can be taken into account in determining whether the claimant’s submission to the defendant’s threats was reasonable. For example, if the defendant, having entered into a contract to build an extension onto the claimant’s house for ?40,000, refuses to do so one week before performance is required unless the claimant pays an extra ?10,000, it would not be reasonable for the claimant to pay the money if it was possible to arrange for another builder to do the work at such short notice and at no substantially greater cost than the original contract price. Similarly, if the benefit which is to be rendered to the claimant by the defendant is wholly disproportionate to the seriousness of the threat, restitution should also be denied because it would not be reasonable for the claimant to have submitted to the demand. For example, if the defendant demanded that the claimant pay him ?1,000 otherwise he would refuse to deliver goods worth ?100, it is surely unreasonable to have succumbed to such a demand, which is wholly disproportionate to the value of the goods, and so restitution should be denied. A different result would probably be reached if the goods were required by the claimant to satisfy a lucrative contract with a third party. In such circumstances it might be considered that the claimant did indeed have no reasonable alternative but to submit to the threat.

It is this requirement of no reasonable alternative being open to the claimant which is of such crucial importance in determining whether the defendant’s threat constitutes economic duress. For, where there is no reasonable alternative but to submit to the defendant’s demands, the economic pressure placed on the claimant is so extreme that he or she can be regarded as having no free choice in deciding whether to do what the defendant wanted. This is the reason why this test is not required for the other heads of duress, where restitution is available even though the claimant may have had a reasonable alternative to submission to the defendant’s threats,^{[49] [50]} because the pressure itself can be assumed to be more significant. In the different context of economic duress, restitutionary relief should be denied to the claimant if a reasonable person would not have succumbed to the defendant’s threats. This is because typically the dispute is between two commercial organizations, where the defendant’s demands, usually for more money, occur in the context of a continuing contractual relationship. Where the claimant succumbs to the defendant’s demands in circumstances where there is a reasonable alternative open to it, that submission should be regarded as a legitimate part of the bargaining process and the law should not interfere with such commercial arrangements. It is only where the defendant can be regarded as taking unfair advantage of the claimant that the law should intervene. The key characteristic of unfair advantage is that the defendant’s threats caused the claimant to pay the defendant in circumstances where he or she had no reasonable alternative but to pay. If the claimant is not a commercial organization, without the resources to challenge the defendant’s threats, it would presumably be less reasonable for such a person to resort to litigation rather than submit to the defendant’s demands. Consequently, the notion of what is reasonable will vary depending on who the claimant is. So the question which must be asked is what it would be reasonable for the particular claimant to have done in the circumstances.

(3) Coerced or Overborne Will

Focusing on whether the claimant’s will has been coerced or overborne identifies accurately those cases where restitution should be awarded for economic duress. This approach does, however, suffer from one major drawback, arising from the very use of the terms ‘coerced’ or ‘overborne’ will, which have a tendency to mislead, since, if interpreted literally, they suggest that the claimant’s intention must have been completely vitiated by the defendant’s threats so that the claimant was acting involuntarily in doing what the defendant demanded.^{[51] [52]} If such an interpretation is adopted, economic duress would be impossible to establish, since in these cases the claimant does have a choice as to whether or not to comply with the defendant’s demands. This was recognized by the House of Lords in Lynch v DPP of Northern Ireland,¹⁴⁶ which unanimously rejected the overborne will theory in respect of the operation of the defence of duress in the criminal law. This interpretation of a coerced or overborne will should be rejected for the law of restitution as well, but this does not mean that the test of a coerced will should be rejected completely, because it does have a legitimate and workable function once it is recognized that the crucial issue before the court is not whether the claimant had no choice at all but to submit to the pressure, but rather, whether the claimant’s choice was freely exercised. As Dyson J recognized in DSND Subsea Ltd v PGS Offshore Technology AS,^[53] a key ingredient of economic duress is whether the practical effect of the pressure was that the victim lacked any ‘practical choice’. The preferable view is that this will be established if the defendant’s threats were unlawful and were a ‘but for’ cause of the claimant’s actions, because there was no reasonable alternative for the claimant but to submit to the defendant’s demands. Whilst the use of language such as an ‘overborne’ or ‘coerced’ will might be described as over-dramatic it is perfectly intelligible,^[54] although ‘coercion’ of the will is more accurate than the will being ‘overborne’.

