Notes - Coercion

DEFINITION
SECTION 15 OF CONTRACTS ACT 1950

“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
whatsoever, with the intention of causing any person to enter into an agreement.”
1) Commission or threat to commit any act forbidden by the Penal Code

Coerced party must show which act of defendant is an act forbidden by the Penal Code and
under which section.
NURI ASIA SDN BHD V FOSIS CORP SDN BHD [2006]

Facts: Plaintiff supplied goods to Defendant and alleged it did upon D2’s giving oral guarantee
for its payment. The sum was unpaid, Plaintiff got D2 to sign a written guarantee and sued upon
it. D2 denied he gave oral guarantee and said that his written guarantee was obtained under
coercion – fight at a restaurant based on witness testimony. D2 stated he was intimidated and
assaulted and forced to sign by affixing his right thumbprint. He lodged a police report.
Held: HC held that the surrounding circumstances definitely fell within the scope of committing
or threatening to commit acts forbidden by the Penal Code using criminal force/assault under
sections 349 – 352 / intimidation under sections 503 and 506 of Penal Code.
2) The place where coercion was employed is immaterial
Explanation to Section 15 of CA 1950:

Immaterial whether Penal Code is in force at the place or not
3) The unlawful detention or threatened detention of any property
TECK GUAN TRADING V HYDROTEK ENGINEERING [1996]

Facts: Plaintiff's refusal to sell at lower price did not amount to unlawful detention of property as
the Plaintiff was exercising its legal right over its own property. Therefore there is no question of
Plaintiff committing coercion on D1.
Held: D1’s contention of ‘economic blackmail’ or varied but similar terms under English law as
‘commercial pressure’ , ‘economic duress’ and ‘unfair use of a dominant bargaining position’. All
these do not form part of the law of coercion in Malaysia. Section 15 does not provide for the
English concept of economic duress.
4) To the prejudice of any person
Section 15 requires that the act causing coercion should be done to the prejudice of any person
– means it need not be directed at the contracting party only. Enough if directed to whosoever
with the intention of causing any person to enter into agreement.
SECTION 73 OF CONTRACTS ACT 1950

Liability of person to whom money is paid, or thing delivered, by mistake or under coercion
ABDUL RASHID BIN MAIDIN V LIAN MONG YEE [2008]

Held: The COA held that there was no coercion under the Contracts Act 1950 s 73 and refused
a refund of the money paid.
Section 73 of the Act, unlike section 15, does not require that the act done that constitutes
coercion must be done with the intention of causing any person to enter into an agreement.
The act done under section 73 also need not be forbidden by the Penal Code.
CHIN NAM BEE DEVELOPMENT SDN BHD V TAI KIM CHOO

Issue: The question arose whether the word coercion in section 73 has the same limited
meaning as that defined in section 15.
Facts: The respondents purchased certain houses to be constructed by the appellants. They
alleged that they later paid an additional sum of RM4,000 each to the appellants under a threat
by the appellants to cancel their bookings for their houses
The respondents claimed under section 73 of the Act, a refund of the additional sums paid
under coercion and succeeded. On appeal, the appellants' main ground was that the
respondents paid the said sum voluntarily and not under any coercion.
Held: The High Court upheld the respondents' claim under section 73 and ordered the appellant
to refund the additional sums paid.
The court further held that 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. It does not apply
to section 73.
The word coercion in the context of section 73 of the Act should be given its ordinary and
general meaning since there is nothing under section 15 that says that the meaning of the word
'coercion' under section 15 should apply throughout the Act.
DURESS vs COERCION
DURESS COERCION
English law refers to coercions as duress. ‘Coercion’ under Section 15 of CA 1950 is not
the same as ‘duress’ under English Law.
The English law does not recognize duress of The committing or threatening to commit an
goods (unlawful detention or threatened act forbidden by the Penal Code whereas
detention of a man’s goods so as to coerce duress under the common law is not confined
him to enter into an agreement) to unlawful acts forbidden by any specific
penal law.
In England, duress should proceed from a Coercion may proceed from a person who is
party to the contract (the wrongdoer) or within not a party to the contract, and it may also be
his knowledge. It is also directed against the directed against a person who, again, may be
party to the contract himself (the coerced a stranger to the contract.
party), or his wife, parent, child, or other near
relative
EFFECTS
It must be done within reasonable time.
SECTION 19(1) OF CONTRACTS ACT 1950

- It provides that where consent to an agreement is caused by coercion, the agreement is
voidable at the option of the party whose consent has been caused.
SECTION 2 (i) OF CONTRACTS ACT 1950

- Agreement enforceable by law at the option of one or more parties, but not at the option
of the other
REMEDIES
1) Refuse to carry out the contract

Where the coerced party has not performed the contract or any part of it, he could refuse to
carry his part of the transaction
2) Resist claim for specific performance

Where the coerced party refused to perform his part of the transaction and the wrongdoer
claims for specific performance, he could resist the claim on the ground of coercion
3) Rescission
The usual remedy is rescission. Once rescinded, the contract becomes void and both parties do
not have to perform their obligations under the contract and may recover any benefit which he
may have conferred on the other party. Rescission must be in full.
Segar Oil Palm Estate Sdn Bhd v Tay Tho Bok [1997] 3 MLJ 211 (CA)
The coerced party cannot rescind the contract in part only. He cannot avoid one part of the
contract and affirm another. He must repudiate it altogether, unless the parts are so severable
as to be independent contracts.
4) Restitution
Section 73, Section 65 & 66 of CA 1950 & Section 30 of the Specific Relief Act 1950. The object
of restitution is that a party who seeks rescission of the contract must also do equity and, if he
has received any benefit under the contract, he should compensate the other party.
LIMITS TO THE RIGHT OF RESTITUTION
1) Right of third parties - bona fide purchaser for value without notice
(i) third parties without notice of the coercion may acquire some interest in the subject matter of
the contract in good faith
(ii) third party acquires good title to the property and the coerced party cannot displace him. In
such cases, the coerced party may not recover or get back the subject matter of the contract
which is now in the possession of the third party
(iii) Yong Yeu Sin v Liew Nyat Kui, the High Court found that the third defendant was a bona
fide purchaser for value without notice and thus had indefeasibility of title to the land transferred
to him
2) Restoration of original subject matter is not possible

If restitution of subject matter is not possible, then there can be no rescission.
E.g. A purchases pieces of cloths from B under coercion exercised by B, then convert it into
suits. A’s right to avoid the contract cannot be exercised because he will not be in a position to
return the clothing.
3) Payment of Damages is an adequate remedy

Where award of damages is an adequate remedy for the coercion, court will not give an order
for rescission.

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DEFINITION

SECTION 15 OF CONTRACTS ACT 1950

1) Commission or threat to commit any act forbidden by the Penal Code

NURI ASIA SDN BHD V FOSIS CORP SDN BHD [2006]

2) The place where coercion was employed is immaterial

Explanation to Section 15 of CA 1950:

3) The unlawful detention or threatened detention of any property

TECK GUAN TRADING V HYDROTEK ENGINEERING [1996]

SECTION 73 OF CONTRACTS ACT 1950

ABDUL RASHID BIN MAIDIN V LIAN MONG YEE [2008]

CHIN NAM BEE DEVELOPMENT SDN BHD V TAI KIM CHOO

SECTION 19(1) OF CONTRACTS ACT 1950

SECTION 2 (i) OF CONTRACTS ACT 1950

1) Refuse to carry out the contract

2) Resist claim for specific performance

2) Restoration of original subject matter is not possible

3) Payment of Damages is an adequate remedy

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