Barclays Bank v O’ Brien: leading UK authority and set out steps to be taken, there is a higher test here ‘manifest disadvantage test’. Not falling into first category above, but variety of case-law on point (new developments now with Irish cts following RBS v Etridge more recently). Husband and wife are in this category: IBRC v Quinn. See also: Armstrong v Armstrong (siblings) Tolhurst v Smith (members of pop group) Gregg v Kidd (siblings) Lloyd’s Bank v Bundy (bank/customer- based on their previous dealings and ct will assess whether the transaction was in the best interests of the customer) Credit Lyonnais Bank Nederland v Burch (employer/employee). Must prove the transaction was entered into in favour of the other party was once that required explanation. McGonigle v Black (an uncle/nephew relationship). If these threats failed, suppose Jack then tells Olson, “I’m going to haul you into court and sue your pants off.O 2b- other relationships: any kind of relationship due to trust and confidence of the parties. Even though Olson may be guilty, this threat makes the repurchase contract voidable, because it is a misuse for personal ends of a power (to go to the police) given each of us for other purposes. Suppose Jack knows that Olson has been tampering with his cars’ odometers, a federal offense, and threatens to have Olson prosecuted if he will not repurchase the car. The agreement is voidable, even though the underlying deal is fair, if Olson feels he has no reasonable alternative and is frightened into agreeing. He threatens to break windows in Olson’s showroom if Olson does not buy the car back for $2,150, the purchase price. Olson, and the next day realizes he bought a lemon. Jack buys a car from a local used-car salesman, Mr. ![]() There are many types of improper threats that might induce a party to enter into a contract: threats to commit a crime or a tort (e.g., bodily harm or taking of property), to instigate criminal prosecution, to instigate civil proceedings when a threat is made in bad faith, to breach a “duty of good faith and fair dealing under a contract with the recipient,” or to disclose embarrassing details about a person’s private life. Such facts as the victim’s belief that the threatener had the ability to carry out the threat and the length of time between the threat and assent are relevant in determining whether the threat did prompt the assent. ![]() The question is whether the threat in fact induced assent by the victim. It does not matter that the person threatened is unusually timid or that a reasonable person would not have felt threatened. Third, the test for inducement is subjective. If, for example, a supplier threatens to hold up shipment of necessary goods unless the buyer agrees to pay more than the contract price, this would not be duress if the buyer could purchase identical supplies from someone else. Second, there must be no reasonable alternative. This rule contains a number of elements.įirst, the threat must be improper. Here the perpetrator threatens the victim, who feels there is no reasonable alternative but to assent to the contract. ![]() The second kind of duress is duress by threat it is more common than physical duress. The Restatement is undoubtedly correct that there are “relatively rare situations in which actual physical force” is used to compel assent to a contract. He is, it is sometimes said, ‘a mere mechanical instrument.’ The result is that there is no contract at all, or a ‘void contract’ as distinguished from a voidable one” (emphasis added). It is defined by the Restatement (Second) of Contracts in Section 174: “If conduct that appears to be a manifestation of assent by a party who does not intend to engage in that conduct is physically compelled by duress, the conduct is not effective as a manifestation of assent.”Ĭomment (a) to Section 174 provides in part, “This Section involves an application of that principle to those relatively rare situations in which actual physical force has been used to compel a party to appear to assent to a contract.…The essence of this type of duress is that a party is compelled by physical force to do an act that he has no intention of doing. If a person is forced into entering a contract on threat of physical bodily harm, he or she is the victim of physical duress.
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