All of the reported cases on economic duress either recognize or are consistent with the coerced will analysis of economic duress. For example, in B and S Contracts and Design Ltd v Victor Green Publications Ltd¹⁴⁹ the claimant agreed to erect exhibition stands for the defendant. The claimant’s employees, who had already received redundancy notices, demanded severance pay of ?9,000 to which they were not entitled. Since the claimant was only able to offer the employees severance pay of ?4,500, it threatened the defendant that, if it did not pay the remaining ?4,500, the claimant would not be able to complete the contract. Since the defendant required the stands to be erected urgently it paid the money as requested. When the defendant came to pay the claimant for its work in erecting and dismantling the stands the defendant treated the ?4,500 which it had already paid to the claimant as an advance payment, and it deducted this sum from the contract price. The claimant sued to recover the ?4,500 from the defendant and failed, because the Court of Appeal found that the defendant had no choice but to pay the money, since cancellation of the contract to erect the stands would have caused it severe financial harm. Therefore, it was proper to treat the money paid as an advance payment and deduct it from the contract price. The finding of economic duress on these facts was surely correct. The claimant had made a veiled threat to commit an unlawful act, namely that it would breach the contract if the defendant failed to pay the sum demanded. This threat was the ‘but for’ cause of the defendant making the payment, since, as Eveleigh LJ put it, the defendant had ‘been influenced against [its] will to pay the money’.^[55] It was also expressly found that the defendant had no reasonable alternative but to pay the money.^[56] This was because there was no chance that the defendant could have found another source of labour to erect the stands and, if the stands were not erected, it would be liable to a number of exhibitors who had leased exhibition space.

Similarly, in The Atlantic Baron^[57] a shipbuilder agreed to build a ship for a fixed price in United States dollars. After the purchaser had paid the first instalment, the dollar was devalued by 10 per cent and the builder demanded an increase of 10 per cent on the remaining instalments which were due to it, threatening to breach the contract if it did not receive the extra payments. The purchaser needed the ship urgently since it was negotiating a lucrative contract for the charter of the ship, and so it paid the additional amounts when it paid the remaining instalments to the builder. For all but one of these payments the purchaser said that the payments were made without prejudice to its right to recover the additional amount paid, although it did pay the final instalment without protest. The purchaser did not commence proceedings for restitution of the excess amounts until over two years later. It was held that the builder’s threat to break the contract constituted economic duress. Clearly the builder had made an unlawful threat and this was presumably the ‘but for’ cause of the purchaser paying the extra amount demanded. The purchaser also had no reasonable alternative but to pay this amount because it needed the ship urgently for the purpose of the charterparty, and in the circumstances it would have been unreasonable to take the matter to arbitration because of the ‘inherent unavoidable uncertainties of litigation’.^[58] Despite this, the purchaser was not able to rescind the contract because its conduct in making the final payment without protest and its delay in seeking rescission were considered to constitute affirmation of the variation of the contract, so that rescission was barred.¹⁵⁴

One of the best examples of the coerced will theory in operation is Enimont Overseas AG v Rojugotanker Zadar (The Olib),¹⁵⁵ where the defendant had chartered its ship for the transport of the claimant’s cargo but, once it had been transported to the nominated destination, nobody accepted delivery. The defendant told the claimant that it would sell the cargo if the claimant did not collect it and pay the sums which were outstanding. Eventually the claimant paid the sums demanded and then sought to recover them on the ground of duress. The question before the trial judge was whether the claimant had a good arguable case of economic duress, for the purposes of serving a claim form on the defendant out of the jurisdiction. The judge held that the claimant had not established such a case for two main reasons. First, it had not shown that the defendant’s threat to sell the goods was unlawful as a breach of the charterparty, because the condition of the cargo was such that immediate sale was essential, and, secondly, it had not established that the defendant’s threats had induced it to make the payments. The judge’s reasoning identifies the two essential features of the coerced will theory, namely the making of an unlawful threat which was the ‘but for’ cause of the claimant’s actions.

(iii) Summary of the Law on Economic Duress

Despite the uncertainties arising from the interpretation of ‘illegitimate pressure’, the preferable view is that economic duress will be established where the defendant actually committed or threatened to commit an unlawful act, whether this was breach of contract, a tort or a crime, in circumstances where, but for the pressure exerted by the defendant, the claimant would not have acted in the way the defendant demanded, and this test of causation requires examination, at the very least, as to whether the claimant had no reasonable alternative open to him or her but to submit to the defendant’s demands.

