The lawful conduct was hard bargaining (generally OK in a commercial setting) but it amounted to economic duress in Progress Bulk Carriers Ltd v Tube City IMS LLC, [2012] EWHC 273 (Comm). Tube City chartered a ship owned by Progress, making it clear that the identity of the vessel was important to both it and the receiver of the goods that were to be shipped on it. Progress then concluded a charter for the ship with another party, in breach of its agreement with Tube City. Progress conceded this and said it would find another ship, initially agreeing to compensate Tube City for any damages. Tube City relied on these assurances and did not look for another vessel itself. Presumably sensing that Tube City was in a jam, Progress then changed its tune and made a ‘take it or leave it’ offer which would have required Tube City to release all claims against the ship-owner.
The dispute went to arbitration, where it was found that Tube City’s agreement (under protest) to waive its claims had been procured by economic duress. But was that correct, given that Progress’s had merely repudiated its contract and not done anything illegal? Cooke J considered the leading cases on economic duress, concluding that ‘lawful act duress’ can – in exceptional circumstances, and not typically in a commercial setting – amount to the ‘illegitimate means’ sufficient to render the contract voidable. Progress had not only repudiated its contract with Tube City but had relied on that breach to take advantage of the situation it had created. The arbitrators got it right.
[Link available here].
