Are businesses allowed to bully?
September 2012
Some businesses like to bully other businesses into agreeing contracts. Usually this is allowed – the bigger stronger player or the one with the other up a barrel has more commercial muscle and is generally allowed to use it. But you can sometimes go too far, as shown by a recent case. A freight company (Progress) contracted to deliver another company’s (Tube’s) scrap metal. It breached the contract by using a different ship from the one agreed, and the goods arrived late. The buyer insisted on a price reduction. Under severe time pressure to agree the release of the goods, Tube effectively had no option but to accept a ‘take it or leave it’ settlement deal where it paid Progress a bit less, but was forced by Progress to agree to waive all claims for loss or damage. The arbitration judge set the settlement deal aside because Tube entered into it under duress.
In most ‘similar’ cases I have been involved with where my clients are the goodies, usually involving the other side effectively saying that it will rip up the existing contract but will continue dealing with my client if it agreed a less favourable contract, my clients have been keen to avoid litigation and have agreed to negotiate a new contract. I then worked in tandem with my litigation partners who tried to keep the legal threats up while I helped put together the revised contract. As is so often the case, the negotiating position largely depends on the client’s willingness to take threatened alternative action (eg go to court) if the other side refuses to agree things.
Of course, the baddies aren’t necessarily that bad. Sometimes circumstances change unexpectedly, making the long-term contract you entered into very onerous, and you have to do something about it.
Personally, I get much more satisfaction working on ‘win-win’ deals negotiated in an open and transparent way with each side trying to address the other’s legitimate interests and which (in a long-term deal) are designed to lead to a good sustainable business relationship.
(Case: Progress Bulk Carriers Ltd v Tube City IMS LLC [2012] EWHC)
