Contract Law

Universe Tankships Inc. v. International Transport Workers' Federation

[1983] 1 AC 366; [1982] 2 All ER 67

Facts

A vessel owned by Universe Tankships arrived in an English port.
The International Transport Workers’ Federation declared the ship “black” and instructed workers not to provide services necessary for its departure.
The union demanded payment into a welfare fund and the signing of certain undertakings.
The shipowner urgently needed the vessel released and had no practical means of obtaining the required services elsewhere.
It made the demanded payment under protest.
After the ship was released, the owner sued to recover the money.
The union argued that the payment had been voluntary or that its industrial action was legally protected.

Whether the payment had been obtained through economic duress.
What elements distinguish illegitimate duress from lawful commercial or industrial pressure.

Economic duress makes a transaction voidable where:
pressure is illegitimate; and
the pressure leaves the victim with no practical or reasonable alternative but to submit.
The pressure must be a significant cause of the victim’s consent.
The relevant inquiry is not whether the victim’s will was completely destroyed.
The victim ordinarily knows what is being agreed but agrees because illegitimate pressure makes resistance impracticable.
A transaction may later be affirmed if the victim, after the pressure ends, clearly elects to retain it.

The shipowner did not make the payment as part of an ordinary negotiated commercial compromise.
The ship was effectively immobilised.
Every day of detention created significant operational and financial loss.
Alternative labour or port services were not realistically available.
The owner therefore had no practical choice except to comply.
The union’s demand for payment into the welfare fund was not sufficiently connected with a protected trade dispute concerning the terms and conditions of the ship’s employees.
Consequently, the pressure lacked lawful industrial justification.
The House of Lords rejected the older suggestion that duress requires proof that the victim’s free will was entirely overborne.
The shipowner intended to make the payment, but that intention was induced by pressure the law regarded as illegitimate.
The immediate protest and prompt attempt to recover the money also showed that the owner had not voluntarily affirmed the transaction after the vessel was released.
Both necessary elements were therefore present:
absence of a practical alternative; and
illegitimacy of the pressure.

The House of Lords held that the money had been paid under economic duress and was recoverable.
Use this case for: economic duress arises where illegitimate pressure leaves the victim with no practical choice but to submit.