## Facts

- Cabot Corporation supplied tantalum powder and wire; AVX Corporation manufactured tantalum capacitors and required a stable tantalum supply.
- By 2000, Cabot was one of a small number of significant tantalum powder producers and held a large share of processed tantalum output.
- Before 2001, AVX commonly purchased tantalum through short-term arrangements rather than binding long-term contracts, in a market that generally favored buyers.
- In late 2000, demand for tantalum and capacitors rose sharply, creating a seller’s market and higher prices.
- In January 2001, Cabot and AVX executed a multi-year “take-or-pay” supply contract requiring AVX to purchase specified quantities (or pay regardless) at agreed prices.
- After the market later loosened and prices fell, AVX asserted the contract was unfair and claimed it was induced by Cabot’s market power and the shortage, amounting to economic duress.
- AVX nonetheless continued performance for a period and engaged in efforts to modify the contract’s terms while retaining contractual benefits.

## Issues

1. Whether AVX could avoid the multi-year supply contract based on economic duress where Cabot’s conduct amounted to aggressive negotiation during a commodity shortage rather than unlawful or wrongful coercion, and where AVX allegedly had alternatives to assent.
2. Whether AVX’s post-execution conduct (continued performance, negotiations to modify terms, and retention of benefits) constituted ratification that waived any duress defense.

## Decision

- The Supreme Judicial Court of Massachusetts affirmed summary judgment for Cabot declaring the contract valid and enforceable.
- The court held AVX could not prove economic duress because it lacked evidence of a wrongful or unlawful act by Cabot and could not show it had no reasonable alternative to contracting.
- The court also held that AVX ratified the contract by continuing to perform, seeking and making modifications, and retaining benefits after any alleged coercive pressure had ended, thereby waiving its duress claim.

## Legal Principles

- Economic duress requires (1) a wrongful or unlawful act by the other party causing financial distress and (2) the absence of a reasonable alternative to assent.
- “Hard bargaining,” including taking advantage of favorable market conditions or superior bargaining power, is not economic duress without unlawful threats or other wrongful conduct.
- The existence of an unattractive choice does not satisfy the “no reasonable alternative” requirement; the standard is whether feasible options existed.
- A party alleging duress must disaffirm within a reasonable time after the duress ends; continued performance, renegotiation/modification efforts, and retention of benefits may constitute ratification and waiver of the duress defense.

## Conclusion

The court enforced the take-or-pay supply contract, ruling that market-driven commercial pressure and aggressive negotiation did not amount to economic duress and that AVX’s continued performance and modification efforts ratified the agreement, barring any duress-based avoidance.


Cabot Corp. v. AVX Corp., 863 N.E.2d 503 (Mass. 2007)