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THREAT AND DURESS BY THREAT

RESTATEMENT OF CONTRACTS | RESTATEMENT (SECOND) OF CONTRACTS | CONTRACT LAW | CASE LAW ON CONTRACTS

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RESTATEMENT (SECOND) OF CONTRACTS

175. WHEN DURESS BY THREAT MAKES A CONTRACT VOIDABLE

(1) If a party's manifestation of assent is induced by an improper threat by the other party that leaves the victim no reasonable alternative, the contract is voidable by the victim.

(2) If a party's manifestation of assent is induced by one who is not a party to the transaction, the contract is voidable by the victim unless the other party to the transaction in good faith and without reason to know of the duress either gives value or relies materially on the transaction.

Comment:

a. Improper threat.....Courts originally restricted duress to threats involving loss of life, mayhem or imprisonment, but these restrictions have been greatly relaxed and, in order to constitute duress, the threat need only be improper within the rule stated in 176.

b. No reasonable alternative. A threat, even if improper, does not amount to duress if the victim has a reasonable alternative to succumbing and fails to take advantage of it. It is sometimes said that the threat must arouse such fear as precludes a party from exercising free will and judgment or that it must be such as would induce assent on the part of a brave man or a man of ordinary firmness. The rule stated in this Section omits any such requirement because of its vagueness and impracticability. It is enough if the threat actually induces assent (see Comment c) on the part of one who has no reasonable alternative....

The standard is a practical one under which account must be taken of the exigencies in which the victim finds himself, and the mere availability of a legal remedy is not controlling if it will not afford effective relief to one in the victim's circumstances....

c. Subjective test of inducement. In order to constitute duress, the improper threat must induce the making of the contract....A party's manifestation of assent is induced by duress if the duress substantially contributes to his decision to manifest his assent. The test is subjective and the question is, did the threat actually induce assent on the part of the person claiming to be the victim of duress.

Threats that would suffice to induce assent by one person may not suffice to induce assent by another. All attendant circumstances must be considered, including such matters as the age, background and relationship of the parties. Persons of a weak or cowardly nature are the very ones that need protection; the courageous can usually protect themselves. Timid and inexperienced persons are particularly subject to threats, and it does not lie in the mouths of the unscrupulous to excuse their imposition on such persons on the ground of their victims' infirmities.

176. WHEN A THREAT IS IMPROPER

(1) A threat is improper if

(a) what is threatened is a crime or a tort, or the threat itself would be a crime or a tort if it resulted in obtaining property,

(b) what is threatened is a criminal prosecution,

(c) what is threatened is the use of civil process and the threat is made in bad faith,

or

(d) the threat is a breach of the duty of good faith and fair dealing under a contract with the recipient.

(2) A threat is improper if the resulting exchange is not on fair terms, and

(a) the threatened act would harm the recipient and would not significantly benefit the party making the threat, or

(c) what is threatened is otherwise a use of power for illegitimate ends.

 
VIOLENCE

Comments:

a. Rationale. An ordinary offer to make a contract commonly involves an implied threat by one party, the offeror, not to make the contract unless his terms are accepted by the other party, the offeree. Such threats are an accepted part of the bargaining process. A threat does not amount to duress unless it is so improper as to amount to an abuse of that process. Courts first recognized as improper threats of physical violence and later included wrongful seizure or detention of goods.

Modern decisions have recognized as improper a much broader range of threats, notably those to cause economic harm.

 The rules stated in this Section recognize as improper both the older categories and their modern extensions under developing notions of "economic duress" or "business compulsion." The fairness of the resulting exchange is often a critical factor in cases involving threats.

 

VIOLENCE ECONOMIQUE

e. Breach of contract. A threat by a party to a contract not to perform his contractual duty is not, of itself, improper. Indeed, a modification induced by such a threat may be binding, even in the absence of consideration, if it is fair and equitable in view of unanticipated circumstances. See 89. The mere fact that the modification induced by the threat fails to meet this test does not mean that the threat is necessarily improper. However, the threat is improper if it amounts to a breach of the duty of good faith and fair dealing imposed by the contract....

f. Other improper threats. The proper limits of bargaining are difficult to define with precision.

Hard bargaining between experienced adversaries of relatively equal power ought not to be discouraged. Parties are generally held to the resulting agreement, even though one has taken advantage of the other's adversity, as long as the contract has been dictated by general economic forces....Where, however, a party has been induced to make a contract by some power exercised by the other for illegitimate ends, the transaction is suspect.

Illustrations....

16. A, a municipal water company, seeking to induce B, a developer, to make a contract for the extension of water mains...at a price greatly in excess of that charged to those similarly situated, threatens to refuse to supply to B unless B makes the contract. B, having no reasonable alternative, make the contract. Because the threat amounts to a use for illegitimate ends of As power not to supply water, the contract is voidable by B.

 

 

 

 

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