Q.
Briefly explain;
Coercion
A.
Similar question was asked in:
MIA QE 2012/3 Q1 (b)(i) Coercion
MIA QE 2014/3 Q1 (c)(i) which render a contract voidable
What constitute a voidable contract?
Briefly explain 'coercion'
LPPEH 2012 D02 Q2
From dictionary.com, coercion means "force or the power to use force in gaining compliance."
From Contract Act, 1950:
Section 15. “Coercion” is the committing, or threatening to commit any act forbidden by the Penal Code, or the unlawful detaining or threatening to detain, any property, to the prejudice of any person whatever, with the intention of causing any person to enter into an agreement.
Explanation -
It is immaterial whether the Penal Code is or is not in force in the place where the coercion is employed.
ILLUSTRATION
A, on board an English ship on the high seas, causes B to enter into an agreement by an act amounting to criminal intimidation under the Penal Code. A afterwards sues B for breach of contract at Taiping. A has employed coercion, although his act is not an offence by the law of England, and although section 506 of the Penal Code was not in force at the time when or place where the act was done.
Coercion in contract:
Contract coercion occurs when a contract agreement is entered into by force under conditions involving harm or threats of harm. State and federal laws require contracts to be entered into "knowingly" and "willingly" by all parties. Thus, if a party signs a contract due to coercion, the contract generally will not be considered legally enforceable.
The rule regarding coercion applies both to the entire contract as well as individual terms in the contract. That is, the parties must willingly agree to the contract as a whole, as well as the various terms, definitions, and requirements laid out individually in the agreement.
What is the Effect of Coercion on a Contract?
If conditions of coercion are found, the effect on the contract is usually that the entire contract is rescinded or cancelled. Contract rescission has the effect of canceling the agreement in its entirety. This will release both parties from their obligation to perform any contract duties as contained in the agreement.
Are there Defenses to Contract Coercion?
A common defense to contract coercion is "unclean hands". This is found when one party avoids liability because the other party is guilty of doing the same thing. Here, unclean hands would mean that both parties actually coerced the other into signing the agreement. In such situations, the contract would still be voided due to the existence of coercion. However, an unclean hands defense might help one party avoid certain liabilities or legal remedies. It is like "pot calling a kettle black", but it can avoid paying for damage or being sued for other damages.
Also, contract coercion may be raised as a defense against performing contract duties. For instance, one party might claim that they don’t need to perform their contract duties because they were coerced into performing the contract. Thus, coercion is often itself used as a contract defense.
Ref:
http://www.legalmatch.com/law-library/article/contract-coercion.html
Section 15, Contract Act, 1950. Available at,
http://www.agc.gov.my/Akta/Vol.%203/Act%20136.pdf