Kolmar Group AG v Traxpo Enterprises Pvt Limited  EWHC 113 (Comm)
Sale of goods; intimidation; FOB
In late August 2007, Kolmar entered into a contract with Traxpo to buy methanol +/- 5% at buyer’s option. Then Kolmar wished to sell on the methanol to an American customer who was in urgent need of it. The contract was FOB with shipment in September 2007 to Kandla. Payment was to be made at sight against an irrevocable letter of credit payable against presentation of specified documents. In mid-September, Traxpo amended the letter of credit – it changed the goods description and made 5% variation to be at seller’s option. The vessel arrived in Kandla but berthing was delayed. In the meantime, Traxpo claimed that to avoid substantial loss due to the significant increase in methanol price, it had to purchase on a piecemeal basis from the local market.
Traxpo offered to provide less methanol and at a higher price than agreed. Kolmar consequently incurred approx. 140k USD in demurrage and had to buy the missing amount of methanol from the domestic market. Despite its awareness of a breach, Kolmar claimed to have been forced to accept Traxpo’s offer due to lack of alternatives. Kolmar sued Traxpo to recover the extra payment of 1.4m USD as restitution for economic duress or, alternatively, for intimidation.
The Court found in favour of Kolmar. Economic pressure is capable of amounting to duress if it is illegitimate and induces the claimant to enter into a contract on a “but-for” basis, i.e. by offering no alternative. Kolmar did not have any other choice but to agree to Traxpo’s amended letter of credit. Furthermore, threats (like Traxpo’s) to back away from the contract would generally be seen as illegitimate, especially if the maker of the threat knows that implementation of the threat would breach the contract. The Court was of the view that whether the claimant had any “realistic alternative” was a relevant consideration. Finally, while presence or absence of protest is relevant, the absence of protest to would not necessarily mean that payment was voluntarily made.