CTN Cash & Carry v. Gallagher (1994) — Economic Duress in Commercial Deals

Cigarettes were delivered to the wrong warehouse and got stolen. The supplier demanded payment anyway and said it would stop future credit if unpaid. CTN paid, then sued for economic duress. The Court said: No duress. In business, a lawful threat to end future credit, made in good faith, is not illegitimate pressure.

• No general rule of “unequal bargaining power” in common law for traders.
• Each case turns on facts: lawfulness + good faith matter.

1. Was CTN’s payment the result of economic duress caused by Gallagher’s threat to withdraw future credit?

• No general doctrine of inequality of bargaining power for commercial parties at common law.
• Economic duress needs illegitimate pressure leaving no practical choice. Lawful, good-faith pressure usually does not qualify.

The Court of Appeal held there was no economic duress. Gallagher’s lawful threat to stop future credit, made in a good-faith dispute over liability, did not count as illegitimate pressure. The payment stood.

• No general doctrine of inequality of bargaining power for commercial parties at common law.
• Lawful act threats (like ending credit) given in good faith do not amount to economic duress.

The case draws the line between hard bargaining and duress. It guides businesses on credit policies and disputes: if your stance is lawful and in good faith, pressure alone won’t void a payment.

Mnemonic: “LAG” — Lawful • Act • Good faith

1. Lawful: Is the threatened act lawful (e.g., stop future credit)?
2. Act: Is it about future dealings, not unlawful seizure?
3. Good faith: Genuine belief debt is due → usually no duress.

Economic Duress

Unfair pressure that forces a party to agree, usually by illegitimate threats leaving no real choice.

Lawful-Act Duress

Rare category where even lawful threats may be duress—needs strong proof of illegitimacy.

Good Faith

Honest belief in one’s legal right—helps show pressure was not illegitimate.