Law provides escape from the jaws of predatory contractors
In one of the various sequels to Steven Spielberg's Jaws , there is an engaging scene intended, no doubt, to provide respite from the ever-tightening grip of aquatic horror.
The tell-tale sign of a large, bad fish has been spotted in the harbour.The entire forces of shark enforcement gather around it in all manner of craft.Massed ranks of fire power are aimed at the protruding dorsal, only for it to topple over and reveal the two junior snorklers who have been pushing the fake fin around by way of a practical joke.Surprised to find themselves looking up the barrels of quite so many guns, one points to the other and without hesitation says: 'He made me do it.'
Parents of young children are familiar enough with this line of defence. But once they have grown up, entered into the adult world and joined firms which carry out commercial objectives, they do not expect to come across it again.
The law has long recognised that people can be forced into doing something they do not want to by pressure and 'threats' and contracts entered into under duress can be made null and void.
At the same time, the courts accept that most commercial activity involves some form of pressure, sometimes overwhelming pressure, and acknowledges that some 'threats'are legitimate.
This will come as no surprise to subcontractors. To claim that you should not be bound by a contract because you were forced into it you have to show that pressure you were subjected to was not part of the rough and tumble of contracting but was illegitimate pressure. Until relatively recently, duress was limited to cases involving physical violence, threats of violence or imprisonment. And as relatively few final accounts are agreed because cigarette butts were applied to the feet of the employer's representative, the plea of duress seldom appeared in construction disputes.
Recently, however, the Technology and Construction Courts have had cause to reconsider the scope of the doctrine. The case of Carillion Construction Ltd v Felix (UK) Ltd (2001) concerned specialist cladding subcontractor Felix, which sought to flex its contractual muscle against the main contractor, Carillion. Felix had been engaged by Carillion to design, manufacture and supply bespoke cladding units for a new office building at the Old Bailey, London.
Felix had started work before the subcontract had been finalized and was running late when it told Carillion there would be further delays unless it agreed Felix's final account of more than £3 million. Carillion believed that Felix was entitled to £2.75 million, but Felix said that unless the final account was agreed, it could not predict when the project would be completed.
At that time there were four outstanding cladding deliveries, large areas of the building were open to the elements and following trades were being held up. Carillion considered its options but concluded it had no alternative but to agree the final account. By this time, Felix's claim had increased to £3.5 million. Eventually settlement was reached at £3.2 million. Even then, Felix was not prepared to give the order for the next delivery until a formal agreement had been drawn up. Carillion expressed its 'extreme displeasure' at being forced into the agreement. Both parties complied with the agreement, but once Felix had made its final delivery, Carillion applied to the court to set aside the settlement agreement on the grounds of duress.
Mr Justice Dyson had previously decided what amounted to economic duress in DSND Subsea Ltd v Petroleum Geo-Services ASA (2000) , concluding that the pressure applied in that case had not been sufficient.He had no hesitation, however, in finding that Felix's behaviour went beyond normal commercial bargaining and that there was no justification for it. The threat to withhold deliveries until the final account was agreed was illegitimate.
The judge found that Carillion had no practical alternative but to agree to the settlement since it would have taken at least six weeks to obtain an adjudicator's decision and it would have faced real difficulties in obtaining an injunction from the court. He agreed that Felix had 'made them do it'. The judge set the settlement agreement aside.