Tuesday, March 16, 2021

Ethiopian Contract Law- Defect in Consent due to Threat

 

 Defect in Consent due to Threat (Art.1706-1709)

A person may be threatened physically or psychologically to make an offer or to accept an offer made to him. In such case the person is declaring his intention to be bound as an alternative means of avoiding the effect of the threat. In principle parties enter into a contract for purpose of deriving economic benefit but  in case of threat, both or at least one of the party is entering into a contract to avoid a possible risk that has been directed against him, his relative, his property interest. So had it not been for the threat, the person would not have declared to be bound i.e. intention to be bound is lacking.

 

Duress (Art.1706 1707) Duress is warning the party that unless he enters into a certain contract certain harm will be done to him. One can raise duress as a cause of invalidation of contract if the following conditions are cumulatively fulfilled.

There is a threat or warning to cause harm. The person must be told expressly that he has to choose either suffering the certain harm or entering into a contract. He should not infer the threat of harm from the behavior or identity of the parties. For example, if three shifta or gangsters come at a home of certain rich man and remained in seat for an hour without giving any instruction to him he cannot claim duress if he writes them a check of 500,000 birr and made them to leave his house.

The harm is on the person himself, spouses or his ascendant or descendants. The existence of threat can not be a ground of invalidation of a contract unless it is directed on the party himself or his spouse or his ascendants and descendant. If the threat is on collaterals such as brothers, sisters, it cannot be a cause of invalidation.

The harm is on person, life, property, and honor. Harm on person is when the threat is to cause bodily damage to any of the above stated person. For example, a gangster come to A’s house and made the following statement. “Mr. A, you shall either sign me a check of birr 200,000 or I am going to cut the breast of your daughter”. Harm to a life is when the threat is to kill any of the above persons. Harm to honor is when the threat is to commit a certain act that negatively affects the reputation or public image of any of the above person i.e. threatening to release information which the threatened person wants to keep secret. For example, Abebe asked Shewakena, his friend, for a loan of birr 200,000. When Shewakena refused. Abebe told him that he (Abebe) will tell to Shewakena’s colleague that Shewakena is eunuchs. 


 Ethiopian law recognizes duress on property. However, care should be taken in case the threat is to harm property. Since here the choice of the party is making choice between similar interests; the person is ordered to enter into contract (Property interest) or loss certain property. The threat on property should be penal offences; a threat to break any contractual obligation should not be taken as duress.  


E.g. Asfaw, a ringleader, warned Belay to make an offer to sale his house in Dire Dawa to Asfaw’s brother, Dingamo; or else the house is to be burnt.


4.  The party believes that the harm will happen if he does not consent to the contract. That means the party would not have entered into the contract had it not been for the threat. Whether or not there existed duress depends on the subjective mentality of a party. Therefore; it is enough if the threat is apparent to a party, although there was no real threat. For example the fact that the pistol used to threaten a party was artificial does not matter; it is enough if he believed that the pistol was the true one. 

5.  The threat should be serious: - the threat is said to be serious when the harm to be caused is greater than the obligation that a party enters into. For example, a simple kissing on a lip or slap on a face are not serious harms.

6.  The harm is imminent that is the harm is going to happen soon and a party does not have time to think of another option to avoid the happening of the harm except by consenting to the contract. For example, if a lady receives a letter that warns her to sign a contract or face rape. Such threat is not immanent. The person or property threatened should be under the control of the threatening party and the threatening party will cause the damage at the moment a party refuses to consent.

 

E.g.1 three gangsters came to Shura’s house and put him and his wife under control and order Shura to sign contract of donation to legally registered political party under the pain of having his wife raped by them.

 

E.g.2 Abesha and Belete kidnapped Zerihuin’s daughter, and made a telephone call to him that he either make an offer to sell his share in Access Bank or they will rape his daughter 

7.  The threat must impress a reasonable person. The law does not expect a citizen to be a hero who can have courage to resist any threat. The law also does not want us to be cowardice. Citizen should have some courage to resist some threats. So the law punishes cowardice by denying the opportunity to invalidate contracts if the threat was such that any ordinary person would have resisted it. For example, the law does not accept a healthy man of 35 to claim that he was threatened by a young girl of 12. In determining the cowardliness, the court should take into account the health, sex, age and position of the person threatened and threatening. Normally, males may be expected to defend themselves better than women. Adults are also expected to defend themselves when compare to a person of early 20’s or late seventies. Moreover; health, education and other psychological factors are also important to determine whether or not the person was cowardice or had reason for failure to resist the threat.

                    

Duress by third Party (Art.1707) Duress may be committed by contracting party or third party to the contract. The right of a party to claim invalidation is absolute i.e. he can claim invalidation no matter who threatened him to enter into a contract (Art 1707 (1). Moreover; the other party cannot raise his unawareness of the duress as a justification to avoid invalidation. Such justification may, however; be a ground to claim damage from a party who got the contract invalidated (Art 1707 (2). For example, if Letamo went to Sisay’s house and pointed a gun at his daughter’s front head and said “Ato Sisay make a call to my brother Shumete and offer him the sale of your business for birr 500,000 or else I am going to change your daughter into corpse”. Being threatened by the statement Sisay made calls and made an offer to Shumete and Shumete happily accepted the offer. Sisay can claim invalidation of the contract without being required to prove the knowledge of Shumete about the threat.  But Shumete may claim damage caused to him due to such invalidation. This is one of the differences between duress and fraud. (See Art 1704(2)

                  

A Threat to Exercise a Right (Art 1708) Under Art 1706 physical violence is used as a means to compel a person to enter into contract. But under 1708, right is used as a means to compel a person to enter into a contract i.e. a person is made to choose either to perform/undergo certain legal obligation or to enter into a contract.


