Duress and Undue Influence in Contract Law in Ghana: Meaning, Elements, and Legal Effects

DURESS AND UNDUE INFLUENCE IN CONTRACT LAW IN GHANA

1. Introduction

A contract is legally binding only where it is entered into voluntarily by parties who freely consent to its terms. Consent must be real and genuine. Where a party’s agreement is procured by pressure, compulsion, or improper influence, the law treats such consent as defective. The result is that the contract becomes voidable at the instance of the affected party.

Under Ghanaian contract law, informed by common law and equitable principles, the doctrines of duress, undue influence, and unconscionable bargain exist to protect parties from unfair pressure and abuse of power in contractual dealings.

2. Meaning and Nature of Duress

Duress refers to unlawful pressure exerted on a person which compels that person to enter into a contract against his or her free will. The pressure may take the form of threats of physical harm, unlawful detention, prosecution, or economic harm.

The essence of duress is that the will of the victim is overborne such that the consent given is not truly voluntary.

For duress to be established, the following elements must generally be shown:

1. There must be a threat or illegitimate pressure.
2. The threat must be unlawful or improper.
3. The threat must have induced the victim to enter into the contract.
4. The victim must have had no practical alternative but to submit.

It is not necessary to prove that the threat was the sole reason for entering the contract. It is sufficient if it was a significant cause.

3. Duress at Common Law

Kaufman v Gerson (1904)

This case is the classical authority on duress by threat of prosecution.

Facts

The plaintiff entered into an agreement with the defendant in a foreign country. The plaintiff threatened to initiate criminal proceedings against the defendant’s husband for an offence he had committed unless the defendant signed a contract agreeing to transfer certain benefits to the plaintiff. The consideration for the contract was the plaintiff’s promise not to prosecute the husband.

Later, the defendant sought to avoid the contract on the ground that her consent had been obtained through threats.

Decision

The court refused to enforce the contract.

Reasoning of the Court

The court held that the defendant’s consent was obtained by duress. The threat of criminal prosecution was a serious form of pressure which overbore her free will. The court explained that:

• It must be shown that the threat was a reason which induced the party to enter the contract.
• It is not required that the threat must be the only motivating factor.
• Any contract founded upon such coercion is contrary to public policy and unenforceable.

Legal Principle

A contract entered into under threat of criminal prosecution is voidable for duress if the threat was a material inducement for entering the contract.

Barton v Armstrong

This case illustrates duress involving threats to life and physical harm.

Facts

Armstrong was the former chairman of a company. Barton was the managing director. Armstrong threatened to kill Barton unless the company agreed to:

1. Pay him a large sum of money in cash.
2. Purchase his shares in the company at a favourable price.

Although Barton believed that part of the transaction might make commercial sense, he executed the agreement because of the threats. He later sought to have the contract set aside.

Decision

The court allowed Barton to rescind the contract.

Reasoning of the Court

The Privy Council held that:

• Threats of death or serious bodily harm constitute the highest form of duress.
• Once such threats are shown to have contributed to the decision to contract, the agreement is voidable.
• It is irrelevant that the victim might also have had commercial reasons for entering the contract.

Legal Principle

Where threats of violence are a significant factor in inducing a contract, the contract is voidable even if other legitimate motives existed.

4. Duress in Ghanaian Law

Hemans v Coffie

This case demonstrates the application of duress in Ghana.

Facts

The plaintiff was indebted to several creditors. He was reported to the police and arrested. While in custody, the police told him that unless he sold his house to pay his debts, he would be imprisoned for a long period. Under this pressure, he entered into a contract to sell his house to the defendant.

After his release, the plaintiff brought an action seeking to have the sale set aside on the ground that it was procured by duress.

Decision

The court set aside the transaction.

Reasoning of the Court

The court held that:

• The use of police detention and threat of imprisonment to compel a sale amounted to unlawful pressure.
• The plaintiff did not act voluntarily.
• His consent was obtained under compulsion and therefore lacked legal validity.

Legal Principle

A contract procured through abuse of police power or threats of unlawful detention constitutes duress and is voidable.

5. Economic Duress

Meaning

Economic duress occurs where one party uses illegitimate economic pressure to compel another party to enter into a contract or vary an existing contract. This usually involves threats of breach of contract where the victim has no practical alternative.

For economic duress to succeed, the claimant must prove:

1. Illegitimate economic pressure.
2. Lack of reasonable alternative.
3. Causation between the pressure and the agreement.

