South Africa: Driving A Hard Bargain – A Case of Applying Economic Pressure to an Agreement

The Supreme Court of Appeal recently examined the distinction to be drawn between agreements concluded as a consequence of normal and acceptable economic bargaining on the one hand, and unconscionable and unlawful duress on the other hand.

In the matter of Medscheme Holdings (Pty) Ltd v Bhamjee, Bhamjee, a medical practitioner had submitted false and excessive claims to Medscheme for direct payment. These claims were paid, but when Bhamjee's conduct was discovered, he was confronted and persuaded to sign acknowledgements of debt in terms of which he agreed to repay monies over-claimed.

Bhamjee argued that he had signed the acknowledgements of debt under duress, in particular, the threat that direct payments to him would be discontinued thereby bringing about the collapse of his practice.

There was no doubt that the acknowledgements of debt were signed as a result of the fear generated by Medscheme, expressly or implied, that direct payments would discontinue with dramatic economic consequences for Bhamjee. The Court, however, found that these circumstances were nothing more than the product of a bargaining process in terms of which Medscheme exercised the force of its discretion whether to allow direct payments to medical practitioners, or not. In other words, this process of hard bargaining was not equivalent to duress even where the bargain struck was the product of an imbalance in bargaining power. As a trade off for continued direct payments to him, Bhamjee, within the bargaining process, agreed to repayment of monies over-claimed, and signed the acknowledgements of debt to this effect.

There is no limit to the instances in which commercial agreements are struck within the context of fierce economic bargaining. The ability to attack the validity of such agreements for want of free exercise of will as a result of duress has been placed in perspective by the Supreme Court of Appeal which has confirmed that, in our law, unlike in the United Kingdom and the USA, economic pressure in the normal sense does not amount to duress allowing for the negation of an agreement.

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