Chapter 1

Introductory Chapter
1. Introduction

It’s inevitable that commercial negotiators of nowadays to apply some pressure to

reach a favourable outcome. However, where that pressure exceeds what the law
considers acceptable, the contract can become voidable on the grounds of economic
duress. It is said that for a successful plea of economic duress to succeed, two
elements must be established, (1) an illegitimate pressure,1 and (2) causation.
Although the two are inextricably linked2, what amounts to an ‘illegitimate’ pressure,
especially in a commercial setting, and the correct test for causation are both far
from obvious.

On the question of the legitimacy or otherwise of the pressure, it is plain that

‘illegitimate pressure must be distinguished from the rough and tumble of the
pressures of normal commercial bargaining’3 and that the question depends on the
nature of the threat and on the demand.4 Yet, as the courts are wary of providing a
broad definition, and consequently apply a wide range of factors when considering
the legitimacy/illegitimacy of the pressure5, a clear concept of legitimacy has yet to
emerge. This is problematic especially in relation to the conduct/motive of the
wrongdoer, which brings broad notions of fairness but makes it difficult to ascertain
whether the essence of the relief is based on the conduct of the wrongdoer or the
adequacy of the consent6. Therefore, it is important to distinguish between
legitimate commercial pressure and economic duress because, economic duress is
a potential weapon that individuals or business can use to set aside an

1
R v AG for England and Wales [2003] UKPC 22, [2003] EMLR 24.
2
In Huyton v Peter Cremer [1999] 1 Lloyd’s Rep 620; Rick Bigwood, Exploitative Contracts (OUP 2003) 291-4.
3
DSND Subsea v Petroleum Geo-Services [2000] EWHC 185 (TCC), [2000] BLR 530, 545; Adam Opel GmbH v Mitras
Automotive (UK) Ltd [2007] EWHC 3205 (QB) at 26.
4
Universe Tankship Inc of Monrovia v International Transport Workers Federation [1983] 1 AC 366, 400-401.
5
DSNDcase ; Carilion Construction Ltd v Felix (UK) Ltd [2001] BLR 1; Adam Opel case.
6
Capper (n 6) 172.
unimpeachable contract7 due to the fact that there are no clear and principled
guidelines as to what constitute exactly to illegitimate pressure and what is
acceptable commercial pressure.

This dissertation claims is that, although existing literature and cases fail to make a
clear distinction between illegitimate and legitimate pressure in commercial
negotiations, a line cannot be drawn between these two elements as the
circumstances in which cases succeed an economic duress claim differ from case to
case and where a type of pressure is acceptable in one case, due to the demand
and the circumstances of the case, might not be acceptable in another case. For
example, simply threatening not to renew contracts is lawful and therefore legitimate
pressure, however, if the threat comes with a demand that would put the other party
in a unfavourable position without any alternative but to submit to that threat, then
this becomes economic duress.

1.1. Research Rationale

In times of austerity, the survival of many businesses will depend on their ability to
successfully negotiate and renegotiate contracts; whether this be maintaining
contracts on particularly favourable terms or getting out of contracts that are no
longer commercially attractive. However, where one party is more powerful than the
other, the exertion of excessive pressure in the course of negotiations may amount
to economic duress and render the contract voidable by the victim of the duress.
Equally, businesses must be aware of other parties attempting to evade what they
now deem to be “onerous” contracts by arguing that they are victims of economic
duress.

Although it is a common practice for a party to subject another to high commercial

pressure when negotiating a contract, the courts haven’t separated the illegitimate
pressure from “the rough and tumble of the pressures of normal commercial
bargaining”.8 Therefore, this has given rise to a huge confusion in terms of where the
line is drawn and what exactly is illegitimate pressure. Phang is of the belief that
7
Daniel Tan, 'GROUNDS OF ECONOMIC DURESS – FURTHER CLARIFICATION OR FURTHER CONFUSION?' [2001]
Singapore Journal of Legal Studies.
8
DNDS Subsea v Petroleum Geo-services ASA (2000).
there is “an extremely clear distinction between commercial pressure on one hand
and duress on the other”,9 but, he agrees that when it comes to understanding what
establishes illegitimate pressure, the law is blurred. Birks on the other side argues
that “discriminating between acceptable and unacceptable pressures is not positive
law but social morality... that makes the judges, not the law or the legislature, the
arbiters of social evaluation”.10 Nevertheless, the English law as a whole does not
normally concern itself with the process of commercial bargaining and how the deal
was reached, however, measures are taken in the circumstances where illegitimate
pressure was being exceeded.

