Duress by Threatened Breach of Contract

Duress by Threatened Breach of Contract

R. J. Sutton *

1. Introduction

If two people have made a contract and one wishes to change
its terms, what may he do to persuade the other to agree? May he
re-open the negotiations afresh? May he refuse to perform the con-
tract until the change he desires is made? If contract rights are
to be effectively protected, some legal control must be exercised
over the undue use of pressure. The extent of this control, as it is
found in the common law, is the subject of the present study.

The policy against such pressure has traditionally been expressed
in the law of consideration. If, in return for the contract modifica-
tion, the party seeking it gives no more than the promise to perform
the duty he already owes under the contract, the modification will
not be supported by consideration and is usually invalid. This is the
“pre-existing duty” rule, which can only be justified in modem times
as a means of preventing extortion by threatened breach of duty.’
The need for this protection recently was illustrated by an English
case where one party refused to perform his contract in highly
coercive and unjustified circumstances. 2

Such a policy cannot be implemented through the law of consi-
deration alone. The “pre-existing duty” rule may operate arbitrarily,
supporting extortive contracts where there is technical consideration.
It may strike down reasonable modifications designed to make
workable contracts which have unexpectedly become unsuitable.
Only in a minority of American jurisdictions is there any effort to

* Senior Lecturer in Law, University of Auckland, New Zealand. The writer’s
interest in this topic began with research undertaken at the Harvard Law
School, and he had the benefit of the comments of Professor J. P. Dawson
and Dr Gareth Jones, of Cambridge, on his earlier efforts. He also thanks the
Oxford Law Faculty for the use of its library facilities for the present research
and Mr F. M. B. Reynolds for helpful textual comments on the final draft
of this article.

‘ See Goodhart, Performance of an Existing Duty as Consideration, (1956)

72 L.Q.R. 490.

2 D. & C. Builders v. Rees, [1966] 2 Q.B. 617, [1965] 3 All E.R. 837 (CA.);
Winder, The Equitable Doctrine of Pressure, (1966) 82 L.Q.R. 165 and Cornish,
Economic Duress, (1966) 29 M.L.R. 428.

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THREATENED BREACH OF CONTRACT

deal with such a modification on its general merits And what if the
rule does apply? The transaction may be invalid, but remedial
problems which follow are apparently left unsolved. It is hardly
surprising that courts in the twentieth century are exploring other
forms of protection.

This article will examine the potential contribution of the law of
“duress”. Duress is defined in this way in the Restatement of
Contracts:

… any wrongful threat of one person by words or other conduct that
induces another to enter into a transaction under the influence of such fear
as precludes him from exercising free will and judgment if the threat
was intended or should reasonably have been expected to operate as an
inducement

The definition is applicable to most legal rules, including “compul-
sion” or “extortion”, although the precise meanings of the terms
used, especially “wrongful” and “free will”, may differ from one
rule to another. It is helpful because it identifies three important
elements of duress.

The first is the threat which is employed. The system of classi-
fication in most judicial and textual treatments of duress depends
upon what kind of a threat it is. As far as duress by threatened
breach of contract is concerned, there are a number of Common-
wealth decisions which can broadly be classified under that head.
There is a much greater body of American case law from which
examples may be drawn to assist in the understanding of Common-
wealth cases.

Secondly, there is the interference with “freedom of will”.
Generally the courts will insist upon this. Otherwise, they could not
stop short of a broad jurisdictioi to investigate the merits of all
consensual transactions. The required degree of coercion, however,
may vary. Take; for example, a man who is faced with bankruptcy,
and a man who has to walk to the next shop to get what he wants.
Both may be said to “act against their will” if they decide to submit
to the threat. The courts may be expected to discriminate, requiring
a higher degree of coercion to be proved where the attacked trans-

3 E.g. King v. Duluth, M. & N. Ry., 61 Minn. 482, 63 N.W. 1105 (1895). See 1A
Corbin on Contracts (1963), paras. 183-4; 1 Williston on Contracts 3d ed. (1957),
541-2, para. 130A; Annot., 12 A.L.R. (2d) 80 (1950).

4 American Law Institute, 2 Restatement of the Law of Contracts (1932), 938,
para. 492(b) (Restatement of Contracts). This article is not concerned with
the more extreme form of duress specified in, para. 492(a).

5 For discussions of “freedom of will”, see Dalzell, Duress by Economic

Pressure, (1942) 20 N.C.L.R. 237, 239 and articles there cited.

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action has merit.” Similar variations in degree may be expected
where the party who has allegedly been coerced might have taken
legal steps to avoid the pressure but prefers not to do so because
of the delay or risk involved.7 While some theorists speak as if a
single standard of coercion applies in all cases,” it is safer to examine
the particular rules governing each case.

Thirdly, there is the element of “wrongfulness”. This term is
applied not to the action which is threatened, but to the threat and
the purpose for which it is made. The mere fact that the action
threatened would be a breach of legal duty does not necessarily
mean that the threat itself is “wrongful”. Conversely, a threat to
carry out a lawful act may nevertheless be wrongful:

Just as acts contracted for may be against public policy and the contract
vitiated for that reason, though the law imposes no penalty for doing them,
so acts that involve abuse of legal remedies or that are wrongful in a
moral sense, if made use of as a means of causing fear vitiate a transaction
induced by that fear, though they may not in themselves be legal wrongsp
What principles underlie the decision to hold a threat “wrongful”?
In America, opinions differ. Professor Dalzell seems to regard all
legally unauthorized pressure as wrongful, the function of the law
of duress being to free people from all unreasonable pressures on
them to make a contract. 10 Professor Dawson, on the other hand,
emphasizes the law’s role in correcting unequal exchanges which can
result from the unfair use of disproportionate power. He suggests
that undue attention may be paid to the wrongfulness of the means
used, when the crucial factor is often the inequality of exchange.”
In the present context, however, the difference is less significant
than might be supposed.

The Restatement definition is not adopted as a “test” for duress.
Its concepts are too indefinite to be falsified or verified by decisions.
It is used instead as a conceptual framework within which it is

6 Compare Dawson, Duress Through Civil Litigation, (1947) 45 Mich.L.Rev.
571, 575 (Dawson, “Civil Litigation”), with Dawson, Economic Duress – An
Essay in Perspective, (1947) 45 Mich.L.Rev. 253, 256-8 (Dawson, “Economic
Duress”).

380;, Dawson, “Civil Litigation”, 686-7.

75 Williston on Contracts Rev. ed. (1937), para. 1620; Dalzell, supra, f.n.5,
8Dalzell, ibid., 379-81 (same standard applied
to variable circumstances

of each case).

0 2 Restatement of Contracts (1932), 941, para. 492, comment g. Cf. Salmond
and Winfield, Principles of the Law of Contracts (1927), 259-60.
10 DaIzell, supra, f.n.5, 362-7.
“Economic Duress”, 289; “Civil Litigation”, 712-16. See also
“Dawson,
Dawson, Economic Duress and the Fair Exchange in French and German Law,
(1937) 11 Tul.L.Rev. 345, 12 Tul.L.Rev. 42.

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THREATENED BREACH OF CONTRACT

possible to analyse and compare decisions from various jurisdic-
tions. The analysis will be used in the next section to show how the
law of duress extended to cover duress by threatened breach of
contract. In the following section it becomes a basis for assessing
the developments which might be expected if present trends con-
tinue.

2. How the Doctrine of Duress Developed

(a) Duress Generally

In English common law, the doctrine of duress could only be
invoked in the case of contracts induced by certain extremely
vicious threats. Unlawful imprisonment could constitute duress, 2
as could .”menace”’13 which forced the victim to submit for fear:
1. of loss of life; 2. of loss of member; 3. of mayhem; 4. of imprison-
ment.14 Insufficient were lesser threats like battery, destruction of
goods, or the wrongful detention of property,15 at least in earlier law.
In later law, the doctrine was thought to extend to most threats in-
volving physical violence. 6 The threat had to be real: vain threats
that would not coerce the “constant man” were not enough. 17 Once
such a threat was proved, relief’ was apparently given without
enquiry into the merits of the coerced transaction itself.

Three centuries have passed since these simple rules were first
formulated, and they have changed little. Even the criminal law of
blackmail seems to have a wider scope and a more refined technique
for dealing with extortionate threats. 9 It seems that conduct which
does not fall within the common law of duress may yet be a
criminal offence? One concession has been made: the old standard
of the “constant man” has been abandoned in favour of a “subjective
test” under which the court enquires in each case whether the threat

12 1 Rolle Abr. 687.
13 2 Rolle Abr. 124 (duress per minas).
14 2 Co. Inst. 483.
35 Summer v. Ferryman (1709), 11 Mod. 201, 88 E.R. 989 (Q.B.).
16 Chitty on Contracts 2d ed. (1834), 169.
N7 1 Co. Inst. 253b.
18 On whether the contract was void or voidable, see Lanham, Duress and

Void Contracts, (1966) 29 M.L.R. 615.

19Winder, The Development of Blackmail, (1941) 5 M.L.R. 21; Hooper,
Larceny by Intimidation, (1965) Crim.L.Rep. 532. See e.g. Thorne v. Motor
Trade Association, [1937] A.C. 797 (H.L.) (“legitimate business purpose” test).
20 E.g. Hardie and Lane Ltd. v. Chilton, [1928] 2 K.B. 306 (CA.), and Lord

Wright’s criticism in Thorne v. Motor Trade Association, ibid., 821-3.

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so terrorized its victim that he could not resist.21 On the whole
however the doctrine appears to be a primitive rule, little used
now that moral standards have improved.

It ought not to be inferred that the victims of less objectionable
threats were thought unworthy of protection since there is evidence
of extensive equitable powers of protection which operated alongside
the common law rule.2 2 They were exercised not merely in the case
of some special relationship which gave rise to an inference of over-
reaching,2s but in all cases where improper pressure was brought to
bear. It is believed that by the time the English court system was
fused in 1875, the Chancery courts had established a distinct juris-
diction in matters of “pressure” which did not amount to duress at
common law. 4 The supervision of contracts procured by threatening
criminal prosecution was the leading example,25
though of more
direct interest to the present enquiry was a single reported example
of a contract set aside because it was induced by a threat to break
a previous contract. 0

Why was the common law of duress not expanded? Presumably,
less objectionable threats did not fit in easily to the common law
formula. To decide whether relief should be given, the court would
have to consider a wider range of factors, such as the bona fides of
the party making the threat and the merits of the coerced trans-
action. Equity was better suited to deal with such complex issues.
Since fusion, however, this justification has become less satisfac-
tory. While some theorists argue that a wide equitable jurisdiction
remains,27 most contemporary opinion is cautious about endorsing
such extensive equitable powers. 8 The protection offered by equity
has become more precarious, and an extended common law rule is
now urgently needed.

