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

Post a Comment

Popular posts from this blog

Harassment and Domestic Violence in New Jersey

Harassment can constitute a basis for the issuance of a restraining order if the statutory elements are satisfied. See N.J.S.A. 2C:33-4. The statute defines harassment: Except as provided in subsection e., a person commits a petty disorderly persons offense if, with purpose to harass another, he: a. Makes, or causes to be made, a communication or communications anonymously or at extremely inconvenient hours, or in offensively coarse language, or any other manner likely to cause annoyance or alarm; b. Subjects another to striking, kicking, shoving, or other offensive touching, or threatens to do so; or c. Engages in any other course of alarming conduct or of repeatedly committed acts with purpose to alarm or seriously annoy such other person. [N.J.S.A. 2c:33-4 (emphasis added).] As provided by the statute, a finding of harassment requires proof of an intent or purpose to harass. State v. Hoffman , 149 N.J . 564, 576-77 (1997). An assertion by a plaintiff that he or she felt ha...
Post a Comment
Read more

NEW JERSEY EQUITABLE DISTRIBUTION

New Jersey is an Equitable Distribution State. This means that marital assets will be divided in a manner that is considered fair but not necessarily equal for the parties. Below we have developed an outline to give a general overview on Equitable Distribution in New Jersey. Equitable Distribution in New Jersey an Outline Overview. I.         Assets subject to Equitable Distribution a.         Assets that are Acquired During the Marriage b.       Assets acquired in contemplation of marriage II.       Assets Immune by Statute a.        Premarital – except the increase in active assets value due to efforts of non-owner. b.       Inheritances c.         Gifts from third parties III.     Specific Assets: Subject to Equitable Distribution a.  ...
Post a Comment
Read more

Service of Process in New Jersey: Court Allowed Service of Process by Facebook.

In the recent case of   K.I.A.  v. J.L. Docket No. C-157-15 (Ch. Div., April 11, 2016), the court held that when service of process cannot be done by traditional means the rules of civil procedure allow an alternate form of service, like Facebook.  Rule 4:4-4(b)(3) permits a court to enter an order permitting service by means other than those provided by rule “consistent with due process.” This is the case of an adoptive parents filed a cause of action against the defendant to enjoin him from contacting their adoptive son, remove information about their son from social media and to contact their family. Defendant an out of State individual contacted plaintiffs’ child through Facebook, disclosed that he was the biological father and contacted the family. In their attempt to serve the summons and complaint to the defendant, plaintiffs’ made reasonable, good-faith attempt to effectuate personal service but were unsuccessful.  The plaintiffs made a request for the c...
Post a Comment
Read more