Atlas Express v Kafco (Importers & Distributors) Ltd [1989]
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Atlas Express v Kafco (Importers & Distributors) Ltd [1989] QB 833 is an English contract law case that dealt with issues related to duress in the context of a contractual dispute.
Kafco Ltd had a contract to supply Woolworths with baskets, and there was a trading agreement in place with Atlas Express for the delivery of these baskets for at least six months. However, Atlas Express realised that it had underestimated the size of cartons to be carried, resulting in increased delivery costs. Despite this, Kafco was unwilling to agree to a variation in the price. In response, on November 18, 1986, Atlas Express sent an empty truck to Kafco along with a letter stating that unless a higher charge was agreed upon, the truck would leave empty. Given that Kafco was heavily reliant on the contract and faced the risk of financial difficulty without it, they felt compelled to sign. Later, Kafco refused to pay and argued that the contract was entered into under economic duress, and there was no new consideration.
Tucker J, in delivering the judgment, held that economic duress was present in this situation, rendering the contract voidable. He noted that Mr Armiger of Kafco signed the contract unwillingly and under compulsion. Mr Armiger lacked bargaining power, and the renegotiation was not considered a genuine arm's-length transaction in which he had a free and equal say.
Tucker J distinguished economic duress from commercial pressure, emphasising that commercial pressure, on its own, is not sufficient to vitiate consent. He acknowledged that the borderline between economic duress and commercial pressure may be indistinct in some cases. However, in this particular case, the circumstances surrounding the contract negotiation led the court to find that economic duress was at play.
This case underscores the court's scrutiny of the circumstances under which a contract is entered into, especially when one party holds a position of significant power or leverage, putting the other party under duress. The court's decision reinforces the principle that contracts entered into under economic duress are voidable, allowing the party subjected to duress to avoid the contract.
Kafco Ltd had a contract to supply Woolworths with baskets, and there was a trading agreement in place with Atlas Express for the delivery of these baskets for at least six months. However, Atlas Express realised that it had underestimated the size of cartons to be carried, resulting in increased delivery costs. Despite this, Kafco was unwilling to agree to a variation in the price. In response, on November 18, 1986, Atlas Express sent an empty truck to Kafco along with a letter stating that unless a higher charge was agreed upon, the truck would leave empty. Given that Kafco was heavily reliant on the contract and faced the risk of financial difficulty without it, they felt compelled to sign. Later, Kafco refused to pay and argued that the contract was entered into under economic duress, and there was no new consideration.
Tucker J, in delivering the judgment, held that economic duress was present in this situation, rendering the contract voidable. He noted that Mr Armiger of Kafco signed the contract unwillingly and under compulsion. Mr Armiger lacked bargaining power, and the renegotiation was not considered a genuine arm's-length transaction in which he had a free and equal say.
Tucker J distinguished economic duress from commercial pressure, emphasising that commercial pressure, on its own, is not sufficient to vitiate consent. He acknowledged that the borderline between economic duress and commercial pressure may be indistinct in some cases. However, in this particular case, the circumstances surrounding the contract negotiation led the court to find that economic duress was at play.
This case underscores the court's scrutiny of the circumstances under which a contract is entered into, especially when one party holds a position of significant power or leverage, putting the other party under duress. The court's decision reinforces the principle that contracts entered into under economic duress are voidable, allowing the party subjected to duress to avoid the contract.