21 Scott v. Sebright (1886), 12 P.D. 21, 24, quoted in Chitty on Contracts

12th ed. (1890), 220, and succeeding editions.

222 Bac. Abr. 7th ed. (1832), 772.
23 E.g. Hylton v. Hylton (1754), 2 Ves. Sen. 547, 548-9, 28 E.R. 349, 350 per

Lord Hardwicke, L.C.

24 Winder, Undue Influence and Coercion, (1939) 3 M.L.R. 97, 110-119.
2 15 Williams v. Bayley (1866), L.R. 1 H.L. 200.
2 0 Ormes v. Beadel (1860), 2 Giff. 166, 66 E.R. 70 (V.C.); rev’d on other

grounds (1860), 2 De G.F. & 1. 333, 45 E.R. 649 (L.C.).

27 Winder, supra, f.n.24; Salmond and Winfield, Principles of the Law of
Contracts (1927), 258-9; approved Mutual Finance Ltd. v. John Wetton & Sons
Ltd., [1937] 2 K.B. 389, 394, [1937] 2 All E.R. 657, 661.
2 8 Typical are Anson’s Law of Contracts 23d ed. (1969), 247-8; Treitel, Law of

Contract 3d ed. (1970), 345-6.

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THREATENED BREACH OF CONTRACT

(b) Duress of Property

Threats to property, according to the traditional common law
formulation, could not constitute duress. Threats of physical violence
were possibly an exception, if only because they implied a further
threat of physical injury to those who stood in the way. Nineteenth
century cases confirmed this narrow view of the law of duress. 9
Relief, if it was to be obtained at all, had to be obtained from courts
of equity.” To this general rule, a qualification must now be added.
A vital distinction was drawn, from early times, between the
setting aside of a contract and the recovery of money paid. 1 After
some confusion in the early nineteenth century,32 the distinction was
firmly adopted. The courts now held that if a person pays an invalid
claim in order to release property which has been unlawfully de-
tained, he may recover it0 3 Of this rule it was said,

… the principle … must be taken as well established and generally
recognised. It may produce the inconvenience of circuity of action; but
the evil of allowing extortion by means of a wrongful detention of goods
would be much greater; and the wrongdoer has no right to complain
when he is compelled to restore money which he was warned that he
had no right to extort. The case is wholly different from that class where
the parties have come to a voluntary settlement of their concerns, and
have chosen to pay what is found due.34

The rule applied in a variety of situations where property or business
interests were threatened in order to “enforce” an invalid demand.
For example, a mortgagee who refused to reconvey the land on
tender of the full amount due,35 and an official or a railway com-
pany which refused, on tender of the proper fee, to perform their
public or statutory duty,36 were brought within the rule.

Though the rule is obviously distinct from the traditional law of
duress, and some judges prefer to use a different name for it,37 it is
commonly known as “duress of goods” and falls within the general

Backhouse (1838), 3 M.&W. 633, 150 E.R. 1298 (Exch.).

2 Skeate v. Beale (1841), 11 Ad. & E. 983, 113 E.R. 688 (K.B.); Atlee v.
30 E.g. Mulholland v. Bartsch, [1939] 1 W.W.R. 100 (Alta. S.C.).
31 Astley v. Reynolds (1731), 2 Stra. 915, 93 E.R. 939 (K.B.).
32 E.g. Gulliver v. Cosens (1845), 1 C.B. 788, 135 E.R. 753 (C.P.); Skeate v.

Beale, supra, f.29.

Empire Shipping Co. (1860), 8 H.L.C. 338, 11 E.R. 459.

n Wakefield v. Newbon (1844), 6 Q.B. 276, 115 E.R. 107; Somes v. British
34 Wakefield v. Newbon, ibid., 281 and 108-9 per Lord Denman, CJ.
3 5 E.g. Fraser v. Pendlebury (1861), 31 LJ.C.P. 1.
1 E.g. Steele v. Williams (1853), 8 Exch. 625, 155 E.R. 1502; Great Western

Ry. Co. v. Sutton (1869), L.R. 4 H.L. 226.

37 See In Re Hooper & Grass’ Contract, [1949] V.L.R. 269, 273 per Fullagar, 3.

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definition of “duress” adopted from the Restatement. Its require-
ments are of interest, because they support the view that duress
rules may be more or less stringent depending upon the merits of
the transaction to be set aside. No particular degree of coercion is
required beyond proof that the disputed claim was paid in order to
obtain possession of wrongly detained property.38 The fact that the
demandant believed he had a valid claim is irrelevant 9 The quota-
tion above suggests that he must at least be warned that his claim
is invalid but even this is not now the case, as it has been held that
protest on the part of the person paying is no more than proof that
he pays unwillingly,40 and this may be proved in other ways. The
modesty of these requirements is presumably justified on the ground
that the retention of money which is not due has little claim to
protection compared to a valid contract.

The English approach to duress is thus fragmented, there being
not only separate legal and equitable rules, but also a special com-
mon law rule dealing with coerced payments. It may be contrasted
with the approach in the United States. There, though the same basic
rules were inherited, the courts seem to have accepted that any
threat to property can be duress in the fullest sense 41 Contracts
have been set aside on account of such a threat where the threat
was extremely coercive and the resulting transaction unfair 2 Some
courts, developing the “subjective test”, managed to include in the
law of duress most of what previously belonged to equity. 3 These
developments, which first appeared in the late nineteenth century,
encouraged theorists to conceive of a law of duress which would
bring all legal control of coercion within a single system of rules. M
“Economic duress”, a term designed to cover all unjustified threats
to a person’s property, business or other economic interests, came
into prominence in theoretical45 and later in judicial discussion of

3 8 Shaw v. Woodcock (1827), 7 Barn. & Cresw. 73, 108 E.R. 652 (K.B.).
39Knutson v. The Bourkes Syndicate, [1941] S.C.R. 419, 425.
4oMaskell v. Homer, [1915] 3 K.B. 106,120-1,124,126
(C.A.).
41 See 5 Williston on Contracts, supra, f.n.7, para. 1617; Dalzell, supra, fmn.5,

242.

595, 600, 59 L.R.A. 296 (1902).

42 E.g. First National Bank of David City v. Sargent, 65 Neb. 594, 81 N.W.
43 E.g. Galusha v. Sherman, 105 Wis. 263, 81 N.W. 495, 47 LR.A. 417 (1900).
Missouri law is a good example of the development of this principle: see
Mississipi Valley Trust Co. v. Begley, 298 Mo. 684, 252 S.W. 76 (1923), and cases
there cited.

1st ed. (1922), 2830; 2 Restatement of Contracts, Ch. 16, 938.

44 10 Am. & Eng. Encyc. Law 2d ed. (1899), 321-7; 3 Williston on Contracts
45 E.g. Dalzell, supra, f.n.5; Dawson, “Economic Duress”, supra, f.n.6. Cf.

Annot., 79 A.L.R. 655 (1932) (“business compulsion”).

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THREATENED BREACH OF CONTRACT

the law. While this unified approach may tend to obscure proper
matters for discrimination, it has the marked advantage of em-
phasizing the law’s responsibility to deal with all issues arising from
coerced consent in a consistent way.

(c) Duress by Threatened Breach of Contract

Duress by threatened breach of contract is closely linked with
“duress of goods”. Though there is no English case in point, some
Commonwealth courts have pressed the analogy, allowing the re-
covery of payments made to procure the performance of a contract
where the money was not due. Two cases, one from the Supreme
Court of Canada and the other from the High Court of Australia,
establish the basic approach. In view of the authority of the courts
which decided them, and the absence of authority elsewhere, they
are taken to represent Commonwealth law.

(i) British Commonwealth Law

In the Canadian case, Knutson v. The Bourkes Syndicate,46 the
plaintiff Syndicate bought land under an option agreement. The land
was subject to an encumbrance the seller promised to discharge,
but difficulties were encountered and Knutson, a member of the
Syndicate, paid off the encumbrance himself. Knutson also acquired,
subject to the option agreement, the seller’s interest in the land. He
had expected to be reimbursed for the money paid to the encum-
brance holder, but the Syndicate refused to pay. Knutson then
declined to transfer the land until his claim was met. The Syndicate
paid him and later successfully sued for the return of the money.
The principal judgment stated the following after referring to
English cases in which the “duress of goods” principle was applied:
Here the evidence is plain that the payments were made under protest,
and that they were not voluntary in the sense referred to in the cases
mentioned. The circumstance that O.L. Knutson thought he had a right
to insist upon the payments cannot alter the fact that under the agree-
ment of September 16, 1936, it is clear that he had no such right. In order
to protect its position under the option agreement and to secure title to
the lands.., the Syndicate was under a practical compulsion to make the
payments in question and is entitled to their repayment.47

In order to establish this claim, the Syndicate apparently did not

46 Supra, frn.39. Additional facts are stated in Bourkes Syndicate v. Olson

(1940), 49 O.W.N. 442, [1940] 4 D.L.R. 641 (CA.).

