“Lawful commercial threats cannot normally constitute economic duress despite business pressure”
The Court of Appeal held that CTN could not recover the payment. Gallaher's threat to withdraw credit was lawful and did not constitute economic duress, despite the commercial pressure it created.
Gallaher mistakenly delivered cigarettes to the wrong CTN warehouse, where they were stolen. Gallaher demanded payment and threatened to withdraw CTN's credit facilities if payment was refused. CTN paid but later claimed the money back alleging economic duress.
Can a lawful threat to withdraw credit facilities constitute economic duress, and what is the relationship between the lawfulness of threatened action and the legitimacy of pressure?
Steyn LJ held that where parties are in an ongoing commercial relationship, threats to withdraw that relationship are generally lawful even if commercially damaging. The lawfulness of the threatened action is highly relevant to whether pressure is illegitimate. Economic duress requires illegitimate pressure, not merely pressure that is commercially disadvantageous.
This case is crucial for understanding the boundaries of economic duress in commercial relationships. It establishes that lawful threats generally cannot ground duress claims, maintaining space for legitimate hard bargaining. Essential for students studying the limits of duress doctrine and commercial law principles.
Lawful threats, particularly in ongoing commercial relationships, cannot generally constitute economic duress even if they create substantial commercial pressure on the other party.
The Court of Appeal held that threatening to withdraw lawful credit facilities did not constitute economic duress, despite the commercial pressure this created.
It establishes important limits on duress doctrine, showing that lawful commercial pressure cannot ground duress claims and preserving space for legitimate hard bargaining.
The court noted that different considerations might apply in cases involving one-off transactions as opposed to ongoing commercial relationships where parties have legitimate interests to protect.
OSCOLA Citation
CTN Cash and Carry Ltd v Gallaher Ltd [1994] 4 All ER 714 (CA)
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[2026] UKSC 1
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