Boris Ignachkov Legal Principles and Key Points
- In the case of Huyton v Cremer [1999] 1 Lloyd’s Rep 620, it was established that whilst the test to establish the causation for economic duress is the ‘but for’ test, this is the minimum required. Illegitimate pressure must be a sufficiently significant cause.
Facts of Huyton v Cremer [1999] 1 Lloyd’s Rep 620
- Huyton (C) entered into a contract with Cremer (D)
- The C agreed to buy wheat from the D, and payment would be made in cash
- But C refused to pay due to discrepancies in the documents D provided
- D argued C waived their right to reject documents when the cargo was accepted, demanding
- When C refused to pay, D claimed they were in breach of contract due to refusal of payment for already accepted cargo
- C counter-argued, saying D committed a repudiatory breach by failing to remedy the defective documents
- D claimed arbitration but said they would withdraw from such if C paid for the D’s new documents, which they did
- Despite C’s payment, D pursued arbitration, C sought an injunction to prevent this
- D argued their arbitration withdrawal was not binding due to the lack of consideration, nor was it binding due to economic duress
Issues in Huyton v Cremer [1999] 1 Lloyd’s Rep 620
- Was there consideration present for the arbitration withdrawal to be binding?
- Was there illegitimate pressure applied upon D which would render the arbitration withdrawal not binding under economic duress?
Held by the High Court (Queen’s Bench Division)
- Found in favour of the C, Huyton. Consideration was found in the compromise of the parties (withdrawing for the payment of new documents), and illegitimate pressure was not found to be a significant cause for the D withdrawing their proceedings.
Justice Mance
Citing the judgment of Lord Goff in ‘The Evia Luck’ [1992], Justice Mance noted the requirements for economic duress:
- “there were two basic ingredients of duress of this character: (i) illegitimate pressure by one party (ii) constituting a significant cause inducing the other party to act as he did” [241]
Looking at the first requirement, in the present case, refusal to pay did not amount to illegitimated pressure
- “Cremer had no continuing right after 19 or alternatively 23 January 1996 either to present conforming documents and to claim payment of the price or, if it be material, to require payment of the price or any equivalent sum by Huyton on any other basis … It follows from these conclusions that Cremer is unable to establish, in any shape or form, the illegitimate pressure on which it relies in support of its claim that the agreement of 6–7 February 1996 is voidable for duress” [247]
As to the second requirement:
- “The minimum basic test of subjective causation in economic duress ought, it appears to me, to be a ‘but for’ test.” [250]
- “Threats to the person are, by definition, male fide acts. Economic duress … embraces situations where the party applying what can, at least with hindsight, be shown to have been economic pressure held the view quite reasonably at the time that he was entitled to do so. There is, also … a major difference between the substantive test of causation in cases of threats to the person and in cases of economic duress.” [252]
Citing Barton v Armstrong [1976], the burden of proof shall be with the party seeking relief
- “the law normally treats the party seeking relief in respect of a breach of contract or seeking to set aside a bargain on grounds, such as innocent misrepresentation, as under a legal onus to prove his case on causation.” [253]
In the present case, Justice Mance did not see it as the fault of the C that the D felt pressured
- “Even assuming … that Huyton was in breach or threatened breach of contract imposes on Huyton an initial factual onus to show that Cremer was not thereby caused to enter into the agreement of 6–7 February 1996, it seems to me that, once Cremer’s misconceptions are taken into account, the onus shifts to Cremer to show that it would still have entered into that agreement, aside from such misconceptions, simply on the basis of Huyton’s breach or threatened breach of contract. I do not think that this is established.” [256-257]
