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Tutorial 2 - Coercion

Contract Law II (Universiti Malaya)

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Contract II – Tutorial 2

Coercion

1. Discuss the decision in the case of Chin Nam Bee Development v Tai Kim Choo [1988]
2 MLJ 117, especially in relation to the meaning of ‘coercion’ in sections 15 and 73 of the
Contracts Act 1950. (section 73 case)
Issue: the issue put forth in this case is whether in construing the usage of the word
“coercion” in section 73…

The High Court referred to the case of Kanhaya and held that the meaning of
coercion under s.73 of Contracts Act is wider and should be given its ordinary and
general meaning. It is not confined to situations falling within s.15 of the Contracts Act.
The judge stated that it would be difficult to give effect to section 73 illustration (b)
if the word ‘coercion’ is to be given the meaning as defined in section 15 of the
Act. They appear to be in conflict with each other. Therefore, the word ‘coercion’ in the
context of section 73 of the Act should be its ordinary and general meaning since there
is nothing under section 15 which says that the ‘word coercion’ should apply throughout
the Act. The definition of coercion in section 15 should only apply for the purpose
contained in section 14, as section 14 of the Act specifically says so.
Section 15 deals with free consent, section 73 deals with restitution. Section 15
did not mention that this section doesn’t apply to other act
Section 15 and Section 73 indeed appear to be in conflict with each other. If
there is threatening of an act forbidden by Penal Code and unlawful detention to the
property then it is amount to coercion. A party must be coerced to enter into an
agreement and commercial duress is not even enough, a party must have no choice at
all to make the agreement. However, Section 73 is a restitution provision which allowing
a person who has paid money or delivered something, whether by mistake or coercion,
the right to claim restoration of the money paid or thing delivered. Meaning that, as long
as a person enters a contract either by mistake or coercion, he is entitled to claim for
restitution. Section 73 did not mention what amounts to coercion, or how to determine
whether the agreement is entered into because of coercion.
In the case above, the defendant contended that the contract did not fall within
coercion as defined in Section 15 of the Contracts Act but the court applied Section 73 in
this case and stated that Section 73 should be wider in meaning and the word ‘coercion’
should be given its ordinary and general meaning. I agree with the judgment, every
situation should have different interpretation of meaning of the word, the Act is
impossible to cover every circumstances and it should be noted that the Act is a
guideline for the people for the judge to give judgment.
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2. Jake and Caleb entered into a contract. Under the contract, Jake was to transport
timber from Caleb’s sawmill to the shipyard from 21 March 2016 to 20 April 2016. Caleb
was to pay Jake RM10,000.

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However, on 28 March 2016, Jake informed Caleb that he would only continue
transporting timber if Caleb would pay an extra RM2,000. Caleb had no choice but to
agree to this demand, as his clients expected the timber to be sent by 20 April 2016.
Caleb, however, pays only RM10,000 on 20 April 2016. After the payment, Jake
continued transporting the timber.

Caleb comes to you in May 2016 and asks whether he can reclaim the RM2,000. Advise
Caleb.
The issue is whether Caleb can reclaim the RM 2000. Ocean Shipping case, the
defendant asked for more payment and threatened to stop working unless paid. The
court held that there is economic duress. Even if there is good consideration, the
contract is voidable. Applying to this case, Jake demanded for RM 2000 and threatened

3. Joan is a University student. She met Jack at the Perdanasiswa during lunch hour.
Jack fell in love with Joan at first sight and proposed to her. She refused. The next day,
Jack telephones her and informs her that if she does not agree to marry him, he would
get gangsters to harm her family. She is very afraid. She signs a contract to marry Jack
after she graduates.

However, after graduation, she realizes that she cannot go through with the marriage.
She seeks your advice. What will you advise her?
The issues arise is whether Joan can take action against Jack and whether there
is a valid contract. The plaintiff is Joan and the defendant is Jack. There are two types of
coercion as defined in Section 15 of the Contracts Act which are the threatening of an
act forbidden by the Penal Code and the unlawful detention of the property according to
the case of Teck Guan Sdn Bhd v Hydrotek Engineering (S) Sdn Bhd. The contract is
voidable if one of the party is coerced to enter into a contract but necessary elements
must be proved. In this case, Jack threatened Joan that if she refused to sign a contract
to marry with Jack, he would get gangsters to harm her family. This is clearly a
threatening act to force the plaintiff to enter into a contract. However, the plaintiff must
take reasonable steps to avoid signing the contract. In this case, there is sufficient time
to ask help from the university or her family but she did not do so. It can be concluded
that she did not take reasonable steps to avoid to enter into a contract with Jack. Thus,
the elements are not fulfilled and there is no valid contract. Joan cannot take any action
against Jack.

