The future of the doctrine of economic duress in South African contract law: The influence of Roman-Dutch law, English law and the Constitution of the Republic of South Africa, 1996

• DOI: https://doi.org/10.47348/ACTA/2021/a5
• Published date: 23 August 2021
• Citation: 2021 Acta Juridica 107
• Author: Bhana, D.
• Pages: 107-140
• Date: 23 August 2021

107

https://doi.org/10.47348/ACTA/2021/a5

The future of the doctrine of economic

duress in South African contract law:

The inuence of Roman-Dutch law,

English law and the Constitution of the

Republic of South Africa, 1996*

DEEKSHA BHANA†

In Engla nd, the contractual doct rine of econom ic duress is an

importa nt mechanism for curbing abu ses of superior ba rgain ing

power. In contrast, i n South Afr ica, the courts are yet to articulate

a denitive doctrine. In this article, I argue for a t wenty-r st

centur y South African doct rine of economic dures s that is delineated

prima rily in terms of S outh Africa’s foundationa l constitutional va lue

of equalit y. For this purpose, I con sider English cont ract law and show

how it is a concern for ‘equity’ that has been central to its t reatment

of economic duress. I then high light the nor mative li mitation s of

the English doctrine, but argue th at the Engl ish legal ex perience of

economic dures s remains valua ble for corresponding developme nts in

the modern South Africa n commercial context, especially in light of

the latter’s post- apartheid constitutiona l framework , which provides

the normat ive content of baseline standards that must inform its

doctri ne of economic dures s.

* Twenty- one years ago, w hen I was a meek LLB st udent at the Univer sity

of Cape Town, Professor D ale Hutchiso n introduced me t o the magn icent

landsc ape of the South Af rican com mon law of contr act. In his g entle,

underst ated mann er, he rmly i nstil led in me the f undament als of contr act

law and so ig nited my ferve nt interest i n the subject. Th is continue s to hold

me in good ste ad today, especia lly as I at tempt to nav igate the more f raught

issues pre sented by the twenty- rst century re alities that con tracting par ties and

society i n general fa ce. I shall r emain foreve r gratefu l to Profess or Hutchison

for this. T his paper is t he product of rese arch part ly conducted dur ing a ve-

week visit ing fellowsh ip at the Univer sity of Leice ster, UK, wh ich was funde d

by South Af rica’s National Re search Found ation and the Un iversity of t he

Witwater srand, Johannesbu rg, and hosted by Francois d u Bois.

† B Com LLB LLM PhD; Profes sor of Law, University of the Wit watersrand.

2021 Acta Juridica 107

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108 TH E FUTURE OF TH E LAW OF C ONTRACT

https://doi.org/10.47348/ACTA/2021/a5

I IN TRODUC TIO N

Economic power and, in par ticular, the exploitation of economic

power are hallmarks of modern commerce. Indeed, capitalism,

the free market economy and freedom of contract are said to

encourage the use of econom ic power by enterprising and

industrious individuals; the idea is that rel iance on the self for the

enhancement of ind ividual welfare w ill ultimat ely secure the social

and economic progress of society as a whole.1 Even so, endemic

to every power is the risk of its abuse. It is therefore crucial that

whilst facilitating an enabling commercia l environment in which

individua ls (by use of their respective barg aining powers) are able

to negotiate the conclusion of transactions, the law likewise curbs

the potential abuse of such powers.2

In the realm of contract law, the regulation of economic power

is tackled inter alia by the doct rine of economic duress.3 In both

the United States of A merica and Eng land, this doctrine has come

to be an import ant mechanism for limiting a contracting party’s

improper exercise of superior bargaining power (by way of the

illegitimate or wrongful use of commercial pressure) against the

other party in a manner which induces the latter to contract and

so unduly impa irs her or his consent. Admitted ly, in English law

especial ly, there are still questions as to the precise nature and

scope of this doctrine, with much depending on how the law

ought normatively to delineate baseline standards of reasonable

1 S ee, for insta nce, JP Dawson ‘E conomic dures s: A essay in per spective’

(1947) 45 Michigan LR 253 at 27 7; J Dalzel l ‘Duress by e conomic press ure I’

(1942) 20 North Carolina L R 237 at 237; J Dalzell ‘Dure ss by economic pre ssure

