Podcast
Questions and Answers
What was the original common law's primary method for avoiding contracts due to duress?
What was the original common law's primary method for avoiding contracts due to duress?
- Creating new laws specifically addressing duress.
- Referring the matter to a higher court specializing in contract disputes.
- Holding that no contract was formed because the victim's free will was robbed by threat. (correct)
- Enforcing the contract but with modified terms to compensate the victim.
In the context of contract law, what is a key similarity between the defenses of mistake and duress?
In the context of contract law, what is a key similarity between the defenses of mistake and duress?
- Both defenses automatically void a contract without further review.
- Both defenses are modern inventions of contract law.
- Both defenses require proof of physical harm.
- Both defenses aim to demonstrate a lack of genuine agreement. (correct)
What is a major shift in the modern interpretation of duress compared to its historical interpretation?
What is a major shift in the modern interpretation of duress compared to its historical interpretation?
- A focus on physical threats rather than economic pressure.
- The inclusion of 'economic duress' as a valid basis for avoiding a contract. (correct)
- A strict interpretation focusing only on threats of death or imprisonment.
- A requirement for the threat to overcome the will of a 'person of ordinary firmness'.
What is an example of evidence that would support a claim of economic duress?
What is an example of evidence that would support a claim of economic duress?
In Austin Instrument, Inc. v. Loral Corp., what critical factor led the court to consider Loral's claim of economic duress?
In Austin Instrument, Inc. v. Loral Corp., what critical factor led the court to consider Loral's claim of economic duress?
In Austin Instrument, Inc. v. Loral Corp., what was the main reason Loral could not secure parts from another vendor in time?
In Austin Instrument, Inc. v. Loral Corp., what was the main reason Loral could not secure parts from another vendor in time?
According to the court in Austin Instrument, Inc. v. Loral Corp., what is an important consideration regarding the 'free will' of a corporation in a duress claim?
According to the court in Austin Instrument, Inc. v. Loral Corp., what is an important consideration regarding the 'free will' of a corporation in a duress claim?
According to the ruling in Austin Instrument, Inc. v. Loral Corp., under what condition would the normal legal remedy of suing for breach of contract be considered inadequate in a duress situation?
According to the ruling in Austin Instrument, Inc. v. Loral Corp., under what condition would the normal legal remedy of suing for breach of contract be considered inadequate in a duress situation?
In the Totem Marine Tug & Barge, Inc. v. Alyeska Pipeline Service Co. case, what critical financial situation was Totem facing after the contract termination?
In the Totem Marine Tug & Barge, Inc. v. Alyeska Pipeline Service Co. case, what critical financial situation was Totem facing after the contract termination?
In Totem Marine Tug & Barge, Inc. v. Alyeska Pipeline Service Co., what did Alyeska allegedly do that contributed to Totem's claim of economic duress?
In Totem Marine Tug & Barge, Inc. v. Alyeska Pipeline Service Co., what did Alyeska allegedly do that contributed to Totem's claim of economic duress?
According to the Totem Marine Tug & Barge, Inc. v. Alyeska Pipeline Service Co. case, what is the modern trend of economic duress law regarding unequal bargaining power?
According to the Totem Marine Tug & Barge, Inc. v. Alyeska Pipeline Service Co. case, what is the modern trend of economic duress law regarding unequal bargaining power?
In Totem Marine Tug & Barge, Inc. v. Alyeska Pipeline Service Co., what is the significance of the 'unfettered will' concept in determining economic duress?
In Totem Marine Tug & Barge, Inc. v. Alyeska Pipeline Service Co., what is the significance of the 'unfettered will' concept in determining economic duress?
In assessing economic duress, what is the critical difference between 'financial embarrassment' and proving duress?
In assessing economic duress, what is the critical difference between 'financial embarrassment' and proving duress?
According to Totem Marine Tug & Barge, Inc. v. Alyeska Pipeline Service Co., what constitutes a 'wrongful act' in the context of economic duress?
According to Totem Marine Tug & Barge, Inc. v. Alyeska Pipeline Service Co., what constitutes a 'wrongful act' in the context of economic duress?
In the context of economic duress, when is a legal remedy considered inadequate, thus supporting a claim of duress?
In the context of economic duress, when is a legal remedy considered inadequate, thus supporting a claim of duress?
How do UNIDROIT principles approach duress differently than the R2d?
How do UNIDROIT principles approach duress differently than the R2d?
If Alaska Packers were decided as a duress case, what implications would it have on the pre-existing duty rule?
If Alaska Packers were decided as a duress case, what implications would it have on the pre-existing duty rule?
Under the U.C.C., if a modification lacks good faith, is there still a need for a defense of economic duress?
Under the U.C.C., if a modification lacks good faith, is there still a need for a defense of economic duress?
In Problem 11-1, if Shark demands a 51% ownership interest from Mary Inventor due to her financial vulnerability, what is the most relevant factor in determining whether duress exists under the R2d?
