Monopolies and Economic Duress – Court of Appeal Test Case

Contracts that are entered into as a result of economic duress may not be worth the paper that they are written on – but what if the pressure brought to bear arises from lawful use of a monopoly position? The Court of Appeal tackled that issue in a guideline case concerning the travel industry.

A small UK-based travel agency derived almost all of its business from flying clients to and from a particular country. It acted as a ticket-selling agent for an airline which enjoyed a monopoly in respect of direct flights between that country and Britain. After the airline gave notice that its contract would be terminated, the agency signed a new agreement, by which it waived its claims for commissions that it was alleged to be owed by the airline under their prior arrangements (the waiver).

After the agency subsequently launched proceedings against the airline with a view to recovering past commissions, the latter relied upon the waiver. A judge, however, found that the waiver was of no effect because it been entered into under economic duress. That was on the basis that the agency had no practical alternative but to accept the waiver if it wished to remain in business.

In upholding the airline’s challenge to that decision, the Court noted that the control of monopolies is a matter for Parliament, not the judiciary.  Although the outcome of the case could be viewed as harsh on the agency, it would be contrary to established precedent to develop the law relating to economic duress in a way which would fetter the lawful use of a monopoly position.

The Court noted that, after the waiver was disapplied by the judge, the agency had succeeded in most, but not all, of its financial claims against the airline. The latter had arguable grounds for resisting all but one of those claims. Whatever moral view might be taken of the pressure applied by the airline, no unlawful act or bad faith on its part had been established.

Times Travel (UK) Limited v Pakistan International Airlines Corporation. Case Number: A3/2017/2065