Times Travel (UK) Ltd Nottingham Travel (UK) Ltd v Pakistan International Airlines Corporation

Economic duress may arise from lawful conduct where a party uses illegitimate pressure, coupled with a demand substantially beyond normal commercial bargaining, to remove the other party’s practical choice.

The causation test is whether the claimant would have entered into the contract but for the pressure. The pressure need not be the sole or predominant cause. A collateral contract may arise from a pre-contractual promise intended to induce entry into the principal contract. A future assurance may be enforceable contractually even where it is not an actionable misrepresentation.

Under Resolution 818g, remuneration may be commission or other remuneration, but a change must be notified in advance in writing. Where commission is payable, it is calculated on the whole of the applicable fares, including fuel surcharge.

The claimants were IATA-approved travel agents appointed by Pakistan International Airlines Corporation. They alleged that PIAC withheld commission, reduced their ticket allocations and threatened termination unless they entered into a new agreement releasing accrued claims.

The new agreement provided for a six-month incentive scheme and released claims for earlier commission. The claimants alleged collateral contracts, misrepresentation and economic duress. They also challenged the release under the Unfair Contract Terms Act 1977.

The central issues were the parties’ pre-existing commission rights, the effect of the new agreement, whether promises of continuing incentives were binding, and whether PIAC’s conduct constituted economic duress.

1. Commission and fuel surcharge. Resolution 818g did not require commission to be paid, but it required remuneration to be established in advance and communicated in writing. PIAC had not given adequate written notice replacing commission with Net Sale Remuneration. The claimants therefore remained entitled to 9% Basic Commission, including commission on the fuel surcharge element. Fuel surcharge formed part of the applicable fares. The court followed Association of British Travel Agents Ltd v British Airways plc [2000] 2 All ER 204, Leonie’s Travel Pty Ltd v Qantas Airways Ltd [2010] FCAFC 37 and Global Service Travel Agency v PIAC 13 December 2012.
2. Collateral contracts. PIAC’s promises that ticket allocations would be restored and that incentive arrangements would continue were sufficiently certain. TT was entitled to incentive commission for 2013. NT was entitled to incentive commission for 2013 and the first six months of 2014, together with the benefits obtained by the APTA litigating agents.
3. Economic duress. The court adopted the test in DSND Subsea Ltd v Petroleum Geo Services ASA [2000] BLR 530: illegitimate pressure, causative significance, and compulsion or lack of practical choice. Lawful conduct can constitute illegitimate pressure in appropriate circumstances. TT established duress because PIAC used termination and severe ticket restrictions to procure waiver of genuine accrued claims. NT did not establish duress because its collateral contract preserved the relevant benefits obtained by the APTA agents and thereby removed the objectionable effect of the waiver.
4. Remedy and disposition. TT was required to elect whether to affirm or rescind the new agreement. If it affirmed, it could claim the contractual incentives but not earlier commission. If it rescinded, it could claim earlier commission subject to limitation and receive post-termination remuneration on a quantum meruit basis. NT remained bound by the new agreement and was entitled to Net Sale Remuneration, the contractual incentives and the APTA benefits. The UCTA challenge failed.