In Problem 11-1, if Shark demands a 51% ownership interest from Mary Inventor due to her financial vulnerability, what is the most relevant factor in determining whether duress exists under the R2d?
In Problem 11-1, could Mary Inventor have a claim against the Bank, or only against Shark?
In Problem 11-1, could Mary Inventor have a claim against the Bank, or only against Shark?
In Problem 11-2, concerning the U.S. government and the shipbuilder, what would be the key element in assessing duress under the R2d?
In Problem 11-2, concerning the U.S. government and the shipbuilder, what would be the key element in assessing duress under the R2d?
In Problem 11-2, concerning the U.S. government and the shipbuilder, how might the UNIDROIT principles approach this case differently than the R2d?
In Problem 11-2, concerning the U.S. government and the shipbuilder, how might the UNIDROIT principles approach this case differently than the R2d?
Why is it important to 'mind the ascent' when handling a transaction?
Why is it important to 'mind the ascent' when handling a transaction?
In the context of economic duress, what does the phrase 'fall correctly' suggest?
In the context of economic duress, what does the phrase 'fall correctly' suggest?
What are two main elements of economic duress?
What are two main elements of economic duress?
What is a definition of duress according to Section 492(b) of the Restatement of Contracts?
What is a definition of duress according to Section 492(b) of the Restatement of Contracts?
What are the two basic elements of economic duress according to Professor WIlliston?
What are the two basic elements of economic duress according to Professor WIlliston?
In order to substantiate the allegation of economic duress or business compulsion, what must a plaintiff show?
In order to substantiate the allegation of economic duress or business compulsion, what must a plaintiff show?
When may a threat to breach a contract or to withhold payment of an admitted debt be considered a wrongful act?
When may a threat to breach a contract or to withhold payment of an admitted debt be considered a wrongful act?
What is a factor in determining the adequancy of a legal remedy when one party refuses to pay a contract claim?
What is a factor in determining the adequancy of a legal remedy when one party refuses to pay a contract claim?
Totem's allegations, if proved, would support a finding that it executed a release of its contract claims against Alyeska under what condition?
Totem's allegations, if proved, would support a finding that it executed a release of its contract claims against Alyeska under what condition?
What are two actions that would be probative as to whether Alyeska exerted any wrongful pressure on Totem and whether Alyeska wrongfully withheld payment from Totem?
What are two actions that would be probative as to whether Alyeska exerted any wrongful pressure on Totem and whether Alyeska wrongfully withheld payment from Totem?
You are general counsel for an insurance company. What do you expect the standard-form release to the people whom the company has compensated for injuries to say?
You are general counsel for an insurance company. What do you expect the standard-form release to the people whom the company has compensated for injuries to say?
Which of the following accurately reflects a key consideration for assessing the 'adequacy of the remedy' in economic duress cases?
Which of the following accurately reflects a key consideration for assessing the 'adequacy of the remedy' in economic duress cases?
If a party claims economic duress, but had several weeks to secure funds from another source, how would this most likely impact their claim?
If a party claims economic duress, but had several weeks to secure funds from another source, how would this most likely impact their claim?
In assessing economic duress, which of the following is the least relevant factor?
In assessing economic duress, which of the following is the least relevant factor?
In the context of contract law, what is the most accurate characterization of 'free will' regarding the defense of duress?
In the context of contract law, what is the most accurate characterization of 'free will' regarding the defense of duress?
What is a modern trend in the interpretation of contract law, particularly regarding parties with unequal bargaining power?
What is a modern trend in the interpretation of contract law, particularly regarding parties with unequal bargaining power?
What should an attorney do while handling a transaction with a client?
What should an attorney do while handling a transaction with a client?
In assessing economic duress, what would be the most important factor in determining if a threat is 'wrongful'?
In assessing economic duress, what would be the most important factor in determining if a threat is 'wrongful'?
In contract law, what is the effect of proving economic duress?
In contract law, what is the effect of proving economic duress?
What does the principle of 'freedom of contract' generally imply?
What does the principle of 'freedom of contract' generally imply?
How do courts typically balance 'freedom of contract' with economic duress claims?
How do courts typically balance 'freedom of contract' with economic duress claims?
What is the key factor in determining whether an available legal remedy is 'adequate' in an economic duress case?
What is the key factor in determining whether an available legal remedy is 'adequate' in an economic duress case?
In the Austin Instrument v. Loral case, why was Loral unable to obtain necessary parts from other vendors in time?
In the Austin Instrument v. Loral case, why was Loral unable to obtain necessary parts from other vendors in time?
According to the ruling in Austin Instrument, Inc. v. Loral Corp., what critical factor demonstrates pressure that deprives a party of its free will?
According to the ruling in Austin Instrument, Inc. v. Loral Corp., what critical factor demