Principles of Business Law Past Paper PDF 2024

Principles of Business Law Semester 2 2024 TOPIC 8: VITIATING FACTORS DURESS Duress: Overview  Duress exists when one party uses, or threatens to use, illegitimate pressure to obtain the other party’s consent.  Examples:  physical harm to the person;  Barton v...

Principles of Business Law Semester 2 2024 TOPIC 8: VITIATING FACTORS DURESS Duress: Overview  Duress exists when one party uses, or threatens to use, illegitimate pressure to obtain the other party’s consent.  Examples:  physical harm to the person;  Barton v Armstrong  economic harm;  North Ocean Shipping Co Ltd v Hyundai Construction Co Ltd  illegal actions over goods (such as refusing or threatening to refuse to return goods or threatening to destroy them).  Contracts can be set aside where a recognised form of duress caused the innocent party to enter into the contract.  The victim of duress must act reasonably soon to have the contract set aside, once the influence has subsided, or they will be treated as having affirmed the contract (recall video 8.1). Duress to person: Barton v Armstrong FPBCL p 315-6 Facts  B alleged that A had coerced him into entering a contract to buy certain companies by threatening the life and safety of B and B’s family.  The trial judge made three findings of fact: 1. that A made the threats alleged; 2. that B took these threats seriously and was justified in doing so; 3. that there were compelling business reasons why B agreed to the sale. Issue  Could the sale contract be set aside on the basis of duress? Duress to person: Barton v Armstrong (ctd) Decision  The contract could be set aside. Reasoning  Actionable duress: A’s conduct amounted to duress (threat to person).  Causation: Even though there were compelling business reasons that contributed to B’s decision to enter into the agreement, the contract could be set aside as the duress contributed to B’s decision to enter the contract.  Affirmation: B made it clear, in a timely fashion, that he was treating the contract as at an end. Duress: Threat of economic harm North Ocean Shipping v Hyundai Constructions FPBCL p 395 Facts  H agreed to build a tanker for NOS for a fixed price stated in $US.  After the contract was formed there was a 10% devaluation in the $US which meant building the tanker would no longer be profitable to H.  H stated it would not build the ship unless NOS agreed to a 10% increase in the price (H had no contractual right to demand increased payment).  NOS needed the tanker urgently so agreed to pay the increased price. Issue  Was NOS bound to pay the increased price?  Did H’s conduct amount to duress? Threat of economic harm North Ocean Shipping v Hyundai Constructions (ctd) Decision  NOS remained bound by the promise made. Reason  Duress: A threat to breach a contractual obligation will amount to duress.  Causation: NOS would not have agreed to pay the additional amount if H did not threaten to breach the contract.  Affirmation: NOS did not exercise the right to rescind the contract within a reasonable time – it thus affirmed the contract.