Skip to main content

Invalidating a Contract under the Doctrine of Economic Duress

The doctrine of economic duress has significantly developed and expanded, in recognition of the ever-increasing complexity of the business world. Claims of economic duress in business litigation are becoming more frequent. Several courts, including the United States Supreme Court, have acknowledged that there are situations under which financial pressure may cancel an otherwise enforceable contract. See 13 S. Williston, Contracts, § 1603 at 664 (3d ed. 1970); United States v. Bethlehem Steel Corp., 315 U.S. 289, 62 S.Ct. 581, 86 L.Ed. 855 (1942); Hartsville Oil Mill v. United States, 271 U.S. 43, 46 S.Ct. 389, 70 L.Ed. 822 (1926).The definition of economic duress is set forth in Williston:1. The party alleging economic duress must show that he has been the victim of a wrongful or unlawful act or threat, and2. Such act or threat must be one which deprives the victim of his unfettered will. [13 Williston, supra, § 1617 at 704 (footnotes omitted)]

The courts in New Jersey have defined economic duress as in the Williston formulation. In Woodside Homes, Inc. v. Morristown, 26 N.J. 529, 544 (1958), define that economic duress requires "an assent by one party to an improper or wrongful demand by another under circumstances in which the former has little choice but to accede to the demand.  Economic duress occurs when the party alleging it is the victim of a wrongful or unlawful act or threat which deprives the victim of his unfettered will. Quigley v. KPMG Peat Marwick, LLP, 330 N.J.Super. 252, 263 (App. Div. 2000) (citing 13 Williston on Contracts § 1617), certif. denied, 165 N.J. 527 (2000).


It is important to distinguish that "Merely taking advantage of another's financial difficulty is not duress. Rather, the person alleging financial difficulty must allege that it was contributed to or caused by the one accused of coercion." Continental Bank v. Barclay Riding Academy, Inc., 93 N.J. 153, 176, 459 A.2d 1163, cert. denied, 464 U.S. 994, 104 S.Ct. 488, 78 L.Ed.2d 684 (1983).  Therefore, when there is adequacy of consideration, there is generally no duress.... Whenever a party to a contract seeks the best possible terms, there can be no rescission merely upon the grounds of driving a hard bargain. Merely taking advantage of another's financial difficulty is not duress. Rather, the person alleging financial difficulty must allege that it was contributed to or caused by the one accused of coercion.... Under this rule, the party exerting pressure is scored only for that for which he alone is responsible. [Williston, supra, § 1617 at 708 (footnotes omitted)]


Disclaimer: The contents of this website are of general nature and not intended to be a substitute for legal advice or the formation of a lawyer-client relationship. In order to be properly represented, please contact your local professional. In addition, the information given on this web site has been composed by a New Jersey attorney practicing exclusively in New Jersey. None of the information contained herein should be deemed to apply in other states, nor should this website be construed as an attempt by the author to practice law in any state other than New Jersey.

Comments

Popular posts from this blog

Planning for Children in Case of Deportation

The current immigration climate is tense. Undocumented people fear not only for deportation but also for the care and wellbeing of their children.  It is important that people that are undocumented make plans in the event that this situation takes place. Among the first things to be planned is the provision of care and supervision of minor children while the parents are in the process of the deportation.

It is important to keep all detail information of the child. If the child is an American Citizen, having their passports updated should be a priority. In addition, it is often suggested to create a power of attorney limited to the event of deportation. In this power of attorney, the parents should assign a guardian to take care of the child and allow permission to travel with the guardian. The undocumented person should also consider leaving financial provisions for the care of the child.
It is often recommended that the undocumented person carries information of their attorney or a l…

What is a Debt Buyer?

The basic business plan of the debt buying industry is to buy debt at pennies for the dollar. They usually by a list of consumer account without original documents to support these claims and without any documentation of how the “amount owing” was calculated.   The problem with this practice is that the debt buyer, has no incentive to obtain the proof required in a court of law because its investment is minimal. Typically a debt buyer sues consumers without any documentary proof that this particular consumer was indebted to the original creditor. . In every credit card account, the original creditor will possess: -           the debtor’s signed application/request for a credit card, 15 U.S.C. 1642 -           required monthly account statements, 15 U.S.C. 1637(b)  -           the credit card contract, amendments to the contract and -           charge slips or other evidence of each purchase and cash advance.          We always recommend our clients to defend these type of lawsuits so they …