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When You're Under Pressure: Key Points To Determine The Viability Of An Economic Duress Argument

Sunday, November 04, 2007 12:57 pm

When You're Under Pressure: Key Points To Determine The Viability Of An Economic Duress Argument

If you're pressured to agree to terms you consider unfair or else face a serious threat to your business (such as a contract breach), one valid option is simply to give in. But if you're counting on a backup plan to later challenge the validity of what you've agreed to by claiming in court that you acted under economic duress, be forewarned: Prevailing with such an argument is quite difficult.

We'll examine some of the common definitions of economic duress and their potential impact on cases. Then we'll briefly explore the challenges of using this argument. Finally, we'll offer three key questions to help plan your course when you're under pressure.

Coercion is common thread in 'duress' definitions

According to one oft-cited definition, duress occurs when a side in a dispute involuntarily accepts another side's terms due to circumstances that result from the other's "coercive acts" and permit "no other alternative." Fruhauf Southwest Garment Co. v. United States, 126 Ct. Cl. 51 (Ct. Cl. 1953). Note: When the coercion is of a financial nature -- as opposed to physically threatening, for example -- it's often called economic duress. A typical scenario is when one party threatens to breach a contract unless the other party enters into a new contract.

The Restatements have also given definitions of duress. According to the Restatement (First) of Contracts, duress occurs by "any wrongful threat of one person by words or other conduct that induces another to enter into a transaction under the influence of such fear as precludes him from exercising free will and judgment, if the threat was intended or should reasonably have been expected [...]

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