These factors were repeated in the recent case of DSND Subsea Ltd v
Petroleum Geo Services ASA (2000). Nevertheless, where the threat is real
the courts are in some cases willing to recognise economic duress, if the
consequences of carrying out the threat are sufficiently serious, as is seen
in the following House of Lords case.
The following recent cases provide further guidelines as to when the courts
may recognise economic duress, and provide a distinction between substantial
duress and normal commercial pressure.
152 Contract law
Pao On v Lau Yiu Long (1980)
It was said that to amount to economic duress, a threat to breach a
contract must be more than normal commercial pressure. The sum
must be substantial to the injured party, possibly involving a threat of
loss of livelihood. Four possible factors were identified by Lord
Scarman to decide if a party had entered a contract under duress:- Did the person protest?
- Was there an alternative?
- Was independent advice taken?
- Were steps taken to avoid the contract after entering into it?
Universe Tankships of Monrovia v International Transport Workers
Federation (1982) (The Universe Sentinel)
A ship was ‘blacked’ by unions, so prevented from loading, etc., unless
the company agreed to make certain payments. It was held that the
agreement was made under economic duress, since there had been no
practical alternative but to make the payments. So here the court
acknowledged that the threat to breach a contract, coupled with a
substantial loss, did amount to economic duress.Consider the following situations:- If a travel agent is told by a holiday company that if he agrees to sell 20
holidays to Spain he will receive a free holiday to Greece, is this economic
duress or normal commercial pressure? - If an estate agent has a contract to sell the houses produced by a large
building company, and is told that if he does not sell a group of new houses
by the end of the month the building company will end the contract under
which he sells their houses. Is this economic duress?