• [1] [2000] BLR 530, [131].
• [2] Adam Opel GmbH v Mitras Automotive (UK) Ltd [2007] EWHC 3481 (QB), [26] (David Donaldson QC).
• [3] According to Smith, in ‘Contracting under Pressure: A Theory of Duress’, there are two separate bases ofduress, one emphasizing the defendant’s wrongdoing and the other emphasizing impairment of the claimant’sconsent. Whilst this distinction is theoretically attractive, it does not represent the law. The distinction can,however, be used to explain the difference of approach to duress of the person and goods on the one hand andeconomic duress on the other. This is because it appears easier to obtain restitution for duress of the personand goods, presumably because the defendant’s wrongdoing is paramount in such cases. In the context ofeconomic duress, the defendant’s wrongdoing is less obvious, and so greater emphasis is placed on the validityof the claimant’s consent. This distinction can also be used to explain why different tests of causation should beadopted for duress of the person and goods on the one hand and economic duress on the other. See furtherp 221, below.
• [4] Universe Tankships Inc of Monrovia v International Transport Workers Federation [1983] AC 366, 400(Lord Scarman); The Evia Luck [1992] 2 AC 152; Huyton SA v Peter Cremer GmbH [1999] 1 Lloyd’s Rep 620,629 (Mance J); DSND Subsea Ltd v PGS Offshore Technology AS [2000] BLR 530, [131] (Dyson J); CarillionConstruction Ltd v Felix (UK) Ltd [2001] BLR 1, [24] (Dyson J); Adam Opel GmbH v Mitras Automotive (UK)Ltd [2007] EWHC 3481 (QB), [25] (David Donaldson QC); Borelli v Ting [2012] UKPC 21; Progress BulkCarriers Ltd v Tube City IMS LCC [2012] EWHC 273 (Comm), [2012] 1 Lloyd’s Rep 501 (Comm).
• [5] The Evia Luck [1992] 2 AC 152, 165 (Lord Goff).
• [6] See p 215, above. 94 See p 229, below. 95 [1976] AC 104, 121.
• [7] 96 [2000] BLR 530, [131].
• [8] 97 Adam Opel GmbH v Mitras Automotive (UK) Ltd [2007] EWHC 3481 (QB), [26].
• [9] 98 See also The Universe Sentinel [1983] 1 AC 366, 385 (Lord Diplock), 391 (Lord Cross), and 400 (Lord
• [10] Scarman) and The Evia Luck [1992] 2 AC 152, 166 (Lord Goff).
• [11] 99 See further p 221, below.
• [12] 100 Burrows regards this as the preferable test: AS Burrows, The Law of Restitution (3rd edn, Oxford: Oxford
• [13] University Press, 2011), 274. McKendrick rejects it: ‘The Further Travails of Duress’ in A Burrows and LordRodger (eds), Mapping the Law: Essays in Memory of Peter Birks (Oxford: Oxford University Press), 188.
• [14] PBH Birks, An Introduction to the Law of Restitution (rev edn, Oxford: Clarendon Press, 1989), 183. Analternative test suggested by Birks, ibid, was to distinguish between a threat and a warning and to denyrestitution where the defendant was simply communicating to the claimant that he or she was subject to apressure which was not of his or her own making, whereas restitution would lie where the defendant had‘threatened the claimant with a pressure of his own making’. This distinction between threats and warning isjust a more specific attempt to identify when a defendant was acting in bad faith. Birks later said that thedistinction between threats and warning was too fine and too easily abused: ‘The Travails of Duress’, 346.
• [15] [1999] 1 Lloyd’s Rep 620, 637.
• [16] Burrows, The Law of Restitution (3rd edn), 273.
• [17] [1994] 4 All ER 714. See p 215, above. The decision of the Court of Appeal in D and C Builders v Rees[1966] 2 QB 617 also appears to support a good faith test. In that case the claimant was not estopped fromdenying that it had agreed to accept a lesser sum of money for building work, because the defendant had actedin bad faith since he knew that the claimant was facing bankruptcy and so took advantage of his strongerbargaining position by threatening to pay nothing at all unless the claimant agreed to accept a lesser amount ofmoney for the work. But this case can just as easily, and preferably, be analysed as involving exploitation ratherthan compulsion, where the fault of the defendant is consequently relevant.
• [18] Particularly Borelli v Ting [2012] UKPC 21; Progress Bulk Carriers Ltd v Tube City IMS LCC [2012]EWHC 273 (Comm), [2012] 1 Lloyd’s Rep 501 (Comm). See p 219, above.
• [19] See p 229, below.
• [20] See, for example, The Atlantic Baron [1979] QB 705 and Atlas Express Ltd v Kafco (Importers andDistributors) Ltd [1989] QB 833.
• [21] Burrows, The Law of Restitution (3rd edn), 274.
• [22] See McKendrick, ‘The Further Travails of Duress’, 188.