D and C Builders Ltd v Rees

Facts

The defendants owed the plaintiffs money for building work done. Knowing that the plaintiffs were in financial difficulty, the defendants offered to pay only part of the debt and threatened to pay nothing at all if the offer was not accepted as full settlement. The plaintiffs reluctantly accepted the reduced payment because they needed immediate cash.

Later, the plaintiffs sued for the balance.

Decision

The court allowed the plaintiffs to recover the balance.

Reasoning of the Court

The court held that:

• The defendants took unfair advantage of the plaintiffs’ financial distress.
• The agreement to accept part payment in full settlement was obtained by economic pressure.
• The consent of the plaintiffs was not freely given.

Legal Principle

Where a creditor is forced by economic pressure to accept part payment in full settlement, the agreement is voidable for economic duress.

Fordflora Co. Ltd V Jospong Group of Companies

Facts 

The plaintiff entered into a contract with the defendant for the supply of certain uniforms at an agreed price and quantity. The plaintiff took out a loan facility in order to fulfill the order. 

In the course of transacting, the defendants reduced the quantity of goods demanded, reducing the total money to be realized from the agreement and making it difficult for the plaintiffs to repay the loan facility. 

The plaintiff sued, inter alia, that the reduction in quantity was a unilateral decision made by the plaintiffs which the plaintiff only agreed to under duress. The defendants on the other hand argued that it was a mutual decision as between the parties. 

Court Decision

The court relied on the case of African Distributors Co. Ltd v Customs, Excise & Preventive Service which stated that duress is not grounded on the absence of consent. Threats or pressure in commerce are commonplace. For instance, an offeror makes an offer to an offeree under threat that if he does not accept the offer would be closed to him. 

The plaintiff had the onus to show that he acted under duress and then go further to show that the duress or pressure exercised on him by the defendants was not regarded as legitimate under law. It must also prove the lack of practical choice. \

The plaintiff failed to lead any evidence to prove this. 

Holding

The court held that there was no duress. 

Illustration 

A enters into negotiations with B and says that, “if you don’t accept the offer I’m making in the terms stated, I would have to withdraw and go elsewhere.” This statement is ordinary pressure in the course of commerce and cannot amount to duress such that if the B accepted it, the contract would be voidable. 

A enters into negotiations with B and says that, “if you don’t accept this new offer that I am making to you, I will stop supplying you with the products you need”. A knowing that if supply is halted, B’s business will come to a standstill and likely collapse. B having no choice then accepts. This is a contract made under duress. 

6. Effect of Duress

Duress does not make a contract automatically void. It renders the contract voidable at the option of the victim. The victim may:

1. Rescind the contract.
2. Recover property transferred.
3. Affirm the contract, in which case the right to rescind is lost.

Delay, affirmation, or intervention of third party rights may bar rescission.

UNDUE INFLUENCE

7. Meaning of Undue Influence

Undue influence refers to improper pressure or domination exercised by one party over another in a relationship of trust or dependence, resulting in the weaker party entering into a transaction that does not reflect free and independent judgment.

Unlike duress, undue influence often involves subtle psychological pressure rather than overt threats.

8. Categories of Undue Influence

The law recognises two main categories:

1. Actual undue influence.
2. Presumed undue influence.

9. Actual Undue Influence

This arises where there is direct evidence that one party dominated the will of the other.

The burden of proof lies on the party seeking to avoid the contract.

Allcard v Skinner

Facts

The plaintiff was a 27-year-old unmarried woman who joined a religious sisterhood. The defendant was the spiritual head and superior of the sisterhood. While under religious vows and without independent advice, the plaintiff made substantial gifts of money and shares to the sisterhood.

Several years later, after leaving the sisterhood, she sought to recover the gifts on the ground of undue influence.

Decision

The court held that undue influence existed but refused rescission because of delay.

Reasoning of the Court

The court found that:

• The plaintiff was under a duty of absolute obedience to the religious superior.
• She lacked independent advice.
• Her spiritual dependence deprived her of independent judgment.

However, because she waited several years after leaving the sisterhood before bringing the action, her claim was defeated by delay.

Legal Principle

Where domination of will is proven, transactions procured are voidable, but the right to rescind may be lost through delay or affirmation.

