A contract may be avoided due to Economic duress. There is no definitive standard for determining if a threat is illegitimate, although a threat of a contract violation or any civil wrong is usually sufficient. The courts would look at whether the complainant has a viable solution, whether the danger was severe, and whether the claimant protested.
The conflict originated from the selling of shredded scrap that the charterers had to ship from Mississippi to China. The ship's owners decided to rent the vessel to the charterers for this voyage. Despite the agreement, the owners leased the ship to a third party, making the original contract impossible to fulfil. However, to make amends for their repudiatory breach, the owners vowed to pay the charterers for their damages and agreed to locate another ship to carry out the agreement. The charterers took advantage of this and negotiated with their clients on a later arrival period. Meanwhile, the cargo's worth had fallen, and the customers demanded a refund for the late arrival. The charterers informed the owners that they intended to sue the owners for these injuries and penalties for breach of contract.
The owners declined to give a ship to the charterers until the charterers renounced their arguments. The owners said that their commitments were not legally enforceable. The charterers had little choice but to embrace the owners' requests because they had no other option. Later, the charterers agreed to prosecute the owners for economic duress. The charterers prevailed in the arbitration tribunal. The owners asked the High Court to overturn the arbitration decision, claiming that their conduct was legal.
- Whether the owners' exclusion of the charterers' argument for breach of the charter party obtained by economic duress?
- Whether the Arbitration Decision lawful?
Despite the reality that the owners' failure to supply a replacement ship was not a fraud, tort, or even a breach of contract, the High Court determined that it led to economic duress. According to the Court, the owners' dishonest behaviour by providing assistance and then removing it at the last minute was followed by a repudiatory breach.
Furthermore, the charterers were left with no other choice as a result of the owners' behaviour. Putting the charterers in a false sense of protection was a manoeuvre to corner them – and therefore, a kind of unconstitutional pressure.
The court also held that Arbitrators failed to provide for tests that helped them to come to conclusions. Further, the court directed the Arbitrators to refer to Mance J’s decision in which he has set out requirements and other basic ingredients for essential duress. The court held that the Arbitrators had already decided that the owners were a repudiatory breach of charter.
This case demonstrates that contracts should be enforced in general and that economic coercion should not be a simple way out of onerous contracts, while still acknowledging that in the few situations when an agreement is obtained by legal yet "morally or socially objectionable" conduct, a workable alternative must be found.
This Article Does Not Intend To Hurt The Sentiments Of Any Individual Community, Sect, Or Religion Etcetera. This Article Is Based Purely On The Authors Personal Views And Opinions In The Exercise Of The Fundamental Right Guaranteed Under Article 19(1)(A) And Other Related Laws Being Force In India, For The Time Being. Further, despite all efforts made to ensure the accuracy and correctness of the information published, White Code VIA Mediation and Arbitration Centre shall not be responsible for any errors caused due to human error or otherwise.