Civil Engineering Reference
In-Depth Information
The straight answer to this question is 'Yes'. The more important question is 'What is eco-
nomic duress?'; unless a contractor can recognise it, the first question is academic.
In practice, economic duress is not common. The law recognises that there are certain
forms of pressure that may be applied to a party which do not amount to a physical threat to
a person nor to damage to goods, but which may allow the innocent party to throw off the
contract. That kind of pressure will often be applied to obtain better terms when a contract
already exists.
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Atypicalscenariowasdemonstratedin
Atlas Express Ltd v Kafco (Importers and Distrib-
basketware importer,tocarryparcelsatanagreedrate.Thecontract, whichwasrecordedby
telex,wascrucialtoKafcobecauseithadjustenteredintoacontracttosupplybasketwareto
a large number of Woolworth stores. After a few weeks, the carrier's representative decided
that the agreed rate was not viable for their company. Atlas knew that Kafco was contracted
to Woolworth, which would sue and cease trading with the importers if deliveries were not
made. Atlas therefore wrote suggesting that the agreement be updated and refused to carry
any further goods until a fresh agreement was signed.
Kafco protested, but it had no real option but to sign the new agreement. However, when
invoices arrived, Kafco paid only the sums calculated in accordance with the original agree-
ment.Atlastooklegalactiontorecoverthebalance.IndecidinginfavourofKafco,thecourt
pointed out that no person could insist on a settlement procured by intimidation. Econom-
ic duress was recognised in English law, and in this instance it voided Kafco's consent to
the second agreement. In addition, Atlas had not provided any consideration for the revised
agreement, and consideration is vital for the establishment of a contract or the variation of
an existing contract.
A contract is essentially entered into on the basis of the exercise of free will by both
parties. It has long been established that physical violence or the threat of it in order to
induce a contract will make that contract void, or at least voidable at the option of the
threatened party. Economic pressure can be as difficult to withstand as physical violence.
It has been held that the following factors (which must be distinguished from the rough
and tumble of the pressure of normal commercial bargaining) must be taken into account by
a court in determining whether there has been economic duress:
•
•
whether there has been an actual or threatened breach of contract;
whether or not the person allegedly exerting the pressure has acted in good faith;
