CTN Cash & Carry Ltd v Gallagher Ltd [1994]

CTN Cash & Carry Ltd v Gallagher Ltd [1994] 4 All ER 714

Economic duress; monopolies

(276 words)

Facts

CTN contracted with Gallagher for the purchase of cigarettes. Gallagher delivered the cigarettes to the wrong address where they were stolen before Gallagher could rectify the mistake.

Issues

Gallagher demanded CTN to pay for the cigarettes despite those not being delivered due to Gallagher’s own mistake. Gallagher argued that the risk had passed to CTN already when the goods were delivered to the (wrong) warehouse. Gallagher threatened to stop CTN’s credit facilities for future dealings if CTN failed to pay. To prevent the loss of its credit facilities CTN paid. However, CTN sued for repayment on grounds of economic duress – in other words, CTN was of the view that the contract was voidable due to duress and inequality of bargaining power.

Decision/Outcome

The Court found against CTN. There is no doctrine of inequality of bargaining power in the commercial context under common law, so cases have to be decided on their individual facts. The Court based its decision on three factors here. First, the agreement/dealings in question took place between two commercial entities, two companies, and not between a supplier and a consumer. Second, Gallagher had the right to refrain from future dealings with CTN for any reason it chose. Thus, because a decision to discontinue dealings with CTN was lawful, it was also lawful for Gallagher to threaten CTN with credit withdrawal in the absence of payment of an invoice that was already due. Third, and most important, Gallagher acted in good faith when it demanded payment from CTN – it genuinely felt entitled to the payment. In the absence of malice or any other form of bad faith, economic duress could not be established.