How Does Duress Affect the Validity of a Contract?

Consequences of Duress

Black's Law Dictionary defines duress as the "threat of harm made to compel a person to do something against his or her will or judgment, especially a wrongful threat made by one person to compel a manifestation of seeming assent by another person to a transaction without real volition." Because one of the requirements of a valid contract is that it be entered into freely by both parties, duress is grounds for having a contract invalidated. If duress in forming the contract can be proven, the party who was coerced into forming the contract is freed from his obligations under the contract as if the contract never existed. The types of duress that can invalidate a contract fall into two major categories.

Physical Duress

The common phrase "no one put a gun to your head" cuts directly to the matter of physical duress. This occurs when someone makes a credible threat of physical harm either to the party forced into the contract or someone socially significant to that person. This need not be a literal gun to the head but can span many forms of violence. Furthermore, physical duress need not be limited to people. If a party to a contract is threatened with harm to goods, this can qualify as physical duress. For example, if an auto mechanic threatens to keep or damage a person's car unless he signs a particular contract, this manner of physical duress would invalidate the contract signed. In court, claiming the defense of physical duress to a contract shifts the burden of proof to the other party that the threat--if there was one--had no impact on the parties entering into the contract.

Economic Duress

The second category of duress occurs when a party is given no practical choice but to enter a contract. Just as it sounds, determinations of economic duress can become quite subjective and given to all sorts of tangential factual determinations. For example, economic duress might exist if there are no viable substitutes to entering the contract in the form of substitute funding, goods, services in the marketplace or legal remedies. But the party claiming the defense would have to prove this condition. A more obvious case of economic duress exists when one party to the contract causes financial hardship on the other party and uses this situation to induce a contract. Even here, there is a minority belief that economic duress rises if a contracting party doesn't cause the financial hardship but merely capitalizes on it. The essence of economic duress, however, remains the use of economic pressure or threats of economic pressure to get someone to sign a contract he otherwise would not.

Resources

• When Contracts are Not Contracts
• Mistake, Duress and Fraud
• Undue influence