• [23] As recognized in Adam Opel GmbH v Mitras Automotive (UK) Ltd [2007] EWHC 3481 (QB), [26](David Donaldson QC).
• [24] The Siboen and The Sibotre [1976] 1 Lloyd’s Rep 293, 336 (Kerr J); Pao On v Lau Yiu Long [1980] AC614, 635 (Lord Scarman); Hennessy v Craigmyle and Co Ltd [1986] ICR 461, 468 (Sir John Donaldson MR);The Alev [1989] 1 Lloyd’s Rep 138, 145 (Hobhouse J).
• [25] [1980] AC 614, 635.
• [26] Some of these factors were identified by Dyson J in DSND Subsea Ltd v PGS Offshore Technology AS[2000] BLR 530, [131], to establish illegitimate pressure. See p 219, above.
• [27] Although this has been undermined somewhat by the recent recognition of lawful act duress whichexpands the scope of economic duress potentially significantly. See p 215, above.
• [28] [1983] AC 366. 3 Ibid, 405 (emphasis added).
• [29] 117 E MacDonald, ‘Duress by Threatened Breach of Contract’ (1989) JBL 460, 472; Birks, ‘The Travails of
• [30] Duress’; McKendrick, ‘The Further Travails of Duress’, 186.
• [31] [1976] AC 104.
• [32] See, for example, Lord Goff in The Evia Luck [1992] 2 AC 152, 165 and McHugh JA in CrescendoManagement Pty Ltd v Westpac Banking Corporation (1988) 19 NSWLR 40, 46.
• [33] See p 209, above.
• [34] McKendrick, ‘The Further Travails of Duress’, 194. 2 See Chapter 9.
• [35] 123 See p 187, above. 4 See p 210, above.
• [36] 125 [1999] 1 Lloyd’s Rep 620. In DSND Subsea Ltd v PGS Offshore Technology AS [2000] BLR 530, [131]
• [37] Dyson J used the language of a ‘significant cause’. See also The Evia Luck [1992] 2 AC 152, 165 (Lord Goff);
• [38] Carillion Construction Ltd v Felix (UK) Ltd [2001] BLR 1; Cantor Index Ltd v Shortall [2002] All ER (D) 161. CfD O’Sullivan, S Elliott, and R Zakrzewski, The Law of Rescission (Oxford: Oxford University Press, 2007), 158,who assert that a contributory test of causation should suffice, because the victim also needs to show that thethreat was illegitimate and that no practical alternative was available but to submit to the threat.
• [39] Birks, An Introduction to the Law of Restitution, 183.
• [40] Maskett v Horner [1915] 3 KB 106, 124 (Buckley LJ); Huyton SA v Peter Cremer GmbH [1999] 1 Lloyd’sRep 620. In Atlas Express Ltd v Kafco Ltd [1989] QB 833 economic duress was established despite the absenceof any protest.
• [41] See R Halson, ‘Opportunism, Economic Duress and Contractual Modifications’ (1991) 107 LQR 649,667-8.
• [42] [1983] AC 366, 400. 136 [1980] AC 614, 627.
• [43] 137 In DSND Subsea Ltd v PGS Offshore Technology AS [2000] BLR 530, [136] Dyson J described this as ‘no
• [44] realistic practical alternative but to concede’ to the pressure.
• [45] A Phang, ‘Economic Duress: Recent Difficulties and Possible Alternatives’ [1997] RLR 53, 59. In HuytonSA v Peter Cremer GmbH [1999] 1 Lloyd’s Rep 620,636 Mance J described the factor as ‘not being an inflexiblethird essential requirement of economic duress’, but he clearly recognized that it was a highly significant factor,since relief would be inappropriate if the claimant chose, unreasonably, not to pursue an alternative remedy.
• [46] See, in particular, Lord Scarman in The Universe Sentinel [1983] 1 AC 366, 400.
• [47] [1984] ICR 419. 141 Ibid, 428. See also The Alev [1989] 1 Lloyd’s Rep 138, 147 (Hobhouse J).
• [48] 142 [1986] ICR 461.
• [49] [1989] 1 Lloyd’s Rep 138.
• [50] For example, in Astley v Reynolds (1731) 2 Stra 915,93 ER939, the defendant obtained restitution on theground of duress of property even though he could have brought an action in trover rather than pay the extramoney which the defendant demanded.
• [51] The test was interpreted in this way by McHugh JA in Crescendo Management Pty Ltd v WestpacBanking Corpn (1988) 19 NSWLR 40, 45, who consequently rejected it. See also Lord Goff in The Evia Luck[1992] 2 AC 152, 166 and Lord Diplock in The Universe Sentinel [1983] 1 AC 366, 384.
• [52] [1975] AC 653. See especially Lord Simon, ibid, 461. See also PS Atiyah, ‘Economic Duress and the“Overborne Will”’ (1982) 98 LQR 197 and Dawson, ‘Economic Duress—An Essay in Perspective’.
• [53] [2000] BLR 530, [131]. 4 Smith, ‘Contracting under Pressure: A Theory of Duress’, 365.
• [54] 149 [1984] ICR 419.
• [55] Ibid, 423. 2 Ibid, 426 (Griffiths LJ). 3 [1979] QB 705. 4 Ibid, 719 (Mocatta J).
• [56] 154 See also DSND Subsea Ltd v PGS Offshore Technology AS [2000] BLR 530, [148] (Dyson J). See p 27,
• [57] above, for analysis of the bar of affirmation.
• [58] 155 [1991] 2 Lloyd’s LR 108.