Limitations of Economic Reasoning

Question: Discuss about the Limitations of Economic Reasoning. Answer: introdution: A shipbuilder entered into an agreement with a builder to build a tanker for North Ocean Tankers. The contract was in US dollars and it contained no provisions relating to currency fluctuations. While the construction of the ship was halfway, the currency value diminished its currency by 10 percent. Since the builder was making a loss in the contract, it demanded an extra 3 million dollars or else it would not proceed with the construction of the work. The buyer agreed to pay extra. However, the buyer did not commence an action to recover extra payment until nine months of delivery. Issue: Relying on the facts, the issue that shall be discussed here is, whether the buyer will success in recovering the excess or not? Relevant Rules: Consideration is an act or promise of one of the parties to the contract, to pay the price for which the promise is bought. Consideration makes a contract enforceable and is regarded as crucial for all the contracts that happen between two parties of the contract (Roberts 2014). A contract without consideration is deemed as unenforceable and void in the court of law. The doctrine of consideration is an idea of reciprocity wherein both the parties to the contract are benefitted from the contract. With the doctrine of consideration, there is an assurance that both the parties to the contract will profit from the contract and there will be a subordinate possibility that only one of the parties will take benefit from it (Fried 2015). Thus, the doctrine of consideration in contract law is regarded as a special element that should be given special care. In the landmark case of Universe Tankships Inc. of Monrovia v International Transport Workers Federation, the issue was whether the plaintiff had the authority of recovering the amount that was paid to the defendant. The defendant was giving unreasonable threat to the plaintiff that they would not release the ship if the plaintiff would not pay the reasonable amount to them (Bayern 2015). The moment when the defendant was threatening the plaintiff, the plaintiff agreed to pay the amount to the defendant, nevertheless later they filed a suit of recovery of the price in excess. The plaintiff succeeded in his claim. In the case of Senitel, a Liberian ship was black listed by the trade union. As a result of the black listing, the tug boats became inaccessible and could not sail. Consequently, it followed shocking outcome. The trade association strategized payment for their fund as a requirement that they would remove the ship from the blacklist. The owner of the Senitel agreed to pay the money then, however, later the plaintiff filed a suit for recovery and he won the case, as the money was an induced influence of economic duress (Feldman 2015). Another landmark case of Williams v Roffey Bros Nicholls (Contractors) Ltd, involved the issue of doctrine of consideration induced with economic duress. In this case, an agreement existed between sub contractor and principal contractor for doing some work related to carpentry. The original consideration of the contract was set for 20000 pounds. However, the sub contractor realized that the price of the contract was underestimated. The sub contractor threatened that if the principal contractor would not be paying to him the requisite amount he would stop working on the carpentry. The principal contractor got afraid of the penalty he may have to pay for delay in the sub contractors work. He agreed to pay the demanded price to the sub contractor. Later when the principal contractor filed a suit against the sub contractor, he won the case on the grounds that consideration was induced with economic duress and he received the price he paid in excess (Boardman 2013). Application: Likewise, in the given case study, there were chances that the North Ocean Tankers might suffer a loss if the builder denied construction of the tanker. Thus, in this case the doctrine of consideration was invoked. In the given case study, there was existence of two contracts; one was the initial contract between the shipbuilder and the tanker and the second contract was due to lack of funds for completion of the building of the tanker. Like it was discussed earlier that in the case of Universe Tankships Inc. of Monrovia v International Transport Workers Federation, Senitel and Williams v Roffey Bros Nicholls (Contractors) Ltd economic duress was involved. In the same way economic duress was also discussed in this case study as well. According to the doctrine of economic duress, a contract is considered as void if it is proven that a party entered into a contract without having sufficient options to some other recourse (McKendrick 2014). Economic duress involves an element of wrongf ul threat or an unlawful action inducing the other person to form contract. An agreement can be declared as useless if the innocent party is able to prove substantial evidence that he was induced in forming contract with the other party. The pressure should be an outcome of unlawful threat and unlawful action. The doctrine of economic duress first evolved in the case of Siboen. The Privy Council held that if any contract is made under the influence of economic duress the contract should be deemed to become void thus making the doctrine of consideration useless. However, it is an arguable matter as both the parties have the intention of creation of legal relation. This creates a binding element to the contract (Thampapillai, Tan and Bozzi 2012). Conclusion: Hence, conclusively, it may be stated that in the given case study, there was use of economic duress and there was existence of two contracts. In the first contract, the initial consideration existed while in the second contract there was existence was economic duress that made the initial contract inactive. Hence, the plaintiff may successfully recover the amount from the defendant as it involved the use of economic duress. References: Ahdar, R., 2014. Contract doctrine, predictability and the nebulous exception.The Cambridge Law Journal,73(01), pp.39-60. Bayern, S.J., 2015. The Limitations of Economic Reasoning in Analyzing Duress.Minnesota Law Review,99(141). Boardman, C.M., 2013.Considering consideration: a critical and comparative analysis of the doctrine of consideration in the Anglo-Canadian common law(Doctoral dissertation, University of British Columbia). Feldman, S.W., 2015. Pre-Dispute Arbitration Agreements, Freedom Of Contract, And The Economic Duress Defense: A Critique Of Three Commentaries.Clev. St. L. Rev.,64, p.37. Fried, C., 2015.Contract as promise: A theory of contractual obligation. Oxford University Press, USA. McKendrick, E., 2014.Contract law: text, cases, and materials. Oxford University Press (UK). Roberts, M., 2014. Teat v Willcocks: Consideration and Variation Contracts Revisited.New Zealand Business Law Quarterly,20, pp.79-87. Thampapillai, D., Tan, V. and Bozzi, C., 2012.Contract law: text and cases. Oxford University Press.