Challenges of Economic Duress in Contract Law: A Case Analysis
The case of Times Travel v. Pakistan International Airlines Corporation [2021] UKSC 40 highlights the concept of economic duress in contract law. The dispute arose over unpaid commissions, leading to legal proceedings that explored the boundaries of illegitimate pressure and bad faith demands. The Supreme Court's examination of the circumstances shed light on the test for determining economic duress involving threats and vulnerability in contractual relationships.
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Presentation Transcript
Where is economic duress now? Times Travel v Pakistan International Airlines Corpn [2021] UKSC 40 Heather Murphy
Times Travel v PIAC [2021] UKSC 40 Economic duress 1. Illegitimate pressure 2. Caused C to enter contract 3. C had no reasonable alternative
What is illegitimate pressure? Pressure Threat Demand Can be a threat to do an unlawful act Can also be a threat to do a lawful act When does a threat to do a lawful act cross the line?
Background: Claim for unpaid commission Times Travel - travel agents. Sold PIAC tickets Sold ticket for 100 to customer Commission: 9% of ticket price: 9 Unfortunately dispute arose about commission owing Agents unhappy said commission due PIAC said no changed basis of commission in 2010 Promised TT that it would look after them, if TT did not sue
Steps in 2012 Served notices terminating existing contractual relationship Offered new terms Commission provided by providing tickets at discounted price. Times Travel must waive historic claims to commission Times Travel had a credit allowance of 300 tickets per fortnight cut to 60
Litigation First instance: succeeded Court considered whether PIAC s conduct was substantially beyond the normal and legitimate Court of Appeal: lost Correct test was whether PIAC had made the demand in bad faith PIAC had, albeit wrongly believed, no commission was due No bad faith no lawful act economic duress Supreme Court: lost Bad faith is not the test
Supreme Court test for lawful act economic duress Look at the circumstances Threat to report or prosecute a crime: or Defendant having exposed himself to a civil claim by the claimant, for example, for damages for breach of contract, deliberately manoeuvres the claimant into a position of vulnerability by means which the law regards as illegitimate and thereby forces the claimant to waive his claim.
When might lawful act economic duress arise? Two were lawful act economic duress Borrelli v Ting [2010] UKPC 21 Progress Bulk Carriers Ltd v Tube City IMS LLC (The Cenk Kaptanoglu) [2012] EWHC 273 (Comm); [2012] 2 All ER (Comm) 855, 864 ( The Cenk K ) Two which are not lawful act economic duress CTN Cash and Carry Ltd [1994] 4 All ER 714 Times Travel v PIAC [2021] UKSC 40
Borrelli v Ting [2010] UKPC 21 Akai went into liquidation Liquidators wanted a scheme of arrangement to find the liquidation Scheme needed consent of minority shareholder (and former chairman) Mr Ting Mr Ting Refused to co-operate with liquidators Refused to approve scheme Produce false evidence
Borrelli v Ting [2010] UKPC 21 Court deadline for approval of the scheme was approaching Liquidators and Mr Ting entered into a settlement agreement Mr Ting would approve the scheme of arrangement Liquidators would not pursue Mr Ting Then criminal activity reports Liquidators sought to have the settlement agreement set aside Succeeded: Mr Ting s behaviour was unconscionable
Progress Bulk Carriers Ltd v Tube City IMS LLC (The Cenk Kaptanoglu) [2012] EWHC 273 (Comm) ( The Cenk K ) Claimants chartered Cenk K from owners To China Carrying scrap metal Buyer for scrap metal in China with fixed arrival date for metal Owners: chartered Cenk K to someone else
Progress Bulk Carriers Ltd v Tube City IMS LLC (The Cenk Kaptanoglu) [2012] EWHC 273 (Comm) ( The Cenk K ) Owner said: find another ship and compensate for loss Claimant accepted that Owner then produced boat, but it would arrive late in China Buyer in China: would accept late delivery, but only at a cheaper price Claimant sought a cheaper price for the replacement ship from the owner, so as to compensate for loss
Progress Bulk Carriers Ltd v Tube City IMS LLC (The Cenk Kaptanoglu) [2012] EWHC 273 (Comm) ( The Cenk K ) Owner said: no only give a small discount Claimant accepted that, and reserved rights to sue for damages Owner then made a take it or leave it option Claimant had to accept a small discount Waive all claims to damages Claimant accepted under protest
Progress Bulk Carriers Ltd v Tube City IMS LLC (The Cenk Kaptanoglu) [2012] EWHC 273 (Comm) ( The Cenk K ) Held: voidable for economic duress Owner had created circumstances by own breach and subsequent misleading activity
CTN Cash and Carry Ltd [1994] 4 All ER 714 CTN ordered cigarettes from Gallaher Gallaher delivered cigarettes to wrong CTN warehouse Before Gallaher could collect cigarettes stolen Gallaher believed that goods were at CTN s risk and sought payment When CTN refused to pay, Gallaher threatened to withdraw credit facilities CTN paid under protest Court: no economic duress
Times Travel v PIAC [2021] UKSC 40 PIAC committed breach of contract failed to pay commission Times Travel didn t sue for it because promised would be looked after by PIAC if they didn t Despite that PIAC sought waiver of claim Applied pressure by terminating existing relationship with 6 weeks notice Reduced credit facilities
Dividing line? Might be over the line Might not be over the line Other breaches of duty False evidence Misleading statement Monopoly position
Thank you Heather Murphy heather.murphy@xxiv.co.uk