4. Discuss whether there is room in Malaysian contract law to embody the concept of
economic duress.
Since the recognition in The “Siboen” and The “Sibotre” that duress is not
limited to persons, the doctrine of economic duress has developed. It is applicable in the
commercial transactions where a blameworthy party attempts to modify the contract

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terms and threatens to discontinue unless he is paid more than was originally agreed. In
such situations, the pressure is exacerbated if the innocent party already has existing
obligations with third parties for which he may suffer further losses if the original contract
does not carry on as planned. However, the courts are also cautions that commercial
pressure alone is insufficient and has required that the illegitimate pressure must be
such of will as to vitiate consent.
According to the case of Pao On & Ors v Lau Yiu Long & Anors, the Privy
Council held that commercial pressure alone is insufficient and also set out the factors to
determine whether there is coercion of will such as to vitiate true consent. The court
stated that there are materials to enquire whether the person alleged to have been
coerced into making the contract, he did or did not have an alternative course open to
him such as an adequate legal remedy; whether he was independently advised; and
whether after entering the contract he took steps to avoid it. The Privy Council then
considered whether English Law recognizes a category of duress known as “economic
duress”. The court held that there was no coercion of the defendants’ will to sign the
guarantee. Although recently two English judges have recognized that commercial
pressure constitute duress the pressure of which can render voidable and stressed that
the pressure must be such that the victim’s consent to the contract was not a voluntary
act on his part. However, in their Lordship’s view, it must be shown that the payment
made or the contract entered into was not a voluntary act. The defendant had
considered the matter thoroughly, chose to avoid litigation and formed the opinion that
the risk in giving the guarantee was more apparent than real. According to the board,
there was commercial pressure but no coercion.
Based on the case of Teck Guan Trading Sdn Bhd v Hydrotek Engineering
(S) Sdn Bhd & Ors, the plaintiffs agreed to sell round iron bars to the first defendant.
The defendants contended the price was RM1180 as stated in a document as a result of
a discussion between the parties. The plaintiffs contended that this was a typing error
and the actual price was RM 1244. They refused to supply the bars unless the
defendants agreed to pay RM 1244. The first defendant initially resisted the demand but
eventually acceded to it as: (a) the plaintiffs persistently refused to supply; (b) the first
defendant had committed itself to supplying and producing concrete requiring the bar;
and (c) there was no time to look for another source of supply. The defendant contended
that the first defendant was subjected to “economic blackmail” which constituted another
category of coercion. However, this argument was rejected by the High Court. In this
case, the first defendant was subjected to commercial pressure, which Mr Lim termed
‘economic blackmail’, when the first defendant, faced with the prospect of not getting
supply of the bars and in order to avoid that, agreed to the new price. It does not amount
to coercion because the agreement to the price was an exercise of free will.
According to the case of Mohd Fariq Subramaniam v Naza Motor Trading Sdn
Bhd, the High Court found that there was no coercion. The plaintiff made no protest
either before or after the agreement was executed. He admitted that the contents in the
agreement were read to him although he did not know how to read and no force was
applied to make him sign the agreement. There was also no evidence that he had taken
any steps subsequently to repudiate the agreement.

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From the three Malaysia cases above, it seems to be no room to Malaysia

contract law to embody economic duress. It must be shown that a party is coerced by
another party to enter into a contract, and it is not a voluntary act. Malaysia judges have
a different point of view that ‘economic duress’ is not suitable to be recognized like how it
was recognized in the English cases. Thus, I think that there is no room to Malaysia
contract law to embody economic duress.
Commercial pressure and economic duress, economic pressure can exist even before a
contract is entered into.
The doctrine of economic duress can be adopted into Malaysia contract law by judicial
interpretation of s.15 of Contracts Act, judges adopting English common law and
amendment of contracts act
The judges in both cases, Teck Guan and Mohd Fariq referred to the case of Pao On,
but the judges did not apply Pao On in the cases.
Perlis Plantations, the judges stated that Contracts Act does not provide for any form of
coercion other than as defined by s.15. There is no room for Malaysia contract law to
embody economic duress.

Undue influence 3 & 4

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