II’ (1942) 20 North Carolin a LR 341 at 379, 385–6; RL Hale ‘ Bargaining , duress

and economic l iberty’ (1943) 43 Columbia LR 603 at 603; MH O gilvie ‘Econom ic

duress, i nequali ty of barga inin g power and threa tened breach of cont ract’

(1981) 26 McGill LJ 289 at 311. This constr uct, which is e ssentia lly clas sical

libera l in natur e, is stil l very much int act in contra ct law, notwith standi ng the

general moveme nt away from thi s philosophy in the twent ieth century. On the

relations hip genera lly betwee n capital ism, the fre e-market ec onomy and the

law, see Joseph E Stig litz The Price of In equality (2012), espec ially at t he preface,

chap 1 and chap 3.

2 S ee general ly A Sen Development as Freed om (1999) in which he propose s a

capabilities-based approach to freedom.

3 O gilvie (n 1) 311.

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THE FU TURE OF THE DOCT RINE OF ECONOMIC DUR ESS 109

https://doi.org/10.47348/ACTA/2021/a5

commercial dealing in the modern contractual context.4 Never-

theless, the connection of the doctrine of economic duress with

the regulation of economic power has become entrenched,

particularly in the context of commercial contracts. Accordingly,

the focus in this article is on com mercial contracts.5

In contrast, South African contract law’s recognition of the

doctrine of economic duress has not moved beyond the broader

statement made by the Supreme Court of Appeal in 2005 that

‘there would seem to be no principled reason why the threat of

economic ruin should not, in appropriate cases, be recogn ised as

duress’.6 To date, South Africa has not had a single case in which

a denite doctrine of economic duress has been ar ticulated and,

save for the notable work of Graham Glover,7 it has not received

much academic attention either. This is notwithstanding an

increasing discourse on South Africa’s horizontally applicable

post-apartheid Constitution, which enjoins the courts inter alia

to transfor m contract law (including its doctr ines pertaining

to improperly obtained consensus) in order to advance the

goal of a substantively equal and economically free society.8

4 S ee for insta nce MH Ogi lvie ‘Wrongf ulness , rights a nd economic dur ess’

(1984) 16 Ottawa LR 1; P Birks ‘ The travai ls of dures s’ (1990) Lloyd’s Mari time

and Commerc ial Law Quar terly 342 and Ste phen A Smith ‘Cont ractin g under

pressure: A t heory of dur ess’ (1997) 56 Cambridge LJ 343. In this a rticle, it i s

import ant to note tha t I draw prim aril y on writi ngs from En gland as wel l as

selected Com monwealth ju risdict ions whose law on du ress is g rounded in the

Engli sh common law.

5 C onsumer cont racts are r egulat ed by the Consume r Rights Ac t 2015 in

Engli sh law and are beyond the scope of th is article.

6 M edscheme Holdings (Pty) Ltd v Bh amjee 2005 (5) SA 339 (SC A) para 18.

7 G G lover ‘The test for du ress in the Sou th Afr ican law of contr act’ (2006)

123 SALJ 98; G Glover ‘Developing a test for econo mic duress i n the South

Afric an law of contr act: A compara tive perspec tive’ (2006) 12 3 SALJ 285.

See also M F Cassim ‘Medscheme v Bhamjee: The concept of econo mic dures s’

(2005) 122 S ALJ 528; FHI Cass im ‘Economic du ress in the l aw of unjusti ed

enrich ment in the USA, E ngland a nd South Afr ica’ (1991) 24 CIL SA 37.

8 S ections 8 and 39(2) o f the Constit ution of the Republ ic of South Afr ica,

1996. See for inst ance G Lubbe ‘Tak ing fund amental r ights ser iously: The Bi ll

of Right s and its impl ications for t he development of contr act law’ (200 4) 121

SALJ 395; D Bhana & M Pie terse ‘Towards a reconc iliat ion of contract l aw

and constit utional v alues: Bri sley and Afrox rev isited’ (2 005) 122 SALJ 865;

L Hawthor ne ‘Distr ibution of wealt h, the dependenc y theory a nd the law of

contract’ (2 006) 69 THRHR 48; AJ Bar nard-Naude ‘ “Oh what a tan gled web

we weave”: Hegemony, freedom of contr act, good fa ith and tr ansform ation –

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