47 Supra, fn.39, 425.

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have to prove that it was under any immediate or pressing need for
the property when it paid the money.48

The Australian decision, Smith v. William Charlick Ltd.,49 ex-
plores the outer limits of the principle. Charlick was a wheat dealer
who bought his produce from the Australian Wheat Board. When the
Wheat Board authorized an increase in price, Charlick made a profit
from stocks he had in hand at the time of the increase. The Board
insisted that Charlick pay the extra profit over to the Board, or else
it would cut off future supplies. Since the Board was the monopoly
supplier, Charlick was forced to pay to stay in business. He sued to
recover the money. The lower court,50 after an extensive review of the
English authorities on the duress of goods principle, concluded the
money was recoverable as having been demanded without right
and paid to avert a commercial evil. The High Court reversed this
decision, restrictively interpreting the three cases on which the
lower court decision was based.5 1 According to the High Court, a
threat to perform a lawful act is not included within the general rule.
The Board was allowed to keep the money because in threatening to
withhold future contracts, it was not threatening anything unlawful.
The Court does not seem to have been unanimous in the test to
be applied in such cases. Knox,C.I. defined it in technical terms,
referring to threats of “unauthorised interference with the person
or the property or any legal right”. 52 He evidently thought that, apart
from the special case of the unjustified demand of a public official,
there would have to be a threat of an unlawful act. A different view
seems to have been taken by Isaacs,J., who pointed out that in
successful duress claims the “‘compulsion and pressure’ originated
from the defendant”, 3 which was not the case here since “[r]efusal
to relieve from business difficulties is not the creation of those dif-
ficulties”. 4 This view would leave the question of unlawfulness open,
but other statements in the judgment lend support to Knox,C.J.’s
test, and the ratio is unclear. Higgins,J., concurring with the majority

48 Ibid., 423. The judgment was criticized in a Note, (1941) 19 C.B.R. 694, for
not examining whether alternative remedies were available, but in In Re
Hooper & Grass’ Contract,, supra, f.n.37, FullagarT. was “much more im-
pressed by the decision than by the criticism”.

49 (1924), 34 C.L.R. 38 (High Ct.).
6o William Charlick Ltd. v. Smith, [1922] S.A.S.R. 551 (Sup. Ct.).
51 Hills v. Street (1828), 5 Bing. 37, 130 E.R. 973 (C.P.); Kenday v. Wood
(1871), L.R. 6 Ex. 243; Melbourne Tramway and Omnibus Co. v. Mayor, etc.,
of Melbourne (1903), 28 V.L.R. 647 (Full Ct.).

52 Supra, f.n.49, 51.
53 Ibid., 55.
54 Ibid., 56.

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THREATENED BREACH OF CONTRACT

on this point, expressed himself against an “unlawfulness” test,
stating that the enquiry in each case is whether “the party receiving
the money [has] the right to take advantage of his neigbour’s ne-
cessity or not”.5 The other judges do not seem to have endorsed one
view or another,56 and later judicial discussion leaves the matter
open.57

These cases emphasize the practical importance of the question
of whether the threatened action is unlawful. If, as in Knutson, the
party making the unjustified demand has refused to’ perform his
contractual duty, the party seeking recovery is not likely to en-
counter any great obstacles. If, as in Smith, the threat could be
carried out without any breach of duty, relief will be much more
difficult 5 8 to obtain. It would be premature, however, to conclude
that a general rule to this effect will dispose of all the problems with
which this article is concerned. In theory at least, it is possible to
maintain a broader view of duress by threatened breach of contract
which could include any threat, lawful or not, which forces the other
party to a contract to forego the benefits to which he is entitled
under it. Such a threat is wrongful because it contravenes an implicit
duty not to subvert the terms of an existing contract and to co-
operate with the other party in realizing its purposes. Whether or
not such a theory can be maintained in law depends upon a much
closer examination of the implications of the principles established
in these cases and their application in subsequent decisions.

(ii) American Law

The law has developed somewhat differently in the United States.
It must be remembered that a great deal more was at stake than the
logical extension of a narrow rule governing coerced payments.
Because the doctrine of duress tended to be seen as a general prin-
ciple affecting all transactions induced by threat, including con-
tracts as well as money payments, a holding that a threatened breach
of contract could amount to duress would have far-reaching con-
sequences. Some hesitation was to be expected.

The issue first arose in the late nineteenth and early twentieth
century. When invited to find that a threat to break a contract could

55 Ibid., 65.
56 See ibid., 68 per Rich,J., and 70. per StarkeJ.
57 See Nixon v. Furphy (1925), 25 S.R. (N.S.W.) 151; Criterion Theatres Ltd.
v. Melbourne and Metropolitan Board of Works, [1945] V.L.R. 267; In Re
Hooper & Grass’ Contract, supra, f.n.37. All dealt with threatened conduct
which was technically a breach of duty to the plaintiff.
58 For Canadian authority, see cases cited infra, Section 3(c), and also

Sutherland v. Sutherland, [1946] 4 D.L.R. 605, 613-4 (B.C.S.C.).

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constitute duress, some courts denied the possibility outright.59 In
others, relief was refused for reasons which made the possibility
very doubtful. In Silliman v. U.S.,60 for example, a claim of duress
was rejected because the claimants’ duty, “if they expected to rely
upon the law for protection, was to disregard the threat of the
department, and apply to the courts for redress against its repudia-
tion of a valid contract”. It was apparently thought irrelevant that
had the claimants waited for their suit to be heard, they might in
the meantime have suffered financial ruin. This attitude was justified
in the influential case of Hackley v. Headley, where the court said,
It is not pretended that Hackley & McGordon had done anything to bring
Headley to the condition which made his money so important to him at
this very time, or that they were in any manner responsible for his pecu-
niary embarrassment except as they failed to pay this demand.6′

The court thought it unfair to treat the claimant differently from
anyone else who re-negotiated a contract which had broken down
merely because his personal circumstances gave rise to a special
need for performance, preventing resort to the normal remedies for
breach of contract. In the light of these authorities, it is difficult to
see how a successful plea of duress could ever have been made out,
though admittedly their effect was more optimistically summarized
by the United States Supreme Court in 1926.62

Some decisions nevertheless permitted relief without directly
opposing the leading authorities.'” A device occasionally used was to
classify the threat as an invasion of “property rights”. Technically,
this was sometimes justified. In one case, for example, it was applied
to the conduct of a seller of an identified herd of livestock who, after
most of the price had been paid, refused to deliver it to the pur-
chaser.04 In this case, “property” in the stock may have passed to

69 E.g. Miller v. Miller, 68 Pa.St.R. 486, 493-4 (1871); Tucker v. State, 72
Ind. 242, 245 (1880); Taylor v. Ford, 131 Cal. 440, 63 P. 770, 772 (1901); Wood
v. Kansas City Home Telephone Co., 223 Mo. 537, 123 S.W. 6, 13 (1909).
60 101 U.S. 465, 471, 25 L. Ed. 987, 989 (1879). Cf. Cable v. Foley, 45 Minn. 421,
47 N.W. 1135, 1136 (1891); McCormick v. Dalton, 53 Kan. 146, 35 P. 1113 (1894);
Rosenfeld v. Boston Mutual Life Ins. Co., 222 Mass. 284, 110 N.E. 304 (1915).
0145 Mich. 569, 8 N.W. 511, 514 (1881), criticized in Dalzell, supra, f.n.5, 256-8.
The argument is not confined to failure to pay money; see Goebel v. Linn, 47
Mich. 489, 11 N.W. 284 (1882). The decision was widely cited in contemporary
cases in many jurisdictions. Its most recent application seems to have been
in Gill v. S.H.B. Corp., 332 Mich. 700, 34 N.W. 2d 526, 7 A.L.R. 2d 252 (1948).
62 Hartsville Oil Mill v. U.S., 271 U.S. 43, 48, 46 S.Ct. 389, 70 L. Ed. 822 (1926).
63See Dalzell, supra, f.n.5, 255-276; 5 Williston on Contracts, supra, f.n.7,
64 Lonergan v. Buford, 148 U.S. 581, 37 L. Ed. 569, 572 (1893).

para. 1620.

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THREATENED BREACH OF CONTRACT

the purchaser, at least in a technical sense, before the threat was
made.

In other cases, such reasoning was more tenuous. In Harris v.
Cary,6 5 the plaintiff had been promised shares in a trading company,
in return for services rendered. The defendant said he would allow
the company to go to ruin if the plaintiff would not accept a reduced
number of shares. Though such a threat would seem to be no more
than a threat to break an implicit term of the contract, the court
evidently saw it as a threat to property rights. This is difficult to re-
concile with the leading authorities. Although the device occasionally
re-appears in modern cases, 6 it does not seem to have played a
significant part in shaping modern law.

More significant was the doctrine of “business compulsion” or
“moral duress”6 7 which came into vogue in the early twentieth
century and has been described in these terms:

… where one, to prevent injury to his person, business or property, is
compelled to make payment of money which the party demanding has no
right to receive, and no adequate opportunity is afforded the payor to
effectively resist such payment, it is made under duress, and can be
recovered.68

The doctrine was useful in cases where a party refused to perform
his contract unless he received an additional benefit,6 9 or attempted
to enforce an invalid demand by threatening to invoke a right of

65 112 Va. 362, 71 S.E. 551 (1911).
66E.g. Smelo v. Girard Trust Co., 158 Pa. Super. 473, 45 A. 2d 264, 265 (1946);

Weiner v. Tele King Corp., 123 N.Y.S. 2d 101, 104-5 (Sp. Term 1953); U.S. ex
rel. Kirby v. John A. Johnson & Sons, 137 F. Supp. 881, 886 (E. D. Tenn. 1954);
aff’d 229 F. 2d 713 (6th Circ. 1955).

607These terms tend to be used indiscriminately to cover all types of duress
not included in the old common law. They can be used more precisely.
“Business compulsion” has been used to describe the rule stated in the text;
see e.g. Ferguson v. Associated Oil Co., 173 Wash. 672, 24 P. 2d 82, 83 (1933);
noted (1934) 8 Wash.L.Rev. 140. “Moral duress” is used particularly in Illinois
and Missouri, where the rule is combined with the “subjective test” of duress,
so that the court takes into account pressures which would not coerce a
reasonable businessman, but in fact coerce the particular plaintiff. See
Comment, Moral Duress in Illinois, [1955] U.I1.L.F. 312; Brueggestradt v.
Ludwig, 184 Il1. 24, 56 N.E. 419 (1900); Rees v. Schmits, 164 I11App. 250, 258
(1911).
68 Illinois Merchants Trust Co. v. Harvey, 335 Ill. 284, 167 N.E. 69, 72 (1929).
69E.g. Brown v. Worthington, 162 Mo.App. 508, 142 S.W. 1082
(1912);
Pittsburgh Steel Co. v. Hollingshead & Blei, 202 I11App. 177 (1916); Manhattan
Milling Co. v. Manhattan Gas & Elec. Co., 115 Kan. 712, 225 P. 86 (1924);
Inland Empire Refineries Inc. v. Jones, 69 Ida. 335, 206 P. 2d 519 (1949).

