In our daily lives we are all subject to certain pressures that require us to act in order to achieve necessary objectives, writes Kim Franklin. The alarm clock requires us to get up, the mortgage necessitates a trip to the office, the needs of our stomachs involve a supermarket or, if we are lucky, a restaurant.
It is no different in the commercial world, where the need to complete a project requires those involved to make demands and act accordingly.
There is a difference, however, between the application of ordinary commercial pressure with a view to driving a hard bargain and obtaining the same result by commercial blackmail.
But where do you draw the line between the rough-and-tumble of commercial bargaining and economic duress?
The boundaries of the doctrine of economic duress can perhaps best be illustrated by some examples. In Carillion Construction v Felix (UK) Ltd (2000), cladding contractors agreed to provide bespoke tailor-made cladding units for an office building in London by a specified date. They failed to do so and then intimated that they could only deliver if their disputed final account was agreed. The main contractors were unable to obtain the cladding units elsewhere and no legal proceedings, not even adjudication, could resolve the problem in time to protect the building from the weather.
The contractors had no choice but to agree the final account in a figure much higher than their valuation. As soon as the cladding was delivered, the contractors applied to the court to rescind the agreement and the court agreed.
In Williams v Roffey Bros (1991), a carpentry subcontractor underpriced work for a number of flats and then experienced difficulties completing. In order to speed things up, the main contractor promised an additional payment for each completed flat. The court held the extra money was payable even though the contractor was doing no more than he had agreed to do in the first place.
The main distinction between these two cases is the element of threat. In the Carillion case, the subcontractors threatened a clear breach of contract.
In the Williams case, the subcontractors made no such threat, they just told it like it was. When the courts are faced with a plea that an agreement was reached only as a result of economic duress, they have to consider not only the threat, but also its legitimacy. Threatening to do something that is within your lawful rights in order to drive a hard bargain will not normally amount to duress. The victim needs also to demonstrate that the threat left them with no practical alternative but to capitulate.
Otherwise, almost every commercial contract could be undone on the basis that when faced with an offer to provide a service for the cheapest price within the shortest time, the contracting party had no alternative but to accept if they wanted to achieve the desired result. In answer to the plea 'they made me do it', the court will respond, 'yes, but were they entitled to?'