This shows that it is the scale of operation, rather than the actual amount at
stake, which is significant, as Kafco was a small company who would have
been ruined financially had the larger company, Atlas Express, been able to
insist on the extra payment. The courts found economic duress to exist in
the recent case of Carillion Construction Ltd v Felix (UK) Ltd (2000) when
Carillion were found to have agreed to pay an excessive amount to Felix in
order to avoid a liquidated damages clause.
The legal effect of common law duress being proved is that the contract is
void. However, economic duress has been developed under the equitable
powers of the courts, and the courts normally say that any contract made in
Duress and undue influence 153Williams v Roffey (1990)
The full facts of this case are in Chapter 3 (p. 54). The defendant
building firm had offered to pay the plaintiff carpenters extra money to
complete work, but had later refused to pay them. When sued, amongst
other things they claimed economic duress. However, there was no
evidence of economic duress, merely the normal commercial pressure
evident in the building trade at that time. The courts were clearly
prepared to consider economic duress, but none was found in this
particular instance.Atlas Express v Kafco (1989)
Kafco was a small firm of basketware manufacturers who had agreed
to supply Woolworths with a large quantity of goods for their seasonal
trade. As Kafco did not have enough of their own transport, they
contracted with the Atlas Express to transport the goods for an agreed
price. Atlas Express, however, found later that they had underestimated
their costs, and found more lucrative work elsewhere. They told Kafco
that they would not deliver any more unless Kafco paid nearly twice the
amount originally asked. Kafco wanted to maintain their contract with
Woolworths, and had taken on extra workers and had increased their
working capacity to produce the required quantity, so had no practical
alternative, but to agree, under pressure, to pay Atlas Express. Kafco
later refused to pay the extra money to Atlas Express, claiming
economic duress. It was held that the agreement for the extra money
was made under duress and was not therefore binding.Can you think of any other situations where a person or company may be
very badly affected financially by a threat to breach a contract?