Rough and tumble

In DSND Subsea Ltd vs Petroleum Geo-Services ASA and Another [28 July 2000], Mr Justice Dyson had to grapple with a topic that does not often arise in the Technology and Construction Court: economic duress. DSND had been engaged by Petroleum Geo-Services to carry out subsea works in the development of the Banff sector of the North Sea. The original subcontract had been amended by subsequent agreements that altered the terms of payment for important aspects of the work. Having made these agreements, PGS sought in the litigation to have them overturned. One of the grounds was that the agreements had been made while PGS was under economic duress.

The plea of economic duress is relatively new. Historically, a contract that was made as the result of threats to the person could always be set aside. The doctrine has developed to include threats to property and threats to economic interests. In the early cases on economic duress, the touchstone was whether the will of the person claiming duress had been so overborne that it could be said that he had not made the agreement of his own free will. More recent cases have veered away from the free will concept. The current test was described by Mr Justice Dyson as follows. There must be pressure whose practical effect is that there is compulsion or a lack of practical choice for the victim, it must be illegitimate, and it must be a significant cause inducing the claimant to enter into the contract.

In determining whether there has been illegitimate pressure, the court takes into account a range of factors. These include whether or not there has been an actual or threatened breach of contract; whether the person allegedly exerting the pressure has acted in good or bad faith; whether the victim had any realistic practical alternative but to submit to the pressure; whether the victim protested at the time; and whether he affirmed or sought to rely on the contract. The judge pointed out that illegitimate pressure must be distinguished from the rough and tumble of normal commercial bargaining.

The judge pointed out that illegitimate pressure must be distinguished from the rough and tumble of the pressures of normal commercial bargaining

In the event, he found that the new agreements had not been entered into as a result of economic duress. There were some clear and important clashes of evidence that had to be resolved and the judge applied some of the factors identified above. For example, he found that PGS did have alternative courses of action and he remarked on the lack of protest from PGS in contemporaneous documents and the absence of reference to duress in internal memoranda.

A not dissimilar case where the decision went the other way was B and S Contracts and Design Ltd vs Victor Green Publications Ltd [(1984) ICR 419]. The plaintiff had agreed to erect exhibition stands for the defendant at Olympia, west London. After some industrial action, it told the defendant that the contract would be cancelled unless extra money was paid. The defendant agreed but then deducted it from the contract price at the end of the job. When sued for the extra, it said it had agreed to pay it because of economic duress. The Court of Appeal agreed, saying cancellation of the contract would have caused such serious damage that the defendant had no option but to pay the extra. Lord Justice Griffiths said: "Many commercial contracts are varied … because the parties are faced with changing circumstances during the performance of the contract and it is certainly not on every occasion that when one party unwillingly agrees to a variation that the law would consider that he had acted by reason of duress."