Mantac Ghana Ltd v Batimat Ltd

Facts

The plaintiff and defendant entered into a leasehold agreement, whereupon the plaintiff sued to recover the property. The defendant alleged that the agreement entered into between the parties was done under undue influence. The reason being that:

1. The defendant was not fluent in the English language and the plaintiff knew this but still gave the document to the defendant to read himself and sign. 
2. The plaintiff was aware of the defendant’s inability to speak the English language fluently and yet there was the absence of independent advice and no opportunity afforded to the defendant to obtain to obtain such advice. This constitutes an unfair inducement. 
3. That the terms of the written agreement differed from the verbal agreement. 

Court Reasoning

The court found that the contract had been handed over to the defendant whereupon he made submissions as to amendments that ought to be made, including the addition of a renewal clause. The change was made. The defendant had two months with the draft and the plaintiffs duly informed him of the contract terms. 

The court held that no undue influence was proved. 

10. Presumed Undue Influence

Presumed undue influence arises where the relationship between the parties is such that trust and confidence exist, creating a risk of abuse.

Once such a relationship is established and a transaction benefits the dominant party, the burden shifts to that party to prove that the transaction was fair and voluntary.

In CFC Construction Company Ltd v Attitsogbe, the court established undue influence on the basis that the plaintiff was an old lady who was a recent widow at the time of the contract. The defendant on the other hand was a young astute business man upon whom the plaintiff was entirely reliant. 

11. Fiduciary and Confidential Relationships

Relationships that raise a presumption of undue influence include:

• Parent and child
• Guardian and ward
• Solicitor and client
• Doctor and patient
• Trustee and beneficiary
• Religious adviser and follower

In such relationships, the law presumes influence because of the imbalance of power and trust.

12. Rebutting the Presumption

The presumption of undue influence can be rebutted by showing that:

1. The weaker party acted freely.
2. Independent legal or professional advice was obtained.
3. The nature and effect of the transaction were fully explained.

Independent advice must be real, competent, and based on full disclosure.

UNCONSCIONABLE CONTRACTS

13. Meaning

An unconscionable contract is one that is excessively unfair, harsh, or oppressive, particularly where one party suffers from a special disability such as old age, illiteracy, poverty, sickness, or dependency.

Equity intervenes where:

• One party suffers a special disadvantage.
• The other party knowingly exploits that disadvantage.
• The resulting transaction is manifestly unfair.

14. Ghanaian Position

CFC Construction Ltd v Attitsogbe

Facts

The second plaintiff was an elderly widow who controlled a construction company as its main shareholder. She was weak, aged, and dependent on the defendant who managed her affairs and was also trustee of her will.

A share transfer agreement was executed transferring 5 percent of her shares to the defendant without monetary consideration. The defendant claimed the transfer was in exchange for services rendered.

Decision

The Supreme Court set aside the transaction.

Reasoning of the Court

The court held that:

• The plaintiff suffered from special disability due to old age and infirmity.
• The defendant occupied a position of trust and dominance.
• No independent advice was provided to the plaintiff.
• The defendant failed to prove that the transaction was fair, just, and reasonable.

Legal Principle

Where a party with special disability enters into a transaction that benefits the dominant party, the burden lies on the dominant party to prove fairness, failing which the transaction will be set aside as unconscionable.

Illustrations

1. A landlord threatens to report a tenant to immigration authorities unless the tenant signs a new lease at double rent. The tenant signs out of fear. The lease is voidable for duress.
2. A lawyer persuades an illiterate client to transfer land to him without independent advice. The transfer may be set aside for presumed undue influence.
3. A contractor refuses to complete urgent public works unless the government agency agrees to pay double the contract price. If the agency has no alternative, the variation may be voidable for economic duress.
4. An elderly woman transfers property to her caretaker without payment and without legal advice. The transaction may be voidable for unconscionable bargain.

Summary Table

Doctrine	Nature of Pressure	Burden of Proof	Effect on Contract	Key Cases
Duress	Threats of harm, detention, prosecution, violence	On victim	Contract voidable	Kaufman v Gerson, Barton v Armstrong, Hemans v Coffie
Economic Duress	Threatened breach of contract or economic pressure	On victim	Contract voidable	D and C Builders v Rees
Actual Undue Influence	Direct domination of will	On victim	Contract voidable	Allcard v Skinner
Presumed Undue Influence	Relationship of trust and confidence	On dominant party	Contract voidable	Allcard v Skinner
Unconscionable Bargain	Exploitation of special disability	On dominant party	Contract voidable	CFC Construction v Attitsogbe