CTN Cash and Carry Ltd v Gallaher Ltd
Court of Appeal
Citations:  EWCA Civ 19,  4 All ER 714.
The claimant operated a ‘cash and carry’ business. The defendant was their supplier. The defendant had absolute discretion in granting the claimant access to credit facilities. They threatened to cut off the claimant’s line of credit unless they were paid a sum of money. The defendant honestly, but incorrectly, believed that they were owed the money.
If the claimant refused to pay, this would seriously jeopardise their business since the defendant effectively had a monopoly on the market. The claimant paid the sum, but later sought to have the transaction set aside for economic duress.
- Did the defendant exert illegitimate pressure on the claimant?
The Court of Appeal held that the transaction was valid. The court would not set it aside for economic duress. Relevant factors included:
- The defendant believed in good faith that the claimant owed them the money.
- The fact that the defendant was under no legal obligation to offer access to credit services;
- The mere fact that the defendant was in a dominant position was insufficient on its own to turn legitimate pressure into illegitimate pressure.
This Case is Authority For…
The mere fact that the defendant used lawful means to exert pressure does not necessarily preclude the defence of economic duress.
Whether the defendant is acting in good faith in exercising the pressure is a critical factor in determining whether it is legitimate or not.
Steyn LJ noted that English common law does not recognise any doctrine based on inequality of bargaining power in commercial dealings.