#consideration #contract

Facts: By a shipbuilding contract the builders agreed to build a tanker for the owners, for $30,950,000 payable in five instalments. The contract required the builders to open a reverse letter of credit for the repayment of instalments in the event of their default. After the first instalment had been paid, the dollar was devalued and the builders threatened not to deliver unless the remaining instalments were increased by 10 per cent. The owners were advised that there was no legal basis for the claim, but were anxious that they might lose a favourable charter with Shell if the ship were not finished on time, and in a telex dated 28 June 1973, they agreed to the increased payments, ‘to maintain an amicable relationship and without prejudice to our rights.’ The builders did this and delivered the tanker; the owners took delivery without protest. Some eight months later the owners claimed the return of the 10 per cent extra. It was suggested that they did not seek the return of the money sooner because they were concerned about the delivery of a sister ship (The Atlantic Baroness) also being built for them. However, the arbitrators found that this fear was groundless. It was held that although the agreement to pay the extra money might initially have been voidable for economic duress, the fact that the shipping company waited eight months before taking any action, meant they had affirmed it.

North Ocean Shipping Co Ltd v Hyundai Construction Co Ltd and Another (The Atlantic Baron) [1979] QB 705