Contract LAW II Assigenment II PDF

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UNDERSTANDIND CONTRACT LAW ,PRIVITY OF CONTRACT LAW...

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NAME: JOSEPH PATRICK KAMARA STUDENT NUMBER: 180601032 COURSE: CONTRACT LAW CODE: 202 ASSIGNMENT LECTURER: MUSTAFA NAIL SHAIL

FACTS Apex Plc have a contract with Nadir Ltd. Apex tell Nadir that unless Nadir enters into a five year contract with Apex’s subsidiary, Crux Ltd, on terms which are particularly advantageous to Crux, they (Apex) will ‘terminate their agreement’ with Nadir. Despite the fact that the terms suggested mean that Nadir will make a loss on the deal with Crux, they agree because of the value which they place on their contract with Apex. Two years later, Apex goes out of business. Nadir now wants to escape from the contract with Crux. ISSUES Whether Nadir had any reasonable alternative to comply with the contract? The two year delay before Nadir attempt to avoid the contract. The optional situation if Apex’s threat, rather than being to terminate their agreement, was not to renew their contract with Nadir?

It looks like the only way possible for Nadir, if she wish to get out from the contract with Crux is to plea for duress. However there may be problem for them, whether the threat was sufficiently serious, and as to the delay of the two years before they attempt to avoid the agreement. Duress is when a party is forced to enter into a contract as a result of threats/pressure. Effect is to make the contract voidable. The injured party may have the contract rescinded unless he has expressly or impliedly affirmed it, not all threat will have this effect, however, and the right to rescind the contract may in any case be lost in certain situation. Historically the only sort of pressure that the court were prepared to consider as amounting to duress involved personal violence or threat of personal violence Barton v Armstrong 1975.1 It was held that the contract was voidable because the threat of personal violence were factor in claimant decision to purchase the shares even though he may have entered into the contract without threat being made. Over the years it has been recognised that in certain situations commercial pressure can go beyond what is legitimate between business and itself amount to duress. In order to prove duress, two main requirements must be meet I. II. III.

The threat must be some action which is unlawful, it must at list involve a breach of contract or a civil wrong such as tort The person threatened must have no practical option to compliance The optional situation

Regarding the requirement of threat, it seems clearly to be satisfied Apex plc are threatening to break their contract with Nadir, which is sufficiently unlawful to give rise to the possibility of duress CTN Cash & Carry v Gallagher 1994.2 It was suggest that in certain situations a threat of a lawful act can amount to duress. 1 Barton v Armstrong (1975) AC 104 2 CTN Cash & Carry v Gallagher (1994) 4 All ER 714

The problem arises with the second requirement, when can it be said that the person threatened has no real options but to comply? Pao On v Lau Yiu Long (1979).3 The cases talk of the person will being defeated but this is not specifically helpful since they are still in fact making choice of compliance, even if they do so to avoid some other consequences. This requirement was meet in Atlas Express Ltd v Kafco 1989.4 Kafco was a small manufacturing company who had a very valuable contract with Woolworth. They employed Atlas a national firm of carriers, to make deliveries to Woolworth. Atlas found that through their own mistake entered into the contract with Kafco on uneconomic terms. They told Kafco that they must agree to an increase in charge for carriage, or otherwise Atlas would not make the deliveries. Kafco could not risk being in breach of their contract with Woolworth, and so agreed to the change under protest. When Atlas brought an action to recover the increased charges, Kafco resisted on the grounds of duress. It was held that losing the contract with Woolworth or being sued by them, would have caused grate damage for Kafco they had no real option but to go along with Atlas suggestion. It was held that they were not bound to pay the additional carriage cost. A question that will come to mind was that could this same argument in Kafco apply to the case of Nadir? The option to make the contract Crux is for Nadir to lose the contract with Apex Plc. According to the facts of the case we are told that they place great value on this contract, it is not quite clear just how vital it is to their business, it seems that Nadir could be appropriately compensated for the loss of the contract by suing Apex Plc for damages for breach of contract, then they would not be able to rely on duress to escape the agreement with Crux. Another problem for Nadir it is now two years since the contract with Crux was made. Duress makes a contract voidable at the option of the person subject to the duress, but is also clear that the right to rescind (cancel) can be lost. In Atlantic Baron 1979.5 It occurred when the party threatened was held to have affirmed (agree) to the contract, and failed to raise their claim until eight month after the ship which was the subject of the contract had been delivered. It was held that the essence of duress was that there had been ‘compulsion of the will’ and this could arise just as much from economic pressure as it could from threats of violence. In Nadir case there is a delay of two years between the threat and the attempt to avoid the contract.

ADVICE TO NADIR

3 Pao On v Lau Yiu Long (1980) AC 614 4 Atlas Express Ltd v Kafco (1989) QB 833 5 North Ocean Shipping v Hyundai Construction (The Atlantic Baron) (1979) QB 705

Based on the fact stated above in my own opinion Nadir will not be allowed to rescind (cancel) the contract. The optional situation, where the threat is if non-renewal rather than termination, it is unlikely that it will amount to duress, because the threat involves nothing unlawful. Although in CTN Cash & Carry v Gallagher 1994. It was suggested that in certain situation a threat of lawful act could amount to duress, there is no reason to think it would be applied to a straight forward case like Nadir case. Nadir are therefore highly unlikely to have remedy as a result of this threat.

References Barton v Armstrong (1975 ) AC 104

CTN Cash and Carry Ltd v Gallaher Ltd (1994) 4 All ER 714 Pao On v Lau Yiu Long (1980) AC 614 Atlas Express Ltd v Kafco (1989) QB 833 North Ocean Shipping v Hyundai Construction (The Atlantic Baron) (1979) QB 705...