McGILL LAW JOURNAL

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forfeiture.70 It does not seem, however, to have seriously impinged
on the leading authorities on duress by threatened breach of con-
tract. It did not imply that such a threat was wrongful since, on the
above formulation, the threat did not have to be wrongful in itself.
Nor does it seem to have been invoked to justify the rescission of an
otherwise binding contract. 71 The leading authorities were thus left
largely unimpaired.

American courts have thus adopted an equivocal attitude, allowing
relief in certain cases, but not admitting that threatened breach of
contract is duress in the full sense. In some jurisdictions, however,
the courts have recently moved toward a greater recognition of this
form of duress. In New York, it has been unequivocally accepted. 72
In the Federal courts, after a long period of development, the law
has now crystallized into a recognizable set of rules.73 In New Jersey,
it has been the subject of a striking extension of the law of “moral
duress”. 74 These developments may form a nucleus for a more com-
prehensive law of duress by threatened breach of contract.

3. The Protection Offered by the Law of Duress

Even in the United States, a general theory of duress by
threatened breach of contract has not been easy to establish. In the
Commonwealth, the acceptance of a narrow rule concerned with
coerced payments, closely analogous to duress of goods, is not a
substantial basis for such a theory. What signs are there of move-
ment towards a broader theory? Could it provide a satisfactory
system of protection?

For the purpose of the present enquiry, it will be assumed that
such a theory would include the legal controls exercised over all
forms of pressure designed to force another party to a contract to
give up his contractual rights. Three forms of pressure are of

7″”E.g. Sunset Copper Co. v. Black, 115 Wash. 132, 196 P. 640 (1921); Ferguson

v. Associated Oil Co., supra, f.n.67.

Ct.Cl. 886 (1966).

258 (1961).

71 See Pittsburgh Steel Co. v. Hollingshead & Blei, supra, f.n.69, 182; White
v. McCoy Land Co., 229 Mo.App. 1019, 87 S.W. 2d 672, 684-5 (1935)
(contract
invalidated on other grounds); aff’d White v. Scarritt, 341 Mo. 1004, 111 S.W.
2d 18 (1937); London Homes Inc. v. Korn, 44 Cal.Rptr. 262, 267 (CalApp.
1965).

72Austin Instrument Inc. v. Loral Corp., 29 N.Y. 2d 124, 272 N.E. 2d 533,

535 (1971). Cf. Newsom v. Medis, 205 Okla. 574, 239 P. 2d 784, 786 (1951).

73 E.g. Aircraft Associates & Manufacturing Co. v. U.S., 357 F. 2d 373, 174

74 E.g. Ross Systems Inc. v. Linden Dari-Delite Inc., 35 NJ. 329, 173 A. 2d

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THREATENED BREACH OF CONTRACT

particular legal significance and will be examined in this article.
They are: (a) refusal to perform a contractual obligation; (b)
threatened cancellation or forfeiture under a contract, pursuant to an
invalid demand; and (c) pressure unconnected with the contract. In
the last two cases there is often no threat to break a contract in the
technical sense, unless it can be found in the breach of an implied
obligation not to obstruct the other party in the enjoyment of the
benefits of his contract. It will be shown, however, that proof of
such a technical breach is not always necessary to establish duress.
The problems raised by all three forms of pressure are so closely
connected that, for the purposes of the present article, they are all
included within the admittedly imprecise term, “duress by threaten-
ed breach of contract”.

(a) Refusal to Perform a Contract

Where one party to a contract refuses to perform it unless he
is given some additional benefit, and the other party lets him have
it, in what circumstances will the law require the benefit to be
restored? This question is central to the whole enquiry. The two
Commonwealth cases where the theory of the law governing this
type of duress have been most discussed, Knutson v. The Bourkes
Syndicate ” and In Re Hooper & Grass’ Contract,76 seem to provide
a ready answer. Where the benefit takes the form of money paid
pursuant to an invalid demand, it must be restored. The recipient
has obtained it by threatening “to withhold that to which the other
party was legally entitled, unless he were paid a price which he had
no right to receive”. 77 Special features were present in these cases
however, and the courts’ general statements may require revision as
the law of duress develops. A more straightforward case involving
this type of duress is the New South Wales decision, T. A. Sundell
& Sons Pty. Ltd. v. Emm Yannoulatos (Overseas) Pty. Ltd.,78 and it
seems preferable to begin the analysis here. Though the fall court
did not claim to be establishing new theory in that case, its observa-
tions may have important implications for the law of duress.

In Sundell, the defendant promised to import building materials
for the plaintiff, who required them for a government contract.
When the overseas price of the materials rose, the defendant
unjustifiably insisted upon an additional payment before he would

75Supra, fam39.
76 Supra, fn.37.
21 Ibidj., 272.
78 [1956] S.R. (N.S.W.) 323 (Eq.).

McGILL LAW JOURNAL

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supply them. Not being able to obtain them elsewhere, the plaintiff
risked the collapse of its government contract if the defendant would
not honour its obligations. It paid the money, and then sued for its
recovery. The defendant’s principal objection, which was readily
disposed of by reference to contrary Australian authority, 9 was
that a threatened breach of contract could not constitute duress.
Of greater interest were its other two arguments, which raised
important questions.

First, how far does the law of duress extend? The defendant
argued that there was no room for its operation here, since the
parties’ former contractual rights had been superseded by a new
contract under which the plaintiff agreed to pay the additional
amount. The court gave two alternative answers:

In our view, the whole of the circumstances indicate that Mr. Sundell
did no more than agree to pay any increase to which this or any other
circumstance would entitle the appellant as against the respondent.
But even if such a promise was made as is alleged, we are of opinion that
it was not binding because there was no consideration for it … every
promise allegedly given to the plaintiff by the defendant under the so-
called second agreement was identical with a promise given under the
original agreement.8 0

If the second answer is combined with the court’s ultimate con-
clusion that relief should be given for duress, an added function
is given to the law of duress. It provides a remedy not only where
money is paid in response to a simple demand, but also where
money is paid under an apparent contract of modification which
turns out to be invalid for want of consideration. This is particu-
larly significant because in the latter case, the right of recovery
does not seem easy to establish without the law of duress. It is
true that the court’s reasoning on consideration may be an obiter
dictum, but it is nevertheless a valuable indication of the direction
the law of duress may take.

If the courts are prepared to go this far, they may be urged
to go the full distance and hold that, in appropriate cases, the law
of duress may invalidate otherwise binding contracts. The distinc-
tion made in cases of duress of goods between recovery of money
paid and the setting aside of a contract has already been strongly
criticized by commentators as being arbitrary and unrealistic.81

7) Nixon v. Furphy, supra, fan.57; White Rose Flour Milling Co. v. Australian
Wheat Board (1944), 18 A.L.J.R. 324 (t.Ct., RichL.); In Re Hooper & Grass’
Contract, supra, f.n.37. See also Carr v. Gilsenan, [1946] Qd. St.R. 44 (Full Ct.).
8oSupra, fmn.78, 327.
s8Goff & Jones, Law of Restitution (1966), 150-1; 5 Williston on Contracts,

supra, f.n.7, para. 1617.

1974]

THREATENED BREACH OF CONTRACT

In the present context the distinction is even more unsatisfactory,
because it means that the courts must apply the technical law of
consideration when much more flexible methods for determining
the validity of a coerced transaction are available within the law
of duress itself. It is true that American courts seem to have been
reluctant to extend the law so far.”‘ More recently, however, the
New York 83 and Federal courts ‘4 have clearly done so, and this
accords with the general theory of economic duress developed in
cases of duress of goods.85 In the Commonwealth, the same result
could be achieved by amalgamating the law of duress with older
equitable doctrine,86 a step with much to commend it in terms of
simplicity and rationality.

Secondly, what degree of coercion is required? In Sundell, the
defendant argued that there was no proof of “practical compul-
sion”. These terms are used in other Australian cases,87 though
it is not -clear whether they imply that “genuine coercion” must
be established as a matter of fact. Speaking of duress of property
generally, the court in In Re Hooper & Grass’ Contract said
that “the withholding of another’s legal right is, I think, itself
treated as ‘practical compulsion’ “.8 These comments seem, how-
ever, to be obiter, since in that case there was an accompanying
threat to cancel the contract which was apparently coercive.8” The
Canadian Supreme Court seems to have taken the same view in
Knutson,90 but there too there was some evidence of coercion
because the plaintiffs stood to lose a profitable re-sale if they did
not secure title within a reasonable time.

The court in Sundell departed from these dicta by treating
“practical compulsion” as a separate question of fact to be deter-
mined by the trial judge.91 A similar emphasis on coercion as an

82 Supra, frn.71.
83 Supra, f n.72.
8 4 Supra, fmn.73.
85 Supra, fn.41.
86 Discussed supra, section 2(a). See Scott v. Sebright (1886), 12 P.D. 21, 24,
31, and explanation of that case (and others) in Galusha v. Sherman, supra,
f.n.43.

87 See Smith v. William Charlick Ltd., supra, f.n.49, 56 per IsaacsT.; Nixon
v. Furphy, supra, f.n.57, 160; Criterion Theatres Ltd. v. Melbourne & Metro-
politan Board of Works, supra, fm57, 274. There has been subsequent High
Court discussion of the colore officii principle, but that is not in issue here.

88 Supra, frn37, 272. Fullagarj. concedes that practical compulsion may be

an issue of fact in other cases.

89 Ibid., 271.
90 Supra, fmn39, 423.
91 Supra, f.n.78, 328.

McGILL LAW JOURNAL

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issue of fact is found in another judgment concerned with a re-
fusal to perform a contract for the sale of goods, where the court
observed that the plaintiff buyer “could not help itself”.9 2 These
statements, while falling short of establishing a required degree
of coercion in cases of duress by threatened breach of contract,
indicate judicial interest in this possibility, and may be the foun-
dation of a new rule.

The requirement is generally imposed in American decisions.
Typical is the statement of the majority of the New York Court
of Appeals in Austin Instrument Inc. v. Loral Corp.:

… a mere threat by one party to breach the contract by not delivering
the required items, though wrongful, does not in itself constitute economic
duress. It must also appear that the threatened party could not obtain
the goods from another source of supply and that the remedy of an
ordinary action for breach of contract would not be adequate.93

This view can be traced back to two early Court of Appeals deci-
sions. In one, a contractor had to do extra work in order to get
his money, but there was no evidence that he could not have sued
for it in the normal way. The court treated him as having made
a gift of the extra work.94 In the other, where a creditor agreed
to settle for a reduced sum, the court said:

There was nothing so peculiar in their position, or in the position of
[the debtor], as to give them any stronger or better claim for relief than
any creditor would have who compromises a claim against his debtor
for fear that he would be subjected to expense, delay, and risk in
enforcing payment thereof.95

The rule has been consistently enforced in New York, and appears
in various forms in many other jurisdictions.

