CONTRACT LAW L4 - Duress & Undue Influence - ECONOMIC DURESS

Question 1

What does the case of CARILLION CONSRUCTION LTD V FELIX demonstrate? (6)

Answer 1

Lack of practical choice in regards to economic duress.
Carillion was the main contractor employed to carry out construction of an office building and subcontracted the supply of cladding to Felix.
Felix was in a strong position to renegotiate with Carillion since there was a number of trades dependent upon it completing the work to ensure the building was watertight and he knew Carillion would not be able to find another cladding supplier in time to meet the main contract completion date, so Felix got Carillion to pay substantially more money to Felix in return for Felix delivering the cladding by the original deadline in the contract.
Carillion wrote a letter protesting before paying.
The court accepted that Carillion had paid this sum under duress and if Carillion were to complete the main project in time and so avoid the heavy fees for late completion.
Mr Justice Dyson held that there was illegitimate pressure or a threat, the practical effect of which was that Carillion had no practical choice but to enter into a contract.

Question 2

What did Dyson J state in DSND? (5)

Answer 2

Whether there has been an actual or threatened breach of contract; whether the person allegedly exerting the pressure has acted in good or bad faith; whether the victim protested at the time; and whether he affirmed and sought to rely on the contract are factors to consider when assessing the legitimacy of the pressure.

Question 3

Is a threat to breach contract lawful or unlawful? (1)

Answer 3

Unlawful.

Question 4

What is breach of contract? (2)

Answer 4

Failure to comply with the term of the contract, and it will normally give rise to a right of the innocent party to claim damages. A threat to breach contract will usually amount to illegitimate pressure.

Question 5

What cases are examples of bad faith amounting to duress and why? (3)

Answer 5

Carillion and Atlas.
The party exerting the pressure was threatening to breach contract in order to extort money from the other contracting party that they were not entitled to.
There was no legitimate basis for the demand and it was a claim in bad faith amounting to duress.

Question 6

In what case was the pressure found to be in good faith and why? (3)

Answer 6

DNSD.
DNSD threatened to suspend its work until Petroleum Geo’s provision of insurance and indemnities covering the safety of the deep sea divers under the contract was clarified.
This was not illegitimate pressure since the pressure was ‘reasonable behaviour by a contractor acting bona fide in a very difficult situation.’

Question 7

Which cases demonstrate that the victim should demonstrate evidence of protest at the time the alleged duress was exerted? (2)

Answer 7

In Carillion, before paying the money Carillion wrote a letter of protest against Felix’s demands.
In North Ocean Shipping Co Ltd V Hyundai Construction Co Ltd & Another, Hyundai agreed to build a tanker for North Ocean but refused to deliver the ship unless paid 10% more, this was illegitimate pressure but North Ocean failed since they did not protest the threatened breach of contract.

Question 8

Which cases demonstrate ‘did the victim affirm?’ (2)

Answer 8

In The Atlantic Baron, a key reason why they were unable to get relief for the alleged duress was that they delayed in taking action to set aside the contract.
In & S CONTRACTS AND DESIGN LTD V VICTOR GREEN PUBLICATIONS LTD, Victor Green acted sufficiently promptly by deducting the £4500 paid under duress from the invoice, thereby avoiding the new agreement and satisfying the criterion that the victim takes steps to avoid the contract as soon as possible.