Universe Tankships Inc of Monrovia v International Transport...

Facts

• The International Transport Workers’ Federation (ITF) blacklisted a ship owned by Universe Tankships Inc.
• To secure the removal of the blacklisting and permit the ship to leave port, Universe Tankships Inc made a payment to the ITF’s welfare fund.
• The shipowners later sought to recover this payment, asserting it had been made under duress.

Issues

1. Whether economic pressure, as opposed to physical threats, can amount to duress in contract law and vitiate consent.
2. Whether the ITF’s actions constituted illegitimate pressure sufficient to render the contract voidable.
3. What test should be applied to determine if pressure amounts to duress.

Decision

• The House of Lords confirmed that economic pressure, not just physical threats, can constitute duress.
• The court held that the ITF’s conduct amounted to illegitimate pressure, vitiating the consent of the shipowners.
• Payment obtained by illegitimate pressure was recoverable as the contract was voidable.
• A two-part test for economic duress was established: (1) the pressure must be a significant cause of the contractual agreement, and (2) the pressure must be illegitimate.

Legal Principles

• Duress negates voluntary consent in contract law where a party’s will is overborne by coercion, including economic threats.
• The boundaries of economic duress depend on whether the pressure used is commercially acceptable or illegitimate.
• The two-part test for duress requires causation (“but-for” test) and consideration of the legitimacy of the pressure and demand.
• Illegitimate pressure encompasses both unlawful acts and illegitimate threats, not just physical coercion.
• The approach in this case has been adopted and further developed in subsequent cases concerning economic duress.

Conclusion

The Universe Sentinel established that economic duress, arising from illegitimate pressure, can vitiate consent and render a contract voidable. By articulating a clear two-part test focusing on causation and the nature of the pressure, this decision marked a significant development in the law of contract duress and continues to influence related disputes.