The reason for the rule evidently lies in the court’s concern
not to upset ordinary commercial arrangements. If a business-
man, for reasons of expedience or otherwise, chooses not ‘to insist
on his strict legal rights, it would be wrong to allow him to recall
the transaction later on the pretext that it was induced by a’ threat-
ened breach of contract. In the absence of evidence of coercion,
the transaction must be presumed fair, and the businessman left
to be content with whatever commercial goodwill he may have
acquired. This policy applies to duress by threatened breach of
contract with special force; it is less apposite in cases where the

92 White Rose Flour Milling Co. v. Australian Wheat Board, supra, f.n.79, 327.
93 29 N.Y. 2d 124, 272 N.E. 2d 533, 535 (1871).
04 Doyle v. Rector, etc., of Trinity Church, 133 N.Y. 372, 31 N.E. 221, 222
95 Secor v. Clark, 117 N.Y. 350, 22 N.E. 754, 755 (1889).

(1892).

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THREATENED BREACH OF CONTRACT

giving of consideration is at issue, since there the question is
whether a generous promise should be enforced rather than wheth-
er a closed transaction should be re-opened. Still less does it apply
where money has been paid to release goods which have been
wrongfully detained, and here the American courts have been much
less consistent in requiring proof of coercion 6

It follows that the Commonwealth decisions which advert to
questions of proof of coercion are not aberrational, but touch on
an issue which is of some importance in cases of duress by threat-
ened breach of contract. Adoption of this requirement would show
that the law of duress, in this context, is not simply a logical ex-
tension of the law of duress of goods. It would also lead to a
third and final problem which is not mentioned in Sundell or
the other Commonwealth cases, but which has evidently troubled
American courts.

According to legal theory, before a threat will constitute duress
it must be “wrongful”. Is it sufficient to show that the threat
would, if carried out, involve a breach of contract? The rule re-
quiring proof of coercion assumes that new contractual arrange-
ments may be fair, even though they are induced by such a ,threat.
Yet proof that the threat was coercive does not necessarily prove that
the resulting transaction was unfair. The so-called “victim” may
simply have been impelled to agree to a contractual re-arrange-
ment that a sensible person would have agreed to anyway, without
being pressured by the threat. Why should not such a transaction
stand? The case against relief was put strongly in the old decision
of Hackley v. Headley:

The duress, then, is to be found exclusively in their failure to meet
promptly their pecuniary obligation. But this, according to the plaintiff’s
claim, would have constituted no duress whatever if he had not happened
to be in pecuniary straits; and the validity of negotiations according to
this claim, must be determined, not by the defendant’s conduct, but by
the plaintiff’s necessities. The same contract which would be valid if made
with a man easy in his circumstances, becomes invalid when the con-
tracting party is pressed with the necessity of immediately meeting his
bank paper.97

To avoid the charge that they are administering a “dangerous”
and “unequal” doctrine, the courts may feel obliged to enquire
whether the coercing party’s conduct was morally blameworthy.

9 0 Dawson, “Economic Duress”, supra, f.n.6, 256-8; Dalzell, supra, fmn.5, 241-2.
9745 Mich. 569, 8 N.W. 511, 514 (1881).

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Such an enquiry has been undertaken in a few cases, notably
King Construction Co. v. W.M. Smith Electric CoY8 In that case,
the supplier of a crane refused to deliver the right crane until the
purchaser agreed to pay a considerably higher price. In upholding
the purchaser’s claim of duress, the court seems to have thought
it relevant that the supplier knew that it was in breach, and that
the purchaser had no means of passing on the extra cost. It seems
implicit that, while the threat would have been a breach of con-
tract if carried out, such proof might not have been sufficient on
its own to justify relief.

On the other hand, it may be contended that “moral blame” is
altogether too vague a criterion, and it would still lead to a posi-
tion where “no-one could well know when he would be safe in
dealing on the ordinary terms of negotiation with a party who
professed to be in great need” 9 A simple rule, allowing or denying
relief in all cases, may be preferable. This consideration may ex-
plain the tendency in the early American cases to hold that the
threat to break a contract could never constitute duress, though
this rule would now be considered too harsh. It also helps to justify
the recent New York formulation in Austin Instrument Inc. v.
Loral Corp.,100 which adopts the view that a threat to refuse to
perform a contract is wrongful in itself. This view perhaps goes
too far if it implies that a coerced yet reasonable solution of a
difficult commercial problem must necessarily be set aside. It
should be noted that earlier New York authority does not seem
explicitly to support such an absolute view,101 and in some pre-

08350 S.W. 2d 940 (Tex.Civ.App. 1961). See especially p. 945; elsewhere, the
court seems to run together its reasoning on duress and on contract modifica-
tion. Cf. cases cited infra, f.n.102. Some support might be found in a few
cases on business compulsion for such an enquiry; see Brown v. Worthington,
162 Mo.App. 508, 142 S.W. 1082, 1085 (1912) (“…if it is against equity and
good conscience for the money to be withheld from plaintiff…”); Thompson
Crane & Trucking Co. v. Eyman, 123 CalApp. 2d 904, 267 P. 2d 1043, 1046
(1954) (“… something more than a mere passive threat to breach a previous
oral contract”).

O0 Hackley v. Headley, supra, f.n.97, 514.
100 Supra, fmn.93.
101 Three major authorities are cited for the proposition that a threatened
breach of contract is duress: (1) E.L Du Pont de Nemours & Co. v. JI.L Hass
Co., 303 N.Y. 785, 103 N.E. 2d 896 (1952)
(memorandum decision, reason for
finding duress unstated); (2) Gallagher Switchboard Corp. v. Heckler Elec.
Co., 36 Misc. 2d 225, 232 N.Y.S. 2d 590 (Sp. Term 1962) (refusal of motion to
strike out defence, on authority, inter alia, of Wou v. Galbreath-Ruffin Realty
Co., infra, fmn.102;
(3) 13 Williston on Contracts 3d ed. (1970), 705 (author
states that a threat to breach a contract “may involve” duress, and cites King

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THREATENED BREACH OF CONTRACT

vious cases where duress was held to exist, the courts undertook
to show that the coercing party was guilty of something more than
a mere threat to break the contract.0 2

An attractive middle way between a discretionary approach
and a hard and fast rule is to be found in the decisions of the
Federal courts. This approach, which has been developed 6ver a
long period,’10 3 is stated in Fruhauf Southwest Garment Co. v.
U.S.:

An examination of the cases, however, makes it clear that three elements
are common to all situations where duress has been found to exist. These
are: (1) that one side involuntarily accepted the terms of another; (2)
that circumstances permitted no other alternative; and (3) that said
circumstances were the result of coercive acts of the opposite party.104

The third element is crucial, and is elaborated in the judgment:

In order to substantiate the allegation of economic duress or business
compulsion, the plaintiff must go beyond the mere showing of reluctance
to accept and of financial embarrassment. There must be a showing of
acts on the part of the defendant which produced these two factors. The
assertion of duress must be proven to have been the result of the de-
fendant’s conduct and not by the plaintiff’s necessities. 105

The defendant must therefore be “responsible” for the plaintiff’s
troubles.” 6 This implies both blame and causation.

The defendant is responsible for the plaintiff’s difficulties only
if he commits a wrongful act. It is not duress to refuse to deal
with the plaintiff except on hard terms, 10 7 or to proceed against

Construction Co. v. W.M. Smith Electric Co., supra, f-n.98, as a leading ex-
ample). Pre-1950 cases are generally equivocal, some allowing relief for un-
clear reasons, some refusing relief because of failure to prove coercion, and
some refusing relief in terms which make the possibility of duress doubtful.
102 Wou v. Galbreath Ruffin Realty Co., 22 Misc. 2d 463, 195 N.Y.S. 2d 886,
888-9 (Sp. Term 1959); Pearlman v. State, 18 Misc. 2d 494, 191 N.Y.S. 2d 422, 427
(Ct.Cl. 1959); and cf. Manno v. Mutual Benefit Health and Accident Associa-
tion, 18 Misc, 2d 80, 87 N.Y.S. 2d 709, 713 (Sp. Term 1959).

103 See Hartsville Oil Mill v. U.S., 271 U.S. 43, 48-9, 46 S.Ct. 389, 70 L. Ed. 822
(1925); Hazelhurst Oil Mill & Fertilizer Co. v. U.S., 42 F. 2d 331 (Ct.Cl. 1930);
James Shewan & Sons v. U.S., 73 Ct.Cl. 49 (1931); Struck Construction Co. v.
U.S., 96 Ct.Cl. 186 (1942); U.S. v. Bethlehem Steel Corp., 315 U.S. 289, 301-2, 62
S.Ct. 581, 86 L. Ed. 855 (1942). Dalzell, supra, fn.5, 254, puts such cases in a
special category relating to government officials, but the principle now seems
to be applied more widely.

104l111 F.Supp. 945, 951 (Ct.C1. 1953). Cf. W.R. Grimshaw Co. v. Nevil C.
Withrow Co., 248 F. 2d 896, 904 (8th Circ. 1957); Urban Plumbing and Heating
Co. v. U.S., 408 F. 2d 382, 389, 187 Ct.Cl. 15 (1969).

1O5 Ibid., 951.
106 Ibid.
107 French v. Shoemaker, 14 Wall. (U.S.) 314, 20 L. Ed. 852, 856 (1972); Law-

rence v. Muter Co., 171 F. 2d 380, 382 (7th Circ. 1948).

McGILL LAW JOURNAL

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him on a lawful claim. 08 In cases of threatened breach of con-
tract, there must not only be a refusal to perform the contract, 10 9
but also oppressive conduct which goes beyond what is reasonably
necessary to protect the defendant’s legitimate interests.”0

There must also be a clear causal connection between the
wrongful conduct and the coercive circumstances. It is not enough
that the defendant makes existing difficulties worse.”‘ If the de-
fendant fails to pay money due under the contract,” 2 it must be
shown that the payment would have relieved the plaintiff of his
financial difficulties. So, in one of the few cases where the failure
to pay money has been held to constitute duress, the court found
that “if the plaintiff had been credited with as much as $150,000
[its minimum claim] on the parts claim, that sum, together with
other payments and credits, would have satisfied almost all of
its debt to the defendant”,” 3 whose threat to default the plaintiff
under the contract would then have been averted.

