Atlas Express Ltd v Kafco (Importers & Distributors) Ltd is an important English contract law case dealing with the doctrine of economic duress and the requirement of consideration in contract variations. Decided in 1989, the case clarifies when commercial pressure becomes illegitimate and capable of vitiating consent. The judgement is particularly significant for understanding how the courts distinguish between lawful commercial pressure and unlawful economic duress in contractual relationships.
Background of the Dispute
Kafco (Importers & Distributors) Ltd was a company engaged in the business of importing and supplying basket ware. It had entered into a contract to supply baskets to Woolworths, a major retailer. In order to fulfil this supply obligation, Kafco required a reliable delivery service.
To meet this need, Kafco entered into a trading agreement with Atlas Express Ltd, a haulage company, under which Atlas would collect and deliver the baskets to Woolworths’ retail outlets. The agreement was intended to operate for a period of at least six months. At the time the contract was entered into, the delivery charges were agreed on the basis of Atlas’s own assessment of the work involved.
Facts of Atlas Express Ltd v Kafco (Importers & Distributors) Ltd Case
After the agreement had commenced, Atlas Express Ltd realised that it had underestimated the size of the cartons it was required to transport. As a result, Atlas found that the deliveries were more expensive than it had initially anticipated. Atlas therefore attempted to renegotiate the contract by seeking higher payment for its delivery services.
Kafco refused to agree to any increase in the agreed price. In response, on 18 November 1986, Atlas sent an empty lorry to Kafco’s premises. Along with the lorry, Atlas delivered a letter stating that unless Kafco agreed to pay the higher charges, the lorry would leave empty and Atlas would not carry out the delivery.
At that point, Kafco was in a vulnerable position. Its ability to continue trading depended on fulfilling the Woolworths contract, and without Atlas’s delivery services, Kafco faced the risk of serious financial consequences. Kafco later stated that it would effectively go out of business if it could not perform its delivery obligations. As a result, Kafco felt compelled to sign the revised agreement.
Subsequently, Kafco refused to pay the increased charges demanded by Atlas. Kafco argued that the agreement to pay more had been entered into under economic duress and was therefore not binding. It also argued that there was no fresh consideration for the revised agreement, as Atlas was merely performing an existing contractual duty.
Legal Issues
The court in Atlas Express Ltd v Kafco (Importers & Distributors) Ltd was required to consider two principal legal issues:
- Whether Kafco had agreed to the contract variation under economic duress, such that its consent was not freely given.
- Whether the revised agreement was supported by valid consideration, given that Atlas was already contractually obliged to perform the delivery services.
Judgement
The case was decided by Tucker J, who found in favour of Kafco. The court held that the revised agreement was voidable because it had been entered into under economic duress.
Tucker J accepted that when Kafco’s representative, Mr Armiger, signed the revised agreement, he did so “unwillingly and under compulsion”. The judge noted that Mr Armiger had no bargaining power and did not regard the situation as a genuine arm’s‑length renegotiation in which both parties had an equal say. The court considered this assessment to be fully justified in the circumstances.
The judge drew a clear distinction between commercial pressure, which is common in business and does not invalidate consent, and economic duress, which can vitiate consent. While acknowledging that the boundary between the two concepts may sometimes be unclear, Tucker J concluded that the pressure applied by Atlas went beyond legitimate commercial pressure.
In addition, the court accepted Kafco’s argument that the revised agreement failed for lack of consideration. Atlas had provided no new consideration in return for the promise of higher payment. Atlas was simply performing its existing contractual obligation to deliver the goods. On this basis, the court applied the principle established in Stilk v Myrick (1809), which confirms that performance of an existing duty does not amount to good consideration for a new promise.
Economic Duress Explained
The decision in Atlas Express Ltd v Kafco (Importers & Distributors) Ltd provides a clear illustration of economic duress in action. Economic duress arises where one party exerts illegitimate pressure on another, leaving that party with no practical alternative but to agree to the contract or variation.
In this case, the threat to withdraw delivery services at a critical moment placed Kafco in an impossible position. The court accepted that the pressure applied by Atlas was not merely commercial bargaining, but a form of coercion that undermined the reality of Kafco’s consent.
Consideration and Contract Variation
The case is also significant for its treatment of consideration in contract variations. English contract law requires that any variation to an existing contract must be supported by fresh consideration. A promise to do something that a party is already legally bound to do will not usually suffice.
In Atlas Express Ltd v Kafco (Importers & Distributors) Ltd, Atlas’s promise was simply to continue delivering goods as it had already agreed to do under the original contract. The court therefore held that the revised agreement lacked consideration and could not be enforced on that basis alone.
Conclusion
Atlas Express Ltd v Kafco (Importers & Distributors) Ltd stands as a leading case on economic duress and consideration in English contract law. The court recognised that Kafco’s agreement to pay higher charges was not the result of free negotiation, but of coercion arising from its vulnerable commercial position. The absence of fresh consideration further undermined the validity of the revised agreement.
By distinguishing illegitimate economic pressure from lawful commercial pressure, the decision reinforces the principle that contracts must be founded on genuine consent and fairness. The case continues to serve as an important reference point for disputes involving contract variations and unequal bargaining power.