North Ocean Shipping Co Ltd v Hyundai Construction Co Ltd [1979]
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North Ocean Shipping Co Ltd v Hyundai Construction Co Ltd [1979] QB 705 is an English contract law case that addressed issues related to duress in the context of a shipbuilding contract.
Hyundai Construction Co Ltd, the shipbuilders, entered into a contract in 1972 with North Ocean Shipping to construct an oil tanker named Atlantic Baron. The contract stipulated five instalments for payment, with a reverse letter of credit agreed upon for repayment in case of default. In 1973, after the devaluation of the US dollar, Hyundai demanded a ten percent increase in the contract price, threatening not to deliver the ship otherwise. Fearing the loss of a charter with Shell, North Ocean agreed to the increase in a telex message on June 28, 1973, citing the desire to maintain an amicable relationship and without prejudice to our rights. The ship was eventually delivered in November 1974, and North Ocean initiated legal action through arbitration on July 30, 1975.
Mocatta J delivered the judgment, noting that the assertion of preserving amicable relations did not constitute good consideration. However, he considered the increase in the letter of credit price to be valid consideration. Mocatta J then explored the issue of duress, considering whether the entire agreement was procured under duress due to the threat to breach the original contract.
Mocatta J acknowledged that while older cases did not address threats to breach a contract, economic duress could be recognised as a valid form of duress. He concluded that if a threat to break a contract led to a subsequent contract with valuable consideration, that contract could be deemed voidable and the excess money paid under it could be recovered. The court found that the agreement in this case was induced by economic duress.
However, Mocatta J also considered the delay in bringing the case to court, and due to an 8-month delay, he concluded that economic duress could not be established. He deemed North Ocean's actions during this period as an affirmation of the varied contract, preventing the court from finding economic duress.
In summary, while economic duress was recognised as a valid ground to void a contract, the delay in bringing the case to court impacted its application in this case.
Hyundai Construction Co Ltd, the shipbuilders, entered into a contract in 1972 with North Ocean Shipping to construct an oil tanker named Atlantic Baron. The contract stipulated five instalments for payment, with a reverse letter of credit agreed upon for repayment in case of default. In 1973, after the devaluation of the US dollar, Hyundai demanded a ten percent increase in the contract price, threatening not to deliver the ship otherwise. Fearing the loss of a charter with Shell, North Ocean agreed to the increase in a telex message on June 28, 1973, citing the desire to maintain an amicable relationship and without prejudice to our rights. The ship was eventually delivered in November 1974, and North Ocean initiated legal action through arbitration on July 30, 1975.
Mocatta J delivered the judgment, noting that the assertion of preserving amicable relations did not constitute good consideration. However, he considered the increase in the letter of credit price to be valid consideration. Mocatta J then explored the issue of duress, considering whether the entire agreement was procured under duress due to the threat to breach the original contract.
Mocatta J acknowledged that while older cases did not address threats to breach a contract, economic duress could be recognised as a valid form of duress. He concluded that if a threat to break a contract led to a subsequent contract with valuable consideration, that contract could be deemed voidable and the excess money paid under it could be recovered. The court found that the agreement in this case was induced by economic duress.
However, Mocatta J also considered the delay in bringing the case to court, and due to an 8-month delay, he concluded that economic duress could not be established. He deemed North Ocean's actions during this period as an affirmation of the varied contract, preventing the court from finding economic duress.
In summary, while economic duress was recognised as a valid ground to void a contract, the delay in bringing the case to court impacted its application in this case.
