Read the text below and answer the following sub-questions: a) Explain the difference between economic duress and lawful act economic duress in English contract law and the effect of this difference when it comes to the question of avoiding the contract or declaring the contract invalid! b) In paragraph 27 in the text below the Court highlights differences between principles regarding the interpretation of contracts. Describe in your own words the principle differences between English Law and the Civil Law systems regarding interpretation of contracts. c) Presume Pakistan International Airline Corporation (the Respondent in this case) is a Pakistan company with its seat in Pakistan. Explain the possible legal reasons why the case is tried in English court(-s) (and not in the Pakistan court system) and obviously under English law! The following text is an excerpt from the UK Supreme Court case Pakistan International Airline Corporation v Times Travel, (2021) UKSC 40. It deals with the issue of economic duress. The facts of the case (from paragraph 63 of the judgment): The claimant, Times Travel (UK) Ltd (TT), is a travel agent in Birmingham. At the relevant time, its business almost entirely comprised selling tickets for flights to Pakistan on planes owned by the defendant, Pakistan International Airlines Corporation (PIAC). PIAC is the national flag carrier airline of Pakistan and, at the relevant time, it was the only airline operating direct flights between the UK and Pakistan. Disputes arose between various travel agents and PIAC as to non-payment of commission that the travel agents claimed was owed to them on the sale of PIAC tickets. PIAC threatened to end any contractual relationship with TT, as it was legally entitled to do, unless TT entered into a new contract under which, inter alia, TT released PIAC from all claims that TT might have against PIAC in relation to commission under the previous contract. TT subsequently sought to rescind the new contract for duress thereby freeing it to recover the commission, which it claimed it was owed, under the previous contract. Excerpt from the judgment (the numbers in front of each paragraph comes from the judgment): (5) The absence in English law of a doctrine of inequality of bargaining power and of a principle of good faith in contracting 26. It is not in dispute that there is in English common law no doctrine of inequality of bargaining power in contract, although such inequality may be a relevant feature in some cases of undue influence: National Westminster Bank Plc v Morgan [1985] AC 686, 708 per Lord Scarman. As Lord Scarman observed in The Universe Sentinel (p 401), when he referred to the judgment of Lord Wilberforce and Lord Simon in Barton v Armstrong, in commercial life many acts are done under pressure and sometimes overwhelming pressure. In negotiating a commercial contract each party to the negotiations seeks to obtain contractual entitlements which he or she does not possess unless and until the parties agree the terms of the contract. Inequality of bargaining power means that one party in the negotiation of a commercial contract may be able to impose terms on a weaker party which a party of equal bargaining power would refuse to countenance. Equally, a party in a strong bargaining position, such as a monopoly supplier, may refuse outright to enter into a contract which the weaker party desires or may impose terms which the weaker party considers to be harsh. The courts have taken the position that it is for Parliament and not the judiciary to regulate inequality of bargaining power where a person is trading in a manner which is not otherwise contrary to law 27. The English law of contract seeks to protect the reasonable expectations of honest people when they enter into contracts. It is an important principle which is applied to the interpretation of contracts But, in contrast to many civil law jurisdictions and some common law jurisdictions, English law has never recognised a general principle of good faith in contracting. Instead, English law has relied on piecemeal solutions in response to demonstrated problems of unfairness: Interfoto Picture Library Ltd v Stiletto Visual Programmes Ltd [1989] QB 433, 439 per Bingham LJ; MSC Mediterranean Shipping Co SA v Cottonex Anstalt [2016] EWCA Civ 789; [2017] 1 All ER (Comm) 483, para 45 per Moore-Bick LJ. 28. The absence of these doctrines restricts the scope for lawful act economic duress in commercial life. In chapter 5 of his book, The Use and Abuse of Unjust Enrichment (Oxford 1991) Professor Jack Beatson (later to become Beatson LJ) discussed the development of the modern doctrine of economic duress and the severe limitations on its application in commercial negotiation. At pp 129- 130 he explained the basic approach of the common law in these terms: All that is not prohibited is permitted and there is no general doctrine of abuse of rights. If therefore a person is permitted to do something, he will generally be allowed to do it for any reason or for none. In the context of contractual negotiations this position enables people to know where they stand and provides certainty as to what is acceptable conduct in the bargaining process but it does leave many forms of socially objectionable conduct unchecked. Again, this is soundly based for judges should not, as a general rule, be the arbiters of what is socially unacceptable and attach legal consequences to such conduct. He suggested (p 134) that the scope for lawful act duress in contractual negotiations was extremely limited.. 29. Ansons Law of Contract, 31st ed (2020) (J Beatson, A Burrows and J Cartwright eds) similarly recognises this restrictive approach to the law of duress in contractual negotiations (p 379, ch (d)): It is not ordinarily duress to threaten to do that which one has a right to do, for instance to refuse to enter into a contract or to terminate a contract lawfully. In the cut-and-thrust of business relationships various types of pressure may be brought to bear in differing situations. [A] contracting party will not be permitted to escape from its contractual obligations merely because it was coerced into making a contract by fear of the financial consequences of refusing to do so. Although this approach leaves many forms of socially objectionable conduct unchecked, as a general rule the determination of when socially objectionable conduct which is not in itself unlawful should be penalized is for the legislature rather than the judiciary. 30. Against this commercial background the pressure applied by a negotiating party will very rarely come up to the standard of illegitimate pressure or unconscionable conduct. It will therefore be a rare circumstance that a court will find lawful act duress in the context of commercial negotiation.