E.g. Abebe entered into a construction contract with Welchafo. In the contract, Abebe agreed to complete the G+1 of Welchafo within six months. The contract further provides that if Abebe fails to complete the construction, he pays 25,000 as penalty and the contract be cancelled. Abebe failed to complete the construction and Welchafo warned him that Abebe shall either agree to construct a fence of a building for free or Welchafo cancels contract and claim the payment of the stated penalty. Abebe agreed to construct the fence. 


In the above example, Abebe has been forced to make a choice between paying penalty and constructing the fence for free but it is very difficult to conclude that he was forced. Life is always full of alternative forcing us to choose one and lose the other. In a word of economists, every thing has an opportunity cost. Hence such type of choice is normal especially in a free market economy. A person may use his rights to derive excessive advantage but even in such case it is very difficult to invalidate the contract since a right is a bargaining power. However; if the right is used abusively and unfairly by taking advantage of the want of the other party the concept of lesion (Art 1710(2) or law of unfair trade practice may be applied. 


Notice that Art. 1708 applies when some one has a right and uses it to obtain a proprietary interest in excess of what he deserves. However; the threat may be directed against the person from whom the threatening person does not have any right. For example, B. borrowed birr 10,000 from Dashen Bank but failed to pay on time. The manager of the bank wrote a letter to B’s brother, L that court action is to be taken against B unless L guarantees the debt. For fear of the court action against his sister, L entered into contract of guarantee with the Bank.


Where a person threatens to violate a law or his obligation Art.1708 does not apply. For example, an employer threatens his employee to terminate the employment contract unlawfully unless the employee agrees to work in another locality than the place his contract provides. However, one may argue that if law invalidates a contract for abusive use of right for a stronger reason it would invalidate the contract entered into to avoid violation of one’s own right. So Art.1708 may also apply in case of threat to violate another person’s right. However such interpretation goes against the meaning of Art 1706. So the best thing to do is to repeal Art. 1708 so that matters not governed by Art 1706 be governed by Art 1710. 


Illustration

A has stolen B’s bicycle and demand B to employ him so that A would return the bicycle. B employed A to get his bicycle

Belay and Hawassa University have had a contract that Belay renders cafeteria service to Hawassa University students at a rate of birr 120 per head per month for two years until January 2009. However, in January 2008 due to price inflation Belay has lost profit from the cafeteria Service and wrote the following letter to the university “if the university does not agree to pay 200 birr per head I terminate the contract within the following three days”. Threatened by the letter university officials entered into contract of variation.

In case 2 above, does it matter if Belay went to the president office and said “Sir if you do not promise me to raise the payment to 200 birr per head I will terminate contract from this moment on wards.” 

                  

Reverential fear (Art 1709):- this is a psychological threat. The threatening person is playing against the psychological (mental) feeling of the threatened person. It is a psychological intimidation that if the person does not give his consent to be bound by the contract he will be belittled by some one or the public in general. It is in short the fear of opinions. Reverential fear is also called undue influence (see Art. 868 civil code). Under common law, undue influence includes playing on victim’s superstitions for example; if a person make donation because witch told him that unless he make, such donation his daughter dies. However; Ethiopian law does not accept superstitious threat as a reverential fear.

Under Ethiopian law the fear is limited to the opinion of ascendants or superior whose opinion can have observable and direct consequence on the future interest of the threatened person (Art 1709). For example, if an ascendant has bad opinion he/she may significantly reduce the share of the person in succession and may also stop or reduce any financial support she/he has been making. The superior may also under evaluate the subordinate which may have a consequence on promotion or scholarship.


However; the mere existence of reverential fear of ascendant or superior is not enough to invalidate the contract. The reverential fear must make the person to lose certain advantages i.e. his bargaining power was reduced; he was not free to bargain properly so that the other contracting party get excessive advantage from the contract. For example, Abebe bought a car from Challa for birr 200,000 but his boss, Bula offered Abebe birr 205,000 Abebe accepted the offer although he did not want to sell the car. So even if a person enters into a contract which he did not want, he must prove financial loss to invalidate contract on the basis of reverential fear.


Proving financial loss is not yet enough. That financial loss must go to the benefit of the person who is the source of reverential fear. 


In short only contracts entered into with superior/ascendant can be invalidated on basis of reverential fear provided such ascendants/superior derived excessive advantage. Whether the advantage is excessive or not should be determined case by case by taking into account the economic position of both parties.


Reverential fear is presumed. The ascendant/superior need not expressly state the opinion he will have if the descendent/subordinate fails to agree. The fact that superior/ascendant made an offer is enough to prove the existence of undue influence. The offeree should be presumed that he entered into such substantially disadvantageous contract because of reverential fear. However; the superior/ascendant can disprove such presumption by any means. 

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