Atlas Express Ltd v Kafco (Importers and Distributors) Ltd 10 Jan 1989 [1989] QB 833, QBD

Facts

Kafco (Importers and Distributors) Ltd, a small company importing basketware, secured a major contract to supply goods to Woolworths plc. They engaged Atlas Express Ltd, a national road carrier, to handle the distribution to Woolworths’ retail outlets. An Atlas manager inspected Kafco’s goods and, based on a visual assessment, quoted a carriage rate of £1.10 per carton, anticipating that each of Atlas’s trailers could hold between 400 and 600 cartons. A contract was concluded on this basis. However, after the first collection, the Atlas driver discovered that due to their size, only 200 cartons could fit onto a trailer. This rendered the agreed rate commercially unviable for Atlas.

Consequently, an Atlas representative presented Kafco’s manager with a new agreement stipulating a minimum charge of £440 per trailer. This was delivered via an empty trailer sent to Kafco’s premises with an ultimatum: either sign the new agreement or the trailer would be driven away empty, leaving Kafco’s goods undelivered. Kafco’s manager protested but knew that failing to meet the delivery schedule for the crucial Woolworths contract would be ‘catastrophic’ for his company. Given the time constraints, finding an alternative carrier was impossible. Under this pressure, he signed the revised agreement, stating he did so ‘very reluctantly’. Kafco subsequently paid the invoice amounts based on the original agreed rate and refused to pay the additional sums demanded. Atlas Express sued for the difference.

Issues

The court had to determine two primary legal issues:

1. Consideration

Was there any valid consideration provided by Atlas Express for Kafco’s promise to pay the higher carriage charge? Under the established doctrine of Stilk v Myrick (1809) 2 Camp 317, performance of an existing contractual duty is not, in itself, good consideration for a new promise from the other party.

2. Economic Duress

If consideration was found to exist, was Kafco’s consent to the new agreement procured by economic duress, thereby rendering the agreement voidable?

Judgment

Tucker J, sitting in the Queen’s Bench Division, found in favour of the defendants, Kafco. He held that the revised agreement was unenforceable on both grounds of lack of consideration and economic duress.

Lack of Consideration

The judge held that the agreement to pay a higher price failed for want of consideration. Atlas was already under a contractual obligation to deliver Kafco’s goods at the originally agreed price. In promising to pay more, Kafco received nothing in return to which they were not already entitled, namely the delivery of their goods. Atlas was merely performing its existing duty. Therefore, there was no new consideration to support the variation of the contract.

Economic Duress

The central pillar of the judgment was the finding of economic duress. Tucker J held that Kafco’s signature on the revised agreement did not represent a voluntary act. He applied the principles established in cases such as Pao On v Lau Yiu Long [1980] AC 614, which require a ‘coercion of the will that vitiates consent’.

The court found that Atlas had applied illegitimate pressure. The threat to refuse to perform the contract was a clear breach, made at a time when Atlas knew Kafco was heavily reliant on them to fulfil the time-sensitive and commercially vital Woolworths contract. Kafco had no practical alternative but to acquiesce. Tucker J found that the defendants had been placed ‘over a barrel’. He concluded that Kafco’s agreement was not a genuine renegotiation but a capitulation to compulsion. His reasoning is captured in the following key passage:

When the defendants’ manager signed the agreement he did so unwillingly and under compulsion. He believed on reasonable grounds that it would be very difficult, if not impossible, to find an alternative carrier… In my judgment, the defendants’ apparent consent to the agreement was induced by pressure which was illegitimate and I find that it was not a consent which was free and voluntary. In my judgment, that is a classic case of economic duress.

Implications

The case is a significant authority on the doctrine of economic duress. It serves as a clear illustration that a threat to breach a contract can amount to illegitimate pressure sufficient to vitiate consent, particularly where one party is knowingly exploiting the commercial vulnerability of the other. The decision underscores the court’s role in policing contract variations to prevent extortionate behaviour. While the later Court of Appeal decision in Williams v Roffey Bros & Nicholls (Contractors) Ltd [1991] 1 QB 1 relaxed the strict rule on consideration by recognising a ‘practical benefit’ as sufficient, *Atlas Express* remains important. It demonstrates that even if a practical benefit (and thus consideration) could be found, the separate doctrine of economic duress provides a vital mechanism to render an agreement made under illegitimate pressure unenforceable. It highlights that freedom of contract does not extend to allowing a party to coerce another into a new bargain by threatening to break the old one.

Verdict: Judgment for the defendants (Kafco). The claim by the plaintiffs (Atlas Express) for the additional carriage charges was dismissed.