Driving a hard bargain is fine, but when does commercial pressure spill over into economic duress and make a contract voidable? In Progress Bulk Carriers v Tube City ship owners repudiated a charter to carry shredded scrap to China, by chartering the ship to another party. They then promised the original charterer an alternative vessel and full compensation for their losses. The charterers, relying on these assurances, did not look elsewhere for an alternative ship but, after negotiations, the owners made a “take it or leave it” offer which, going back on their promise of compensation, included a waiver of all claims by the charterers. Now desperate to fulfil their sale contracts in time, the charterers accepted the offer under protest. Hard bargain or economic duress?
Economic duress in English law requires “illegitimate pressure” but does that have to be unlawful, e.g. by threatening a breach of contract? The court said that illegitimate pressure could be created by conduct that was not itself unlawful, although that would be an unusual case, particularly in a commercial transaction, or by a past unlawful act, as well as the threat of a future unlawful act. The pressure created by the owners’ demand for a waiver of rights had to be seen in the light of their repudiatory breach and their subsequent conduct, including their refusal to honour their previous assurances as to a substitute vessel and paying full compensation. In these circumstances, the refusal to supply the substitute vessel, unless the charterers waived their rights, was “illegitimate pressure”.