The theory of the causal test seems to be that there is a strong
case for relief only where the defendant takes advantage of his
own wrong.” 4 In practice, it presumably means that a man in
general financial difficulties may go around to his debtors col-
lecting what he can, and no enquiry will be made into the propriety
of the arrangements he makes. When he deals with a single major
debtor, however, he is much more likely to be overreached, and
he is given special protection. The test seems to be a useful device
to limit the doctrine to those cases where it is most clearly needed.
The whole Federal approach, while it is perhaps unduly cautious,

108 In Re Prima Co., Harris Trust & Savings Bank v. Keig, 98 F. 2d 952, 965
(7th Circ. 1938), cited in Lawrence v. Mutter Co., ibid., as authority for
the proposition that “mere stress of business condition does not constitute
duress where the defendant was not responsible for such circumstances”.

109 W.R. Grimshaw Co. v. Nevil C. Withrow Co., supra, fan.104, 904 (threat
of lawful declaration of default not duress); Harvey-Whipple Inc. v. U.S.,
342 F. 2d 48, 53, 169 Ct.Cl. 689 (1965); Inland Empire Builders Inc. v. U.S.,
424 F. 2d 1370, 1377 (Ct.Cl. 1970).

110 See cases cited infra, f.n.115, and cf. Fruhauf, supra, f.n.104, 952.
” As in Fruhauf, ibid., 951-2.
112 In other types of case, proof is no doubt much easier. See e.g. Urban
Plumbing and Heating Co. v. U.S., supra, f.n.104 and Struck Construction Co.
v. U.S., supra, f.n.103 (disruption of construction contracts by unreasonable
orders).

113 Aircraft Associates & Manufacturing Co. v. U.S., 357 F. 2d 373, 379, 174
Ct.Cl. 886 (1966). Cf. James Shewan & Sons Inc. v. U.S., supra, f.n.103 (two
major debts could have been satisfied).

114 James Shewan & Sons Inc. v. U.S., ibid., 93.

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THREATENED BREACH OF CONTRACT

is a useful illustration of the way in which courts can extend the
law of duress and yet avoid its more troublesome implications.
In view of the relatively undeveloped state of Commonwealth
law, there is little point in speculating which of these different
approaches to the problem of “wrongfulness” is most appropriate.
Clearly, there are persuasive arguments in favour of a test of wrong-
fulness which does not depend solely upon whether the threatened
action would be a breach of contract. They become even more
persuasive when considered in relation to threats made in support
of bona fide legal claims. If the party making a threat knows that
he is asking for more than the contract allows him, his conduct
will only be justifiable in exceptional circumstances, as where, for
example, the original contract has become unsuitable because of
unexpected changes in conditions. If, however, he genuinely, though
incorrectly, believes that he is asking only for what is due, his
threats cannot normally be regarded as oppressive.” 5 Yet it may
still be possible for him to act wrongfully by taking unnecessarily
harsh or sudden measures which prevent the other party from
litigating a disputed legal issue.

The problem of the bona fide legal claim has arisen in a number
of Commonwealth cases on duress by threatened breach of con-
tract, and it must be conceded that this consideration has been
disregarded in the leading authorities. In Knutson v. The Bourkes
Syndicate,”6 where the defendant vendor relied on a strong moral
as well as legal claim in refusing to perform the contract, the
court treated the existence of his bona fide claim,” 7 which was
not clearly void,”” as irrelevant. The same attitude is evident in
In Re Hooper & Grass’ Contract,”9 where a vendor of land refused
to convey it until a disputed legal demand was paid, and the court,
relying on Knutson, allowed relief without reference to the ven-
dor’s belief in the validity of his demand. While it is true that
these cases did not involve any element of compromise, neverthe-
less the contracts were performed in good faith, on the under-
standing that the vendors’ legal demands had prevailed. It is re-

115Cf. Bennett v. Mahon, 180 F. 2d 224, 231 (8th Circ. 1950); La Crosse
Garment Manufacturing Co. v. U.S., 432 F. 2d 1377, 1382-3 (Ct.Cl. 1970). See
also Weinman Pump Manufacturing Co. v. Cline, 116 Ohio App. 4, 183 N.E. 2d
465, 471-2 (1961) per Duffey P.J. diss.

116 Supra, f.n.39.
“17 Ibid., 425.
118 Ibid., 423.
119 Supra, f.n.37; and ef. Nixon v. Furphy, supra, f.n.57. Compare Donaldson

v. Gray, [1920] V.L.R. 379 (Sup. Ct.).

McGILL LAW JOURNAL

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spectfully suggested that greater attention might have been paid
to whether it is desirable for the courts to intervene where that
happens.

It now appears that the analysis in Knutson may be incomplete.
In an Alberta case, J.H. Samuels & Co. Ltd. v. Crown Trust Co.,”
the court made a more determined effort to put the bona fide legal
claim into its proper commercial perspective. A lessee of business
premises claimed he was entitled to a renewal at a “reasonable”
rental. Over a long period he wrangled with the lessor, refusing
to accept a renewal which was offered him because the rental was
too high, but not taking any legal steps to safeguard his position.
Ultimately the lessor threatened to let the premises to someone
else, and the lessee, to preserve his rights, signed the lease on the
lessor’s terms. His claim that the lease should be set aside for
duress was rejected. The court said:

There was no compulsion on the plaintiff to enter into the lease –
it was
free to do so or not to do so as it pleased. The only loss it stood to
suffer was the loss of prospective profits from its subtenants. If it
considered that it could still make a profit under the new lease it was
free to enter into it; if it considered that it could not make a profit it was
free to reject it. It seems to me that the real position is that over a
period of many months the plaintiff was ‘jockeying’ for position, was
trying its utmost to obtain a greater commercial advantage for itself,
and when it found at the end that it was not succeeding in its endeavour,
it threw up its hands and acceded to the defendant’s terms.’2

In this case, which was decided on the assumption that the les-
see’s claim was valid, the general fairness of the negotiations was
evidently regarded as more important than any technical breach
of contract the lessor may have committed.

The approach in the Alberta case has much to commend it,
but is it consistent with Knutson and In re Hooper & Grass’ Con-
tract? These cases must be related to their own facts. They in-
volved disputed legal claims which held up the completion of land
sales. Special policies may apply here. It is not a great concession
for the seller to agree to transfer the land rather than leave the
buyer to his legal remedies. Unless third parties are involved, which
is not likely in this context, specific performance will probably
be awarded. The disputed claim, moreover, may be small, yet its
significance can be unduly inflated by implicit threats of cancella-
tion. 22 It is no coincidence that the court in Knutson invoked the

120 (1959), 27 W.W.R. (n.s.) 160, 18 D.L.R. 451 (Alta.S.C.).
121 Ibid., 172 and 462. Additional reasons for rejecting the claim were given
at 173 and 463, but the court seems not to have chosen the technical ground
that a contract cannot be set aside for this type of duress.

122 See In Re Hooper & Grass’ Contract, supra, fam37, 271.

1974]

THREATENED BREACH OF CONTRACT

analogy of duress of goods, saying that the plaintiffs acted “to
secure property of which, in equity, the Syndicate had become the
owner”. 12 These observations, it may be argued, have force only
for land sales contracts, and the general rules for duress by threat-
ened breach of contract have yet to be established.

These observations confirm a conclusion which may be gathered
from all the arguments so far adopted. Knutson, though an im-
portant case in the development of the law, is too closely tied to
the law of duress of goods to be a reliable guide on the require-
ments of duress by threatened breach of contract. Subsequent de-
cisions, and the experience in America, show that more complex
enquiries are required than were at first envisaged. As the courts
move towards a broader theory of duress, proof of a substantial
degree of coercion, and of oppressive or unreasonable conduct
going beyond the simple refusal to perform a contract, may well
become regular requirements for successful pleas of duress.

(b) Threatened Cancellation

Threats of cancellation or forfeiture present unusual problems
for the law of duress, as the following example will show. A life
insurance company threatens to cancel a policy because a pre-
mium has not been paid. Even if the premium is not due, the
insured may be forced to pay it. Why? Not because he has been
wrongly deprived of anything he needs; the company is not obliged
to give him anything until the policy matures. Nor is he coerced
by any unlawful act; legally, the company’s purported cancellation
would be innocuous. The insured is coerced by his own uncer-
tainty. Until the dispute is settled, his interest in the policy is, for
all practical purposes, unacceptably at risk. This element of coer-
cive uncertainty will be found in any case where one party’s rights
under a contract depend upon his performance of a disputed
obligation, or the satisfaction of a precedent condition where the
meaning of the condition is in doubt.

In the Commonwealth, Knutson v. The Bourkes Syndrcate’

is an authority in favour of the right to recover money which has
been unlawfully demanded and paid to avert a threatened cancel-
lation or forfeiture. In that case, part of the disputed sum of
money was paid before the completion of the contract, to ensure
that the Syndicate’s option to purchase the land was validly exercised.
The court allowed recovery, the money having been paid “to protect

= Supra, fnm39, 423.
124 Ibid.

McGILL LAW JOURNAL

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[the Syndicate’s] position under the option agreement”.u 5 Further
support is found in In Re Hooper & Grass’ Contract,u6 where an
implicit threat of cancellation was an important consideration in
favour of recovery. Curiously, in neither case was reference made
to the fact that the payment in Knutson was not the result of a
threat “to withhold that to which the other party was legally en-
titled”,127 or a threat to perform some unlawful act. Assuming Knut-
son is correct, the decision implies that a threat to perform an
unlawful act is not, after all, necessary for duress. Support for
this view, as has already been observed, can be found in two of
the judgments in Smith v. William Charlick Ltd. 28

In America, the better view also favours recovery. 29 Earlier
cases, where relief was refused,’30 can be ascribed to a general fail-
ure to recognize the coercive effects of uncertainty.131 The theo-
retical basis of recovery is beyond argument, at least in jurisdic-
tions which accept the “business compulsion” rule.13’2 The rule
seems confined to simple money payments; as far as compromises
are concerned, it would, in view of the principles which apply to
duress by refusal to perform a contract, be difficult to justify
relief based solely on another’s threat to exercise rights he genu-
inely believes he has.””