Economic duress is a relatively new mechanism and prior to being able to set a
contract aside where that pressure was being exceeded, the court relied on doctrine
of consideration only.11 Nowadays, in order for a claim for economic duress to be
successful, there must be a coercion of the will that vitiates consent.12 In other
words, meaning that the victim must have no other alternative but to submit to the
pressure, however, in Barton v Armstrong it has been argued that “the absence of
choice in this sense, does not negate consent in law...”.13 This is a clear example of
how the line between legitimate negotiation and economic duress has always been
blurred and what constitutes “illegitimate” pressure can only be determined on a
case by case basis. Consequently, this are of the law requires a thorough
examination to not only help paving the way to a better understanding as to what
extent can a party use its commercial bargaining power to influence a commercial
negotiation, but to understand what establishes economic duress and what really
founds the concept of illegitimacy of the pressure. Unfortunately, there are currently
no clear guidelines as to where the line between legitimate and illegitimate pressure
is drawn currently in UK, which essentially, will be explored and critically analysed in
this paper.

9
Andrew Phang, 'Whither Economic Duress? Reflections On Two Recent Cases' (1990) 53 The Modern Law Review.
10
Peter Birks, An Introduction To The Law Of Restitution (Clarendon Press 1990) 177.
11
Stilk v Myrick [1809] 170 ER 1168.
12
Occidental Worldwide Investment Corp v Skibs A/S Avainti, Skibs A/S Glarona, Skibs A/S Navalis [1976] 1 Lloyd’s Rep 293.
13
Barton v Armstrong [1973] 2 NSWLR 598, 634.
1.2. Research Aim, Objectives and Questions

This research paper aims to explore the doctrine of economic duress in commercial
negotiations including a critical analysis of the elements that could help in
determining the dividing line between tough legal bargaining pressure and pressure
that should amount to economic duress in commercial contract negotiations. I will be
looking to explain precisely how the law distinguishes, or should distinguish, between
permissible and illegitimate uses of coercive pressure in commercial negotiations
within a theoretical approach. Therefore, this research will be aiming to investigate
the questions below:

Q1. What establishes legitimate and illegitimate pressure in economic duress?

Q2. Is there a line drawn between tough bargaining and economic duress? If not,
can a line be drawn?

1.3. Research Contribution

This study offers an understanding of the elements that establishes economic duress
and a critical analysis of those factors to individuals and companies going into
commercial negotiation or wanting to bring in a claim for economic duress. In an
extensive degree, it could add guidance of what practices businesses and individuals
should adopt to avoid giving raise to economic duress as well as helping them to
understand what the end line of acceptable bargaining pressure that one can apply
in contract negotiations is. The line has been blurred between these two elements,
however, this dissertation will attempt to make it clearer and draw the line between
legitimate and illegitimate pressure by delivering additional knowledge and
guidelines into the current literature.

1.4. Research Methodology

There are many type of research methods that one can adopt in gathering data and
information in support of the legal research that is carried out and one of them is the
sociological approach, which includes both quantitative and qualitative research
methods, aiming to look at the impact of the law in action. This method aims to gain
empirical knowledge and an understanding of how the law and the legal proceedings
impact the parties involved. It often fills a gap in the understanding of ‘law in action’
found in black letter approach methodology perspective. Therefore, for the purpose
of this legal dissertation, this method would have been very useful as up to date
information could have been gathered by using questionnaires or interviews to find
out if in today’s society, commercial negotiators are aware of what the law deems as
acceptable and unacceptable pressure in commercial dealings and an in-depth
investigation of the different type of pressures negotiators face in commercial
dealings.

