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when do lawful "bullying" tactics render a contract unenforceable?

12 March 2012

I’m not talking about shouting or causing injury in negotiations….…but rather about allowing the other side to become so dependent upon your fulfilment of a (non-contractual) promise that it is prepared to enter into whatever agreement you give them in order to see that promise fulfilled.

That was the position of ship owners in a recent case who, having breached a previous obligation to provide a ship, so delayed the subsequent provision of the ship that the Charterers were prepared to sign almost anything (including a waiver in respect of previous losses) to get the ship and to avoid catastrophic loss.

Whilst nothing illegal was done, the court found the contract was obtained by “economic duress” and therefore unenforceable.

When you’re in a very strong negotiating position dealing with a desperate counterparty the lesson seems to be not to push your luck too far – after all – nobody likes a bully!

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