The English Court of Appeal in Times Travel (UK) Limited v Pakistan International Airlines Corpn [2019] EWCA Civ 828 has set a high bar for parties seeking to establish lawful act economic duress to get out of bad contracts.

Times Travel operated a business that almost entirely depended on selling tickets for Pakistan International Airlines (PIA). During a dispute over historical commissions payment, PIA lawfully terminated its contract with Times Travel and offered a new contract which included a requirement that Times Travel waive its commissions claim. Times Travel signed the contract but argued that it did so under economic duress.

The Court noted that while economic duress can be established for unlawful acts (eg fraudulent statements), a threat to carry out a lawful act only goes too far when it is made 'illegitimately'. Further, duress will not extend to the use of lawful pressure to achieve a result to which the person exercising pressure subjectively believes, in good faith, it is entitled. To maintain certainty in commercial negotiations, deliberate use of a lawful act in bad faith is required to establish economic duress.

Here, it was common ground that PIA was entitled to terminate the old contract and reduce Times Travel's ticket allocation, and no bad faith was found on the part of PIA.

See the Court's decision here.