Bashing the bullies

Throughout history there has always been sympathy for the underdog. This view applies to extremely wide-ranging situations, from David v Goliath to the modern day victory of Bob the Builder over Westlife for the Christmas number one spot.

However, unlike Bob, many builders operating in the commercial market find their position as underdog extremely difficult. They are often faced with situations where halfway through a job, the trade absolutely vital to the progress of the work starts to flex its muscles regarding its bargaining position in relation to the completion of the project. This situation can place insurmountable pressure on the "underdog" to concede ground both in terms of activity on site and monies to be paid over.

Commercial fire power
Some may say that in recent years the law relating to construction and engineering projects has endeavoured to reduce commercial inequality by such steps as changing pay-when-paid provisions and the introduction of faster dispute resolution procedures. But in my experience there are very few of you out there who have not at some time felt obliged to agree to demands placed on you, simply because of the commercial fire power of your opponent.

On very rare occasions it may be that the law can come to your rescue. But what exactly can the law do when it comes to economic duress? This is an area of the law where one party may be able to set aside an agreement on the basis that it was forced to enter into it.

Recent case law states that the ingredients of actionable duress are that there was pressure or a threat that was illegitimate and that you had no practical choice but to enter into agreement. And, case law suggests, the pressure exerted on you must have been a significant cause inducing you to enter into the contract.

The attempt to identify the facts leading to the existence of illegitimate pressure is an area where there is most likely to be a conflict of evidence between parties. The parties seeking to maintain the agreement will of course claim that the concluded agreement was reached as a result of the usual commercial negotiations. There must inevitably be a number of factors taken into account as to whether illegitimate pressure has been exerted.

However, unlike Bob, many builders operating in the highly competitive commercial market find their position as underdog extremely difficult

The factors must include: whether or not there has been an actual threatened breach of contract; whether the pressure was exerted in good or bad faith; whether the victim had any realistic practical alternative but to submit to the pressure; and whether the victim protested at the time.

Be warned
The difficulty is to distinguish this scenario from the everyday rough and tumble of normal commercial bargaining. Be warned that when a party has been prepared to run such an argument, the outcome of the case has been variable. Contemporaneous evidence of events leading up to the agreement under question will be critical to the outcome of any dispute of this nature. For instance, in the recent case of Carillion Construction Ltd vs Felix (UK) Ltd, one of the factors that appears to have contributed to victory for the underdog at the first instance was a note made in preparation for the settlement meeting which had written on it "no deliveries until we get agreement".

There are of course duties under contract for parties to perform their obligations, and clearly the terms of the contract will affect a court's view as to what constitutes coercion, as will the question of what the practical choices of the underdog were.

In order to successfully obtain an order for setting aside an agreement on the basis of economic duress, it is likely to be important for the underdog to demonstrate that it considered other alternatives before entering what was considered to be a forced agreement. These include factors such as using alternative contractors as far the contract allowed, and consideration of the availability of mandatory injunction proceedings or adjudication proceedings. In certain circumstances adjudications may be too slow, as 28 or more days may be too long when site time is critical. Also, applications for injunctions are fraught with risk and difficulty.