Duress In Commercial Contracts - Crossing The Rubicon Of Illegitimate Pressure

Progress Bulk Carriers Limited v. Tube City IMS LLC (Cenk K) [2012] EWHC 273 [Comm]

This was an appeal to the High Court from an arbitration, in which the tribunal had been asked to consider whether a settlement agreement was voidable for duress. The court gave particular consideration to whether or not the owner's conduct amounted to "illegitimate pressure", which, coupled with a prior (unaccepted) repudiatory breach, might establish duress in law. Mr Justice Cooke held that the arbitrators had applied the correct test.

The background facts

The claimant was the disponent owner of Cenk K and concluded a voyage charter with the defendant charterer on 2 April 2009 to carry shredded scrap from the USA to China. The charterer was shipping the cargo to fulfil its obligations under a sale contract.

On 7 April, the owner fixed Cenk K to another charterer (Daewoo) without informing the charterer. The charterer discovered that the owner had done this on 16 April. The owner did not dispute that it had acted in repudiatory breach of the charterparty, but the charterer did not accept that breach as terminating the contract, which therefore remained alive, although the named vessel could no longer be made available to meet the agreed laycan. On 18 April, the owner said that it would find an alternative vessel to load between 27 and 30 April and that it would compensate the charterer for damages resulting from its failure to provide Cenk K.

The arbitrators found that the charterer reasonably relied upon the owner's assurances. Eventually, the owner put forward Agia to perform the voyage. The charterer passed on the details of Agia to its buyers and sought an extension of time for shipment. The receiver agreed to extend the shipment date to 15 May but only on condition that the purchase price was reduced. The charterer explained that this deal with the receiver was the best that could be done in the circumstances, since the market had moved down in the interim by more than the differential sought by the receiver.

On 27 April the owner replied stating that it would grant a $1-2 per mt discount on the freight rate. The charterer protested as this was far less than the loss it would suffer under the sale contract.

On 28 April, the owner made a "take it or leave it" offer. It required acceptance of the Agia clean, with a $2 reduction per metric ton on the freight and the charterer's agreement to waive its claims for damages arising from the nomination of Agia...