Economic Duress
The section 15 of the Contract Law, Cap 149 provides the meaning of the term duress. According to the section 15, the term duress supersedes free consent and/or free consent in order to enter to an agreement.
The section 15 of the Cap 149 does not provide the meaning of the economic duress. However subsequent developments in English law in this field, brought us to the doctrine of financial coercion which is the result of an expression of equity law and it also leads to the cancellation of the contract if it reverses the free will of the coerced.
The doctrine of economic duress, as a doctrine of the law of equity is also applicable in Cyprus and covers commercial transactions and contracts.
It is well settled that duress is not a tort and is only actionable in the sense that a party who has been a victim of duress can commence proceedings to set the agreement aside.
One of the defining features of economic duress is that it involves illegitimate pressure meaning that it is without any commercial or similar justification. Illegitimate pressure must be distinguished from the rough and tumble of normal commercial bargaining and will depend upon a consideration of all of the circumstances in any given case.
The ingredients of actionable duress are that there must be pressure, (a) whose practical effect is that there is compulsion on, or a lack of practical choice for, the victim, (b) which is illegitimate, and (c) which is a significant cause inducing the Claimant to enter into the contract. In determining whether there has been illegitimate pressure, the Court takes into account a range of factors. These include whether there has been an actual or threatened breach of contract; whether the person allegedly exercising the pressure has acted in good or bad faith; whether the victim had any realistic practical alternative but to submit to the pressure; whether the victim protested at the time; and whether he affirmed and sought to rely on the contract. These are all relevant factors. Illegitimate pressure must be distinguished from the rough and tumble of the pressures of normal commercial bargaining.
The party asserting duress carries the burden of proving causation, and must prove that the duress was a "significant cause" inducing that party to enter into the agreement.
From the above it becomes evident that the Court, examines a number of factors in order to reach to a decision to set aside an agreement due to economic duress. It is emphasized that illicit pressure must be separated from the sometimes-harsh pressure resulting from normal commercial transactions. It follows from the above, that economic coercion can also arise through the threat of using legal means or procedures.
