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North Ocean Shipping Co. V. Hyundai Constructions Notes

BCL Law Notes > Restitution of Unjust Enrichment BCL Notes

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NORTH OCEAN SHIPPING CO. LTD. V. HYUNDAI SHIPPING LTD. FACTS A shipbuilding company entered into a contract by which they agreed to build a tanker for ship owners for a fixed price in United States dollars, payment to be made in five instalments. The company agreed to open a letter of credit to provide security for repayment of instalments in the event of their default in the performance of the contract. After the owners had paid the first instalment, the United States dollar was devalued by 10 per cent. upon which the company put forward a claim to an increase of 10 per cent. in the remaining instalments. The owners, asserting that there was no legal ground on which the claim could be made, paid the second and third instalments without the additional 10 per cent., but the company returned both instalments. The owners suggested that the company should subject their claim to arbitration, but they declined to do so, and requested the owners to give them a final and decisive reply to their demand for an increase by a certain date, failing which they would terminate the contract. The owners, who at that time were negotiating a very lucrative contract for the charter of the tanker, replied that although they were under no obligation to make additional payments, they would do so "without prejudice" to their rights, and requested that the company arrange for corresponding increases in the letter of credit. The company agreed to do so in June 1973, and the owners remitted the remaining instalments, including the 10 per cent. increase, without protest. The tanker was delivered to the owners in November 1974 but it was not until July 1975 that the company knew that the owners were claiming the return of the extra 10 per cent. paid on the four instalments with interest and the matter was referred to arbitration. HOLDING Mr. Longmore's alternative argument that the increased price agreement and the additional payments made in consequence thereof resulted from a form of duress. Recognising Economic Duress Perhaps their greatest importance, however, is the quotation in the first mentioned from the judgment of Isaacs J. in Smith v. William Charlick Ltd. (1924) 34 C.L.R. 38, 56 where he said:

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