10.2 Duress

The defense of duress typically involves one party making a threat toward the other party to induce that person to enter a contract. This threat can take various forms, such as physical harm, economic harm, damage to reputation, or even blackmail. The key is that the threat or pressure is wrongful and improper. Contracts require the genuine and voluntary consent of all parties involved. When a party is forced or pressured into the contract against their will, their consent is not genuine, and the contract is ordinarily considered voidable. A contract induced by physical violence is void.

Physical Duress

If a person is forced into entering a contract on threat of physical bodily harm, he or she is the victim of physical duress. This is defined by the Restatement in Section 174: “If conduct that appears to be a manifestation of assent by a party who does not intend to engage in that conduct is physically compelled by duress, the conduct is not effective as a manifestation of assent.” In addition, comment (a) to Section 174 provides in part, “This Section involves an application of that principle to those relatively rare situations in which actual physical force has been used to compel a party to appear to assent to a contract.…The essence of this type of duress is that a party is compelled by physical force to do an act that he has no intention of doing. He is, it is sometimes said, ‘a mere mechanical instrument.’ The result is that there is no contract at all, or a ‘void contract’ as distinguished from a voidable one” (emphasis added).

Duress by Threat

A second kind of duress is duress by threat, which is more common than physical duress. Here the perpetrator threatens the victim, who feels there is no reasonable alternative but to assent to the contract. Duress by threat renders the contract voidable. For a threat to rise to the level of duress, the threat must be improper and there must be no reasonable alternative other than entering a contract. As an example, if a supplier threatens to hold up shipment of necessary goods unless the buyer agrees to pay more than the contract price, this would not be duress if the buyer could purchase identical supplies from someone else. It is also notable that the standard for evaluating the threat is subjective. It does not matter if the person threatened is unusually timid or that a reasonable person would not have felt threatened. The question is whether the threat in fact induced assent by the victim.

There are many types of improper threats that might induce a party to enter into a contract: threats to commit a crime or a tort (e.g., bodily harm or taking of property), to instigate criminal prosecution, to instigate civil proceedings when a threat is made in bad faith, to breach a “duty of good faith and fair dealing under a contract with the recipient,” or to disclose embarrassing details about a person’s private life.

As an example of a contract procured through duress by threat, suppose that Jack buys a car from a local used-car salesman, Mr. Olson. The day after the sale, Jack recognizes he bought a lemon. He threatens to break windows in Olson’s showroom if Olson does not buy the car back for $2,150, the purchase price. Mr. Olson agrees. The agreement is voidable if Olson feels he has no reasonable alternative and is frightened into agreeing. Suppose Jack knows that Olson has been tampering with his cars’ odometers, a federal offense, and threatens to have Olson prosecuted if he will not repurchase the car. Even though Olson may be guilty of breaking the federal law, this threat is made to have the car repurchased, and that misuse of the information for personal ends of power is what rises to duress. Suppose instead that Jack then tells Olson if he isn’t made whole on the car, “I’m going to haul you into court and sue your pants off.” As long as Jack means that he intends to sue for his purchase price, this is not an improper threat, because everyone has the right to use the courts to gain what they think is rightfully theirs.

A threat to breach a contract that induces the victim to sign a new contract may also be improper. Suppose that as part of the original purchase price, Olson agrees to make all necessary repairs and replace all failed parts for the first ninety days. At the end of one month, the transmission dies, and Jack demands a replacement. Olson refuses to repair the car unless Jack signs a contract agreeing to buy his next car from Olson. Whether this threat is improper depends on whether Jack has a reasonable alternative; if a replacement transmission is readily available and Jack has the funds to pay for it, he might have an alternative in suing Olson in small claims court for the cost. But if Jack needs the car immediately and he is impecunious, then the threat would be improper and the contract voidable. A threat to breach a contract is not necessarily improper, however. It depends on whether the new contract is fair and equitable because of unanticipated circumstances. If, for example, Olson discovers that he must purchase a replacement transmission at three times the anticipated cost, his threat to hold up work unless Jack agrees to pay for it might be reasonable.

Check your Understanding