Case Name : Sara International Limited vs Rizhao Steel Holding Group Company Limited Case Reference: 2013 VIII AD (Del) 415 Neutral Citation: 2013:DHC:2907 Case Number: CS(OS) 1586/2009 Court: Delhi High Court Bench: 01 Coram: Manmohan Date: 30.05.2013
The four necessary ingredients to successfully avoid a contract on the ground of economic duress claim are:
- Pressure which is illegitimate;
- Its effect on the victim → the pressure must be a significant cause inducing the claimant to enter into the contract
- Lack of reasonable alternative → practical effect of pressure must be that there was compulsion or lack of practical choice for the victim
Refer also:
Pao Onvs Lau Yiu, (1979) 3 All ER 65 (PC) {Privy Council} : Duress is a coercion f the will to vitiate consent nad in a contractual situation commercial pressure is not enough. There must be some fact which could in law be regarded as a coercion of will to vitiate consent. It is material to inquire whether the person alleged to have been coerced did or did not protest. Whether the person had an alternative course open as an adequate legal remedy. Whether the person was independently advised. Whether the person took steps to avoid the contract.
Universe Tankships Inc of Monrovia vs International Transport Workers Federation, (1983) 1 AC 366 : Duress is not always lack of will to submit but intentional submission arising from the realisation that there is no practical choice open to him
Double Dot Finance Ltd vs Goyal MG Gases Ltd, (2005) 117 DLT 330 : Commercial contracts can be avoided on the grounds of economic duress if the facts of the case justify such a decision. | Upheld by Division Bench in Goyal MG Gases Ltd vs Double Dot Finance Ltd, (2009) 2 Arb LR 655
Unikol Bottlers Ltd vs Dhillon Kool Drinks, AIR 1995 Del 25 (at paras 31-37) : The court is concerned with the question of free will. The plaintiff is on test and it must be ascertained whether the plaintiff exercised free will. There is a four-fold test to assess the same:
- Did plaintiff protest before or soon after the agreement?
- Did plaintiff take any steps to avoid the contract?
- Did plaintiff have an alternative course of action or remedy?
- If so, did the plaintiff pursue or attempt to pursue the same?
- Did the plaintiff convey benefit of independent advice?
DSND Subsea Ltd vs Petroleum Geo Services ASA, (2000) EWHC 185 (TCC): Illegitimate pressure must be distinguished from the rough and tumble of the pressures of normal commercial bargaining. CTN Cash and Carry Ltd vs Gallaher Ltd, (1994) 4 All ER 714: A threat not to contract with another except on certain terms would ordinarily be lawful duress; it would be difficult to establish duress if the defendant bona fide considered that his demand was valid.
Central Inland Water Transport Corp Ltd vs Brojo Nath Ganguly, (1986) 3 SCC 156 : This principle will not apply where the bargaining power of the contracting parties is equal or almost equal. ; followed in Delhi Transport Corporation vs DTC Mazdoor Congress, (1991) Suppl (1) SCC 600
See also:
Act, Section
PDF: Sara Intl Ltd vs Rizhao Steel Holding Group Company Ltd, CS(OS) 1586-2009 (Del HC).pdf