Case No 15
Case Name - Carillion Construction Ltd v Felix (UK) Ltd
Year 2000
Subject Matter - Economic Duress
It is more common than generally thought that agreement is secured by one party to a contract holding the other to financial ransom. This is often the case where agreement is secured by the large organisation putting financial pressure on a smaller one. Occasionally the roles are reversed and the small organisation is able to exert financial pressure on a large organisation as a way of securing agreement. Carillion a large contractor found itself in that position when dealing with Felix a much smaller organisation in connection with the construction of an office building for Hammerson UK Properties. Carillion was the main contractor and Felix the subcontractor engaged to manufacture,supply and erect the external cladding.
Work on the cladding erection was commenced by Felix in September 1999. This occurred before a subcontract had been entered into which was not concluded until 14th January 2000. Complaints were made by Carillionconcerning delays which they considered had been caused by Felix due to the late delivery of cladding panels. Disputes began to arise between the parties as to the likely final value of the work being undertaken by Felix. In particular they were experiencing difficulties in reaching agreement as to what constituted variations to the work being undertaken by Felix and their value. Much of the work which Felix claimed to be extra Carillion considered to be part of the original subcontract package.
Felix anxious to secure the agreement of Carillion resorted to what may be considered as strong arm tactics. They refused to make deliveries until agreement was reached. Carillion became concerned that there could be a delay to the completion of the main contract works if matters were not resolved. If this occurred it could expose them to the payment of liquidated damages. By the end of March 2000 a significant difference as to the final sum to be paid to Felix had arisen. Carillion considered that Felix were entitled to the total sum of £2.756m which would become payable to Felix once it had completed its work. Felix on the other hand considered at that stage that their financial entitlement would be £3.119m. Carillion felt under great pressure to agree a final account for the work undertaken by Felix to ensure they completed their work.
The parties ultimately reached agreement to a sum of £3.2m which was expressed in full and final settlement. Carillion indicated their displeasure at being forced into the agreement and reverted to their original figure once deliveries of all cladding had been made. Felix brought an action to try and enforce the agreement. The court however considered that the pressure applied by Felix was illegitimate and without justification and refused to enforce the terms of the agreement.
This case illustrates that courts are not prepared to enforce agreements reached by coercion using financial pressure. However financial pressure in itself is not sufficient to have the agreement set aside; coercion must also be present.