International Construction Law Review
BEING HELD TO RANSOM OR “WIELDING THE WHIP OR THE ROD”1 HOW UNSCRUPULOUS DEALING, ILLEGITIMATE PRESSURE AND TOUGH NEGOTIATING TACTICS CAN BE OVERCOME BY THE LEGAL REMEDY OF ECONOMIC DURESS
PHILIP LOOTS2
DR DONALD CHARRETT3
INTRODUCTION
This paper looks at the legal doctrine of economic duress in the Anglo-Australian context of construction contracts on large resource projects. Employers on large projects are sometimes put in a position where, to obtain timely completion, there seems to be no alternative but to renegotiate the commercial terms of a construction contract with a non performing contractor (and inevitably on terms that are more favourable to the contractor). Redress may however be possible by seeking curial intervention on the grounds of economic duress, to avoid the consequences of having acceded to undue pressure.
Economic duress is an action for restitution of property or money extracted under duress and the avoidance of any contract that is induced by it. It is a common law doctrine that is part of the law of contract and unjust enrichment and is closely related to the equitable doctrine of undue pressure4. It is not, in and of itself, a species of tort5. Economic duress is a factor which may render a contract voidable6.
1 Smith v William Charlick Ltd [1924] HCA 13; (1924) 34 CLR 38, per Isaacs J at 56: “Refusal to relieve from business difficulties is not the creation of those difficulties. It is not the same thing as wielding the whip or the rod.”
2 Counsel, Wheatstone Project; Adjunct Professor, Centre for Mining, Energy and Resources Law, University of Western Australia; past counsel, Gorgon Project.
3 Melbourne TEC Chambers.
4 Electricity Generation Corporation t/as Verve Energy Ltd v Woodside Energy Ltd [2013] WASCA 36 at paragraph 23, per McLure P.
5 Id. at paragraph 150, per Murphy J.
6 Pao On v Lau Yiu Long (PC) [1980] AC 614 at 636, per Lord Scarman.
The International Construction Law Review [2014
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