Unfortunately, due to time restrictions, this was not feasible as interviews and
questionnaires require a lot of time for the research to be carried out and analysed.
Therefore, this study will start with a “black letter law” which is also known as
doctrinal methodology which is a “detailed and highly technical commentary upon,
and systematic exposition of, the context of legal doctrine”.14 Because the contract
law has a general black letter law approach that focuses on understanding of cases
and statutes, this method is considered to be the most suitable.

Adapting this method allows to fundamentally explore the implications and difficulties
of the standards and rules supporting them. With black letter approach, the attention
is drawn to primary sources, to be specific, statutes, academic journals and case
law. Accordingly, it centres around the law in books as opposed to the law 'in action’,
which subsequently neglects the political and sociological interferences. The
essential point of this technique is to collect, examine and depict legal rules, as well
as to offer the researcher the possibility to express its interpretation on the meaning
of the definitive legitimate sources in which such rules and laws are considered,
specifically, case law, with the aim of identifying the difference and limits between
commercial law and duress.

As this dissertation will depend on information that already exists, such as journal
articles, case reports, legislation, statutes and books, the case reports and journal
articles will be gathered from Lexis and Westlaw as well as from the University of
14
Michael Salter and Julie Mason, Writing Law Dissertations (1st edn, Pearson Longman 2007) p 49.
Portsmouth library and any legislation and statutes will be collected from the UK
government website.

1.5. Structure of Dissertation

Chapter one of the dissertation provides an introduction and sets out the aims,
relevance, contribution and purpose of this study, together with the caveats of this
legal research paper. It also provides the conceptual framework, research questions
and methodological approach adopted for this dissertation.

Chapter two provides a comprehensive review of existing literature addressing the

historical development of the doctrine of economic duress to understand how the
doctrine of economic duress was established in the first place. Furthermore, the
state of mind of the party applying pressure is analysed which looks at whether the
good or bad faith of the party applying the pressure would be particularly relevant in
establishing economic duress. Additionally, the legitimacy of pressure is explored
from the lawfulness side of threats, because the requirement that pressure be
"illegitimate" as opposed to unlawful stemmed from a desire to expand the scope of
the doctrine of economic duress to deal with threats of lawful acts as well as unlawful
ones.15 This chapter will end with a justification on why the line between legitimate
and illegitimate pressure needs to be drawn followed by a chapter summary.

Chapter three investigates what the factors that lead to acceptable commercial
pressure are and investigates the motive that parties might have when they want to
renegotiate a commercial contract as it is presumed that sometimes, the motivation it
is in the realisation that they made a bad bargain. Following this, we will analyse if
parties are driving a commercial hard bargain or just a bad bargain from which thy
later try to escape by using the excuse of economic duress. This chapter will then
look at the commercial pressure and bargaining position, more specifically, it will
analyse whether the bargaining power of the parties influence the decision of the
judges when establishing a case for economic duress followed by a chapter
summary.

15
Rick Bigwood, "Economic duress by (threatened) breach of contract", in (2001) 117 L.Q.R. 376 at 379.
Chapter four provides a critical analysis of the factors that constructs illegitimate
pressure which in turn leads to economic duress. The philosophical approach to
economic duress will help in analysing economic duress from different perspectives
as there are numerous ways in which one party can become vulnerable to
exploitation at the hands of another in a commercial negotiation and sometime,
although under pressure, they do have the choice to either submit or not. The
overborne will theory to illegitimacy of pressure will then be examined followed by a
critical evaluation of the difficulties in evaluating economic duress. Following this,
the attention will be drawn to how the courts measure illegitimacy of pressure and
chapter will end with a chapter summary.

Chapter five concludes the dissertation by answering the research questions and
determining whether a line can be drawn between commercial legitimate pressure
and illegitimate pressure, followed by the limitations of the research along with future
recommendations both to commercial negotiators and researchers.