Saturday, August 06, 2005

Negligence & Economic Duress

To establish a claim in negligence, a plaintiff must show that the defendant owes him a duty of care and that there has been a breach of that duty causing actionable damages.(Grant vs Australian Knitting Mills 91936) A.C. 85 at 103 (P.C.).

Definition of the circumstances in which a defendant owes a duty of care and that there has been a breach of that duty causing actionable damages. Whatever the nature of the harm sustained, the court asks whether the damage was reasonably foreseeable and considers the nature of the relationship between the parties and whether in all the circumstances it is fair, just and reasonable to impose a duty of care.(Marc rich vs Bishop Rock Marine (1994) 1 W.L.R. 1071 C.A.)

Generally, the damages necessary to sustain a claim in negligence must be actual physical injury to person or property other than property which is the product of the negligence itself. Normally, a plaintiff claiming in negligence cannot recover economic loss. Economic loss is only recoverable where there is a special relationship amounting to reliance by the plaintiff on the defendant or where the economic loss is truly consequential upon actual physical injury to person or property. Since damages is an essential ingredient of the cause of action of negligence, the limitation period will not start to run until the damages has occurred. (Pirelli vs Faber & partners (1983) 2 A.C. 1 (H.L.).

An agreement made under duress in the form of illegitimate economic pressure which amounts to a coercion of will and which vitiates consent may be voidable.

(See: Occidental Worldwide Investment vs Skibs A/S Avanti (1976) 1 Lloyd’s Rep. 293; North Ocean Shipping vs Hyundai Construction (1979) Q.B. 705).

“It must be shown that the payment made or the contract entered into was not a voluntary act”

(See: Lord Scarman in Pao On vs Lau Yiu Long (1980) A.C. 614 at 636 (P.C.).

It must also be shown that the pressure exerted was ill legitimate.

(see:Universe Tankships vs International Transport Worker Federation (1983) 1 A.C. 366 at 384,400 H.L.).

Sufficiently coercive threat to break a contract may amount to economic duress. This occur typically where a party to an existing contract compels by coercion uncovenanted additional payment by threatening not to perform the contract if his demand is not met.

In a building contract, if for example a sub-contractor has undertaken work at fixed price and, before he has completed the work, he declines to continue with it unless the contractor agrees to pay an increased price. Such an agreement could be voidable for economic duress if the sub-contractor was held guilty of securing the contractor’s promise by taking unfair advantage of the difficulties he would cause if he did not complete the work.

(see: William vs Roffey bros. 91991) 1 Q.B. 1 at 13 (C.A.)

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