In CTN Cash and Carry Ltd v Gallaher Ltd Steyn LJ highlighted the fact that for a case like this to succeed in economic duress the circumstances would have to be exceptional: “Outside the field of protected relationships, and in a purely commercial context, it might be a relatively rare case in which ‘lawful act duress’ can be established”. It is widely acknowledged that this area of contract law is underdeveloped and due to the overlap with undue influence (covered below) and to an ever decreasing extent with consideration, it is difficult to predict how the courts will interpret cases of economic duress.
Delilah is more likely to have the contract declared voidable if she argues that she was subject to undue influence. Undue influence is divided into two main categories; presumed- and actual- undue influence. If there existed a relationship of trust and confidence (including, but not limited to relationships such as solicitor & client or doctor & patient etc.) between the two parties then the onus would be on Samson to prove that he had not abused this relationship of trust and that Delilah entered into the contract freely. In National Westminster Bank Plc v. Morgan it was also held that the claimant would have to show that, as a result of the presumed undue influence, he suffered a “manifest disadvantage”, the definition of which was further explained in Bank of Credit and Commerce International SA v. Aboody.
Since the nature of their relationship is not mentioned in the question (either expressly or impliedly), it can be assumed that no such ‘special’ relationship existed and therefore the claim with which Delilah is most likely to succeed would be under actual undue influence, though the burden of proof would then lie with her. A good example of actual undue influence is the late 19th century case of Williams v. Bayley where it was decided that the threat of prosecution (of the respondent’s son) was ruled to constitute actual undue influence. More recently, in C.I.B.C. Mortgages Plc v. Pitt, Lord Browne-Wilkinson stated that “Actual undue influence is a species of fraud. Like any other victim of fraud, a person who has been induced by undue influence to carry out a transaction which he did not freely and knowingly enter into is entitled to have that transaction set aside as of right”. He also reiterated that once actual undue influence has been proven by the claimant, no further evidence of a ‘manifest disadvantage’ need be shown; this is particularly helpful in Delilah’s case, as she was paid £150,000 for the café which, although one can only speculate, may have been a perfectly reasonable price and may therefore not have been manifestly disadvantageous to her.
In Lloyds Bank v. Bundy, Lord Denning further emphasised the general principles applied by the courts when he stated that “English law gives relief to one who without independent advice enters into a contract upon terms which are very unfair or transfers property for a consideration which is grossly inadequate, when his bargaining power is grievously impaired by reason of his own needs and desires…coupled with undue influence or pressures brought to bear on him by or for the benefit of the other.”
Therefore, if the courts rule that Delilah was unduly influenced into entering the contract, Delilah would have the right to have the contract set aside. This claim can be rebutted if it can be proven that Delilah acted independently i.e. by seeking independent advice, although again this is not explicitly confirmed or denied in the title question. A claim in actual undue influence is therefore the most likely remedy for Delilah should she seek to recover her café and have the contract of sale declared voidable. (Though given the subsequent finding of structural damage, she may choose not to challenge the contract).
Before moving on to the second part of the question, it is worth mentioning that Delilah may be able start an action against Samson for breach of the Protection from Harassment Act (1997) which creates a statutory tort of harassment (for which an injunction may be granted), which is defined as conduct which takes place on two or more occasions and which may result in “alarming the person or causing the person distress”.
The next question about which Delilah shall require legal advice regards the discovery that the property which she has sold (but not yet conveyed) to Samson is structurally flawed and that the cost of repair is £50,000. If the contract, as discussed above, is declared voidable on grounds of undue influence (or for any other reason), then no further contractual issues arise relating to the fundamental structural damage of the café: Delilah would, to secure the safety of her café, have to pay for the repairs to the property which would have been restored to her as a result of her successful claim.
If, however, the contract of sale is deemed by the courts to be valid (i.e. Delilah does not - or attempts and fails to - convince the courts that she was unduly influenced into entering into the contract with Samson), then Samson may be able to have the contract declared void ab initio (this time in his favour) on the grounds of common (or mutual) mistake. The doctrine of common mistake would be applicable in this instance because both parties were unaware of the pre-existing problem. The case of Bell v. Lever Brothers Ltd could be relied upon by Delilah if Samson did pursue the argument of common mistake. The reason for the claimants failure to recover the total of £50,000 in Bell was that the payments were deemed not to be ‘fundamental’ to the contract and that the claimants may have made the payments even if they had been aware that they were not obliged to do so due to the defendants breach of contract during their terms as chairman and vice-chairman. Samson’s persistence in attempting to secure the sale of the café may therefore be used against him by Delilah to show that the structural damage in this scenario is not fundamental to the purpose of the contract (see Lord Thankerton’s test below).
The question states that both parties ‘discover’ the risk of subsidence after the contract of sale is completed, this means that there was no misrepresentation by Delilah and Samson would not be able to make a claim to declare the contract voidable on those grounds. Samson, to have the contract declared void, would need to show the courts that the common mistake “relate[s] to something which both [parties] must necessarily have accepted in their minds as an essential element of the subject matter” (as per Lord Thankerton in Bell v. Lever Brothers Ltd).
Samson, in his attempt to have the contract declared void, may also rely on the Sale of Goods Act (1979) (particularly s.14(2)), which contains implied terms about the quality of the goods being sold. It is also noteworthy that the courts in general do not want the doctrine of mistake to be used by parties who have entered into a contract only to discover it has been a worse bargain than they had initially presumed (hence the decision in Bell). Given that the House of Lords in Bell deemed £50,000 not to be ‘fundamental’ to the purpose of the contract in 1929 it is perfectly possible that Samson would also not be successful in a claim to have the contract declared void.
Samson may claim that both parties were mistaken as to the quality of the property sold, but, as with Bell the courts are unlikely to uphold this reasoning in this scenario and there are various cases which can be used by Delilah in defence of such an action; in Leaf v. Intenational Galleries for example, the courts refused to grant the equitable remedy of rescission to the claimant who purchased a painting (mistakenly) believing it to be a Constable (although the claimant did not seek to have the contract declared void). A case which may assist Samson is that of Nicholson and Venn v. Smith-Marriott in which the claimant purchased napkins which he (mistakenly) believed were formerly ‘authentic property’ of Charles I. However, Lord Denning in Solle v. Butcher to a certain extent negated that ruling by emphasising that cases of common mistake “must now be read in the light of Bell v. Lever Bros Ltd. The correct interpretation of that case, to my mind, is that once a contract has been made, that is to say, once the parties…have to all outward appearances agreed with sufficient certainty in the same terms on the same subject-matter, then the contract is good unless and until it is set aside for breach of some condition”.
Bibliography
McKendrick, E Contract Law (Palgrave 4th ed.)
Beale, Bishop & Furmston Contract – Cases & Materials (Butterworths 4th ed.)
Birks, Introduction to the Law of Restitution (1985) p183
Giliker & Beckwith, Tort (2001)
Hanbury & Martin, Modern Equity (Sweet & Maxwell 16th ed.)
Electronic Sources
IOLIS CD-ROM 2002/2003 ‘Contract Law’
WestLaw UK
Word Count: 1952
Birks, Introduction to the Law of Restitution (1985) p183
