Areas of applicable law: Contract law – Duress – Economic duress.
Main arguments in this case: An agreement that has been made by pressurising the other party cannot be legally binding in a contract.
The fact of the case: The case involved a haulage company called Atlas Express and a small manufacturing company Kafco. The manufacturing company had secured a contract with Woolworth under which they had to supply goods to the various Woolworth stores around the country. The manufacturing company signed a contract with Atlas Express to deliver the goods to the stores. The parties agreed that the deliveries would be in small boxes and the delivery charge would be £1.10 per box. However, what they did not specify at the time of agreement was the quantity of boxes per load.
The problem started when the haulage company found out that the delivery was going to be in small quantities as the first delivery only had 200 boxes. It was quite below the quantity of what the haulage company was expecting (their expectation was in the region of 400 boxes). The haulage company demanded more money per load or they would not deliver the consignments.
Kafco had no other option but to agree to pay extra money to the haulage company. There were several reasons for that; they were a small company who had just secured a big order and it was imperative for the business that they delivered on time. Moreover, it was also difficult to find another haulage company in the short span of time they had. Most importantly, if they had failed to deliver the goods in time, that would not only have jeopardised their future dealings with Woolworth, Kafco could also be sued for breach of contract. So they agreed to pay the extra money.
However, when the time came to pay the extra money, Kafco refused and argued that agreement to pay additional money was made under economic duress.
The court decided in favour of the manufacturing company and held that the agreement was indeed made under economic duress as there was illegitimate pressure on Kafco and under the circumstances there was no other way for the company but to agree.