North Ocean Shipping Co Ltd v Hyundai Construction Co Ltd [1979] QB 705
Contract; vitiating circumstances; duress; threats of economic harm.
Facts: Hyundai agreed to build a tanker for North Ocean Shipping (NOS) for an agreed price that was fixed in US dollars. However, after a contract was created on these terms, there was a 10% devaluation of the US dollar and to build the ship at the agreed price would no longer be profitable for Hyundai. Hyundai said they would not build the ship unless NOS agreed to a 10% increase in the contract price. NOS urgently needed the tanker in order to perform another contract and would suffer financial losses if the tanker was not built on schedule. They therefore agreed to pay the additional sum demanded by Hyundai. Hyundai gave consideration for this promise, creating a binding contract for the increased price.
Issue: Could the contract to pay the higher price be avoided on grounds of duress?
Decision: NOS had agreed to pay the higher price because of unlawful threats of economic harm and this amounted to duress. The contract was voidable.
Reason: The threat by Hyundai to terminate the contract was unlawful. Furthermore, the unlawful threat was made in circumstances that compelled NOS to agree to Hyundai's demands. This meant that NOS's consent was given not voluntarily but rather under duress. In such circumstances, the party who was forced to enter the contract can choose to have it set aside as void and recover any money paid. However, this choice must be made within a reasonable time. The court found that NOS had delayed unreasonably in seeking to set aside the agreement and could not therefore recover the additional 10% they had paid. Relief was denied.