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Huyton SA v Peter Cremer GmbH & Co. [1999] 1 Lloyd’s Rep 620; [1999] CLC 230

Shipping; economic duress; illegitimate pressure

(334 words)

Facts

Huyton entered into an agreement with Cremer according to which it agreed to buy wheat from Cremer. Payment was to be made in cash against listed documents. Huyton arranged for a vessel to lift the wheat Cremer was to ship. However, the vessel incurred significant load port demurrage. Upon its arrival to the final port, the vessel discharged against indemnities given in Huyton’s and the owners’ favour.

Issue

Cremer’s documents were rejected by Huyton’s bank for documentary discrepancies. Cremer argued that Huyton waived its right to reject documents when it accepted the cargo on completion of discharge, and demanded payment. Huyton did not pay and Cremer claimed that that Huyton was in breach of contract due to refusal of payment for the already accepted cargo. In response, Huyton argued that Cremer committed a repudiatory breach when it failed to remedy defects in the documents. Cremer wanted to proceed to arbitration. Then Huyton paid against Cremer’s new presentation of the documents, relying on Cremer’s promise that it would withdraw from arbitration. Cremer gave notice to proceed regardless, so Huyton sought an injunction preventing Cremer from pursuing its arbitration claim. Cremer claimed that its arbitration withdrawal was not binding due to lack of consideration, or due to economic duress.

Held

The Court found in favour of Huyton. Consideration could be found in the parties’ compromise. Cremer could not avoid being bound by its compromise based on its lack of intention to see it through, unless duress was present. However, Cremer could not show illegitimate pressure. The contract was for payment against documents and Cremer did not present those. Even if Huyton put illegitimate pressure on Cremer, the second limb of economic duress, namely that pressure had to be a significant cause for Cremer’s entry into the agreement, was still not satisfied. The test of subjective causation in economic duress was the “but for” test, and Cremer’s feelings of pressure resulted from its own misconceptions about the situation.


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