• In the case of CTN cash and carry v Gallagher 1994 4 all er 714, it was held that there is no extension of the categories of economic duress to create lawful act duress in a commercial context.
  • Parties are free to carry their contracting terms and withdraw credit facilities without this being classed as duress.

Facts of the Case

  • (C) a company which ran a cash and carry warehouse, bought cigarettes in bulk from G, who delivered them by mistake to the wrong address.
  • Before the goods could be redelivered, they were stolen.
  • G invoiced C for the goods, believing that the risk in the property had passed to C and then threated to cut of C’s credit facilities if it did not pay.
  • C did pay but later brought an action claiming repayment on the grounds that it had paid because of economic duress. This was dismissed

Issues in CTN cash and carry v Gallagher 1994 4 all er 714

  • Can C successfully claim economic duress?

Held by Court of Appeal

  • Appeal dismissed

Steyn LJ

  • Held that the economic duress could not be proved in the context of commercial dealings carried out at arms length between the companies, especially as G believed its demand for payment to be lawfully held.
  • “It is important to have in mind that the sole issue raised by this appeal and argued before us was duress. The plaintiff claims payment was made by it under duress and is recoverable accordingly. I agree, for the reasons given by my Lord Steyn L.J., that that claim must fail. When the defendant company insisted on payment, it did so in good faith. It believed the risk in the goods had passed to the plaintiff company, so it considered it was entitled to be paid for them. The defendant company took a tough line. It used its commercial muscle. But the feature underlying and dictating this attitude was a genuine belief on its part that it was owed the sum in question. It was entitled to be paid the price for the goods. So, it took the line: the plaintiff company must pay in law what it owed, otherwise its credit would be suspended.
  • Further, there is no evidence that the defendant’s belief was unreasonable. Indeed, we were told by the defendant’s counsel that he had advised his client that on the risk point the defendant stood a good chance of success. I do not see how a payment demanded and made in those circumstances can be said to be vitiated by duress.”