125 Ibid., 425.
12()Supra, f.n.37, 271.
127 Ibid., 272.
12S Supra, fmn.49, 55-6 per Isaacs,J., and 65 per HigginsT.
12D Dalzell, supra, f.n.5, 273-4; Note, Quasi-Contractual Recovery of Money Paid
to Avoid Penalty or Forfeiture, (1934) 47 Harv.L.Rev. 1413; Annot., 86 A.L.R.
388 (1933).

130 E.g. Rosenfeld v. Boston Mutual Life Ins. Co., supra, fn.60.
‘3’ Cf. Dawson, “Civil Litigation”, supra, frn.6, 686-8.
132 Discussed supra, section 2(c) (ii).
138 A number of American authorities oppose relief here, for a variety of
reasons. It is said that the threat to bring proceedings in support of a legal
claim is not duress: Booher v. Williams, 341 IllApp. 504, 95 N.E. 2d 518, 521;
Causey v. Matson, 215 Ga. 306, 110 S.E. 2d 356, 359 (1959) (though the court
seems also to have found in these cases that the claim was valid); that the
plaintiff could have litigated rather than “compound and complex his posi-
tion”: Yingling Aircraft Inc. v. Budde, 208 F.Supp. 773, 776 (D.C. Colo. 1962);
that the plaintiff was not unlawfully constrained where he had counsel to
assist him in evaluating the unfounded threat: Alloy Products Corp. v. U.S.,
302 F. 2d 528, 530-1 (Ct.Cl. 1962); and that the compromise was “voluntary”, the
refusal to proceed under a contract or to stand suit not being duress:
Nesbitt Fruit Products Inc. v. Del Monte Beverage Co., 177 CalApp. 2d 353, 2
Cal.Rptr. 333, 338 (1960). Different principles apply where one party uses such
a threat to take unfair advantage of the ignorance and inexperience of the
other.

19743

THREATENED BREACH OF CONTRACT

One might question whether the same principles would not
preclude the recovery of money, since the person making the de-
mand will usually be acting in good faith. It must be remembered,
however, that the money will be paid to avoid a feared legal conse-
quence, not to induce the recipient to perform some desired action.
The transaction is therefore of slight merit, when compared with
a compromise of a legal dispute, or the acceptance of another’s
legal claim in order to rehabilitate a contract which has come to
grief on account of the parties’ legal differences. If moral wrong-
fulness is required at all, it may be found in the unfair use of a
forfeiture provision to prevent a party from taking a genuine claim
to law when he is willing and able to perform the contract no
matter what obligation it imposes.

What degree of coercion is required? The fear of the loss of
rights under the contract will usually be coercive in itself. The
only question which then arises is whether the person making
the payment should, if he can, resort to some other legal remedy
instead. Orthodox American theory says that he should. This has
been taken particularly seriously in California, where recovery
has been denied in two cases in which the plaintiffs could have
invoked a statutory provision empowering the court to stay for-
feiture. 3 4 In a third case, the recovery claim went to trial, but it
seems that the claimant would need to show that he acted reason-
ably in not resisting the claim earlier.1 5 Whether this is good
policy is another matter. The Massachusetts Supreme Court ob-
served here:

The salutary result of allowing recovery on such facts is that the area
of possible litigation is surely confined to the only issue genuinely in
dispute, and time is afforded to determine that issue in due and seemly
course.136

If the statutory procedure were invoked, there would be the addi-
tional issue of whether the forfeiture should be stayed and if so,
upon what terms. No attempt was made in the California cases

‘ 34 Texas Co. v. Todd, 19 CalApp. 2d 174, 64 P. 2d 1180, 1187 (1937); Western
Gulf Oil Co. v. Title Ins. & Trust Co., 92 Cal.App. 2d 257, 206 P. 2d 643, 648
(1949). Compare e.g. Sunset Copper Co. v. Black, supra, f.n.70 (no enquiry
about other remedies), and Buck Kreihs Co. Inc. v. U.S., 331 F.Supp. 1173,
1174-5 (E.D.La. 1971) (promise to repay inferred from facts which did not
establish a sufficient degree of coercion to found a duress claim).

’35 Lewis v. Fahn, 113 Cal.App. 2d 95, 247 P. 2d 831, 834-5 (1952).
availability of the ‘statutory procedure as a means of resistance
mentioned.)

(The
is not
136 Governor Apartments Inc. v. Carney, 342 Mass. 351, 173 N.E. 2d 287,

289 (1961).

McGILL LAW JOURNAL

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to show that the procedure would provide a preferable forum, or
that there would be any other countervailing advantages. More-
over, the rule that a person considering payment must act “reason-
ably” is unhelpful. Not knowing what the court might regard as
reasonable, he may be impelled towards an unsuitable alternative
remedy. On the whole, it is difficult to find a convincing justifica-
tion for a rule which insists on the exercise of any alternative
remedies.

There seems no reason, therefore, why the courts should not
allow recovery readily, without being deterred by the fact that
the recipient acted in good faith, or that alternative remedies were
available. The principle is a logical one which can be applied in
analogous situations. A good example is the case of a -building
contract, where the building owner claims that certain work is
included in the contract, and threatens to declare a default if the
builder does not carry it out. What is the position if the builder
carries out the work, but later seeks compensation, offering to
prove that the work was not included in the contract?

Hitherto, the builder has been given relief on principles which
seem peculiar to the law of quantum meruit. This remedy has a
different history,137 and apparently different requirements, 38 from
the remedies available for the recovery of money payments. In
Molloy v. Liebe, the Privy Council said of such a claim:

Molloy insisted on the works being done, maintaining that they were not
extras. The contractor on the other hand maintained that they were. As
Molloy insisted on the works being done, in spite of what the contractor
told him, the umpire naturally inferred (and it was for him to draw the
inference) that the employer impliedly promised that the works would
‘be paid for either as included in the contract price or, if he were wrong
in his view, by extra payment to be assessed by the architect. It is difficult
to see how the umpire could have drawn any other inference from the
facts as found by him, without attributing dishonesty to Molloy. 3 9

This view is now orthodox building law, 4 ” though it is by no means
free from doubt.’4′

’37Ames, Lectures on Legal History (1913),
154-6; Bullen and Leake,
Precedents of Pleadings 2d ed. (1863), 31-33, 36-42.
138 Goff and Jones, Law of Restitution (1966), 29-31, 144; Denning, Quantum
Meruit: the Case of Craven-Ellis v. Canons, (1939) 55 L.Q.R. 54. See e.g.
Craven-Ellis v. Canons Ltd., [1936] 2 K.B. 403, 412, [1936] 2 All E.R. 1066, 10734
(C.A.); Upton-on-Severne R.D.C. v. Powell, [1942] 1 All E.R. 220, 221 (CA.).

139 (1910), 102 L.T. 616, 617.
140 Hudson’s Building Contracts 10th ed. (1970), 541-3, 548. Cf. Spencer,
Powers of Direction and Determination under Construction Contracts, (1955)
41 Va.L.Rev. 343, 348-52; Ellis, Note, (1961) 19 Fac.L.R. 171.
1-1 See counsel’s use of a similar argument in Davis Contractors Ltd. v.
Fareham U.D.C., [1956] A.C. 696, 704, [1956] 2 All E.R. 145 (H.L.), and the

1974]

THREATENED BREACH OF CONTRACT

Its theoretical shortcomings were exposed in the Canadian
Supreme Court decision, Peter Kiewet Sons’ Co. v. Eakins Con-
struction Ltd.14 There, a subcontractor had been told he would
be put off the job if he did not perform certain extra work at his own
expense: He did the work, but his suit for a quantum meruit was
not successful. Applying modern theory, the court looked for either
an actual contract, to be inferred from the parties’ conduct, or
for a quasi-contractual obligation to pay for the work. In the
view of the majority, the head contractor’s express refusal to pay
anything extra was fatal to any inferred contract. Nor was there
any room for an obligation imposed by law which, according to
the majority, was excluded by the express remuneration provision
in the contract. 144

It seems inevitable, from the majority’s reasoning, that the
builder’s claim in such cases must be based on an obligation im-
posed by law. Where relief is not precluded by the terms of the
original contract, on what theory might the obligation be imposed?
Here, the dissenting judgment of Cartwright,J. is of special interest.
He referred to the extreme circumstances of compulsion, and ar-
gued that relief should be given on the same principles of duress
as were applied in Knutson v. The Bourkes Syndicate. 45 This ex-
tension of the law of duress, if logically pursued, may well bring
consistency to the law of quasi-contract. The only reservation one
might have is whether the building owner will be given sufficient
protection should he change his position to his detriment on the
assumption he will not have to pay extra for the work. This,
however, is a common problem in the law of quasi-contract, and
perhaps the only answer is the adoption of an enacted change of
position defence, examples of which are to be found in some Com-
monwealth countries where the law of money paid under mistake
has been dealt with by the legislature.’4

(c) Extraneous Pressure

Pressure used to induce another person to give up his rights
under a contract may take the form of a threat quite unconnected

doubts expressed by Viscount Simonds at 713 and 147, and Lord Reid at
723-4 and 155.
14 [1960] S.C.R. 361.
i-13 Ibid., 366.
44 Ibid., 368-9.
i45 Ibid., 378-81.
146New Zealand: Judicature Act, 1908, s.94B, as inserted by Judicature
Amendment Act, 1958, s.2, no. 40; West Australia: Law Reform (Property,
Perpetuities and Succession) Act, 1962, s.24, no. 83.

McGILL LAW JOURNAL

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with the contract itself. The threat may be independently wrongful,
as where, for example, a public official misuses his powers. Pre-
sumably, such pressure is governed by the principles of duress
established to deal with threats of this kind, and is therefore beyond
the scope of the present enquiry. The threat may, on the other hand,
be perfectly lawful, as where a person is told that if he does not
comply with a demand, he will be refused further contracts with the
party making it. If the demand does not correspond with the obliga-
tions created by an existing contract between the two parties, the
most plausible objection to the pressure is that it conflicts with
general duties of good faith owed by the party making the demand
on account of the contract he has undertaken. This form of pressure
is directly relevant to the present enquiry.

