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What is duress and how can it derail a contract?

| Jul 25, 2020 | Business Law |

When business booms, new doors often open and with them often come new opportunities. Sometimes that opportunity takes the form of new contracts. While businessmen and women might often smile and shake hands over these contracts, that is not always the case. Sure, fine print carries its own notoriety, inspiring hours of careful reading, but sometimes contract signing can take a sinister turn.

That sinister turn has a name: duress. Many prefer to sign a contract with a clear head, a full understanding and ultimately an ability to say “no.” But, unfortunately, sometimes an unhealthy pressure makes its way into the process. When one party pressures another one to sign on the dotted line, it adds a bitter taste to the euphoria that can come with new opportunity. And it can also lead to litigation.

Physical duress

One of the two key kinds of duress is in the threat of physical harm. The idea of violent threats over the signing of a contract might sound like something out of a movie, but it is very much a possibility, and overt cases can be all the easier to identify. Once physical duress is alleged, it is now up to the accused party to bring together evidence that proves that whatever action they may have taken cannot reasonably be construed as a threat.

Economic duress

This occurs in contracts when one party uses the threat of the other party’s financial wellbeing against them. For instance, let’s say there’s a contract in play that not only will boost one party’s business, but it also crucial to their longevity. If the other party threatens to break the contract unless they sign up for an additional contract, this is applying duress. When it comes to litigation for this kind of duress, a business would need to prove that, from an economic standpoint, they had to take the contract, and refusing it would have been detrimental to them.

Maintaining a positive contractual relationship is something that every business strives for. Approaching a contract fully educated on its ramifications, and having no influencing external pressure is the ideal way to breach the process. But when that external pressure, in the form of duress, becomes evident, it sours business relations and can lead to litigation. Knowing the ins and outs of contracts and the process behind them can facilitate a healthier business relationship and make one aware when matters are going south.