Commonwealth authorities are opposed to allowing relief for
duress here. Smith v. William Charlick Ltd.,147 discussed earlier, is
directly in point. A more recent decision to the same effect is the
judgment of the Ontario Court of Appeal in Morton Construction Co.
v. City of Hamilton.14 The plaintiff had done some work for the
defendant corporation. The work proved unsatisfactory, and a dis-
pute arose about who was responsible. The corporation told the
plaintiff he must repair the work at his own expense, or he would
receive no more contracts from the corporation. He carried out the
work, and then sued for compensation, offering to prove that the
failure was the result of the corporation’s own poor design. His
claim was rejected. There was no implied contract to pay for the
work, because the corporation had made it clear that it had no
intention of paying.140 Nor could an obligation be imposed by law,
because

[t~he plaintiff’s consent to do the work in question was not deprived of its
voluntary character by reason of the threats made by certain members of
the City council to the effect that the plaintiff would receive no further
contracts from the city unless it effected the required repairs at its own
expense. The defendant was legally entitled to make a threat of that
nature….150

These cases are a serious obstacle to relief.

147Supra, f.n.49. See, however, Criterion Theatres Ltd. v. Melbourne and
Metropolitan Board of Works, supra, f.n.57, 274 (Smith case considered
inapplicable where defendant based his demand on a disputed legal claim).

148 [1962) O.R. 154, 31 D.L.R. (2d) 323.
140 Ibid., 161 and 330. Cf. City of Moncton v. Stephen (1956), 5 D.L.R. (2d)

722 (N.B.S.C.): see 723-5 per BridgesT.

‘5OSupra, f.n.148, 161 and 330. Compare Terminal Warehouses Ltd. v. J.H.
Lock & Sons Ltd. (1957), 9 D.L.R. (2d) 490, 498-9 (Ont. High Ct.), which may
now be overruled.

19741

THREATENED BREACH OF CONTRACT

To the extent that they proceed on the view that a threat to do
a lawful act cannot constitute duress, the cases may be open to
question. On a broader theory of duress, it may well be that proof
of the unlawfulness of the threat, if carried out, is neither a sufficient
nor necessary condition of relief in all cases. It may be expected
that relief for duress will increasingly come to depend upon the
application of criteria which are specially developed for that purpose.
Applying such criteria, a plausible argument may well be made that
any extraneous pressure, brought to bear to frustrate another
party’s legitimate contractual expectations, can constitute duress.

In America, despite the encouragement offered by legal theory,
few courts have gone that far. The courts of New Jersey are an
exception. They do not test “wrongfulness”, even in this context, by
reference to the lawfulness of the threat.’ 5′ In the leading case on
duress, Rubenstein v. Rubenstein, the Supreme Court said,

… means in themselves lawful must not be so oppressively used as to
constitute, e.g., an abuse of legal remedies …. The act or conduct com-
plained of need not be ‘unlawful’ in the technical sense of the term; it
suffices if it is ‘wrongful in the sense that it is so oppressive under given
circumstances as to constrain one to do what his free will would
refuse…’ .152

This principle was elaborated in an earlier decision,153 where it was
said,

Judgment whether the threatened action is wrongful or not is colored
by the object of the threat. If the threat is made to induce the opposite
party to do only what is reasonable the court is apt to consider the
threatened action not wrongful unless it is actionable in itself. But if the
threat is made for an outrageous purpose, a more critical standard is
applied to the threatened action.1 53a

These observations have proved helpful where pressure has been
brought to bear in an effort to alter the effect of the contract.

In Ross Systems Inc. v. Linden Dari-Delite Inc.,15 4 a commission
agent concluded a franchise agreement with a retailer, under which
the retailer was to be supplied with Farmland ice cream at a price
fixed in the agreement. The agent then negotiated an extra commis-
sion from Farmland, and this increased the price the retailer had
to pay Farmland. The retailer was forced to pay the extra charge
because it feared that Farmland might terminate the franchise agree-

151 On the influence of the Restatement here, see Talbott, Contracts, (1956)

11 Rutgers L.Rev. 238, 242-3.

15220 N.J. 359, 367, 120 A. 2d 11, 15 (1956).
153 Hochman v. Zigler’s Inc., 139 N.J.Eq. 139, 50 A. 2d 97. (Ch. 1946).
iSla Ibid., 144 and 100.
15435 NJ. 329, 173 A. 2d 258 (1961).

McGILL LAW JOURNAL

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ment, and that the agent might indulge in harassing tactics. The
court allowed recovery of the extra payments as money paid under
duress. The pressure was apparently held “wrongful” simply because
it had the effect of increasing the contract price.155 Reference was
made, elsewhere in the judgment, to a previous Supreme Court
decision in which a similar result had been coerced by a threat to
withold future supplies of goods, and the money had also been
held recoverable. 10

To the same effect is Wolf v. Marlton Corp.,157 where an un-
willing purchaser of a house in a subdivision told the subdivider that
he would re-sell the house to an “undesirable purchaser” if he was
called upon to complete the purchase. The subdivider, fearing the
adverse effect this would have on his other sales, did not call for
completion. He nevertheless sued the purchaser for breach of con-
tract and was successful, his failure to call for completion being
excused on the ground that it was coerced. Of the purchaser’s threat,
the court said,

… where a party for purely malicious and unconscionable motives
threatens to re-sell such a home to a purchaser, specially selected because
he would be undesirable, for the sole purpose of injuring the builder’s
business, fundamental fairness requires the conclusion that his conduct in
making this threat be deemed “wrongful”, as the term is used in the law
of duress. 5 s
The fact remains that few courts have carried the law of duress
this far. The reason presumably lies deeper than any announced rule
that a threat to commit a lawful act cannot amount to duress.
Practical problems of decision must not be under-estimated. Some
courts may be unwilling to substitute broad notions of “fundamental
fairness” or “commercial morality” for established concepts of con-
tract law, though they freely apply equally imprecise notions, such
as “reasonable care”, in other contexts. Others may see themselves
being carried far beyond ordinary contractual considerations. Wolf
v. Marlton, for example, has been criticized on the ground that an
“undesirable purchaser” presumably meant a coloured person, and
the decision: therefore had the unconstitutional effect of encouraging

1’5Ibid., 335 and 261-2.
5OPompton Stationery Corp. v. Passaic County News Co., 127 NJ.L. 235,
21 A. 2d 849 (Sup.Ct. 1941). There the threat does not seem to have been in
breach of contract, though it may have been part of an unlawful monopolistic
scheme.

15757 NJ. Super. 278, 154 A. 2d 625 (App.Div. 1959).
158 Ibid., 288 and 630.

1974]

THREATENED BREACH OF CONTRACT

racial discrimination in subdivisions of land. 5 9 Problems may arise,
too, with the idea of a “threat”. Does it include, for example, the
conduct of one who says he does not wish to receive a benefit, but
nevertheless accepts it in circumstances where the other party has
no option but to give it to him? 60 The extent to which the law, is
developed here may depend more upon the willingness of courts to
embark on a new process of decision than upon the logical develop-
ment of any single principle.

4. Conclusion

There are evident advantages in using the law of duress to
regulate pressures which one party to a contract may apply against
the other. It has a flexibility which is not often found in the more
traditional methods of dealing with contract modifications. It also
offers, at least as an ideal, the prospect of a coherent body of
principle which will cover all aspects of such coercion in a consis-
tent way. Though present Commonwealth law falls short of this ideal,
there are welcome signs of a movement towards a broader theory of
duress by threatened breach of contract.

One sign is the gradual extension of the scope of the law. Once
a narrow rule applied to payments made under duress of goods, it
has extended beyond this and closely analogous situations to cover
all paynents made to induce another to perform his contractual
duty, and apparently includes payments made under contracts which
prove to be invalid for want of consideration. It also includes
payments made, and possibly work performed, to avert threats to
exercise ‘claimed rights of cancellation or forfeiture under a con-
tract. Two problem areas still remain. One is where the coercive
conduct induces a contract which cannot be set aside for any other
ground than duress. Here, it has been argued that the law of duress
might well be invoked, without undue derogation from existing
theory. The other is where extraneous lawful pressure is brought to
bear to force a departure from the contract. This is a problem with
difficulties of its own which few common law courts have yet been
prepared to tackle. On the whole, the areas which the doctrine has
yet to cover are those in which it could only be invoked in unusual
circumstances.

159 Note, (1960) 34 St. John’s L.Rev. 319, 322. One suspects that New Jersey
courts may occasionally avoid broad issues by holding that the plaintiff’s
will was not overborne, even though the threat had some coercive force;
see Shalit v. Investors Savings and Loan Association, 101 NJ.Super. 283, 244
A. 2d 151, 154 (1968).

160As in City of Moncton v. Stephen, supra, frn.149, 724.

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Another sign is the increasing interest in determining whether
pressure is coercive in fact. There is a strong case for requiring a
substantial degree of pressure to be proved before the court allows
relief, though the precise degree may be variable, and the require-
ment itself may be discarded in those particular cases where
It must be con-
it would be opposed to sound legal policy.
ceded, however, that whatever may be the position in America, the
requirement has yet to be firmly established in the Commonwealth.
A point which has, in the writer’s respectful opinion, received
insufficient attention in the Commonwealth is the test of “wrong-
fulness. No duress rule which attempts to test the coercing party’s
conduct solely by reference to whether his threatened action would
be lawful if carried out can do full justice to the issues discussed in
this article. There is, however, no simple answer to the problem. If
a solution based solely on technical unlawfulness is unsatisfactory,
so too is one which would commit the whole matter to the court’s
sense of what is the “fair thing” in the particular case. It seems
that the lawyer’s skill and ingenuity will have to be devoted to creat-
ing standards of reasonable negotiating behaviour which are not
too vague to be consistently applied. Broad considerations of legal
theory are not of great assistance here beyond making the valuable
point that whether or not conduct is wrongful depends, not only on
what is threatened, but also on what is sought to be achieved.

This article has been concerned to illustrate not only the major
theoretical features of the law of duress but also the many different
rules which the law includes. The cases considered display a wide
variety of legal techniques. They may go some way towards dispelling
the fear that a court which commits itself to a broad theory of
duress must accept either clear rules leading to unsatisfactory
results in some specific cases, or vague and diffuse enquiries of
uncertain scope. It is to be hoped that the courts will put aside any
such fear, and will continue to act creatively in exercising a jurisdic-
tion they have always had, but which has tended to be overshadowed
by other doctrines whose shortcomings are now apparent. The law
of duress has a vital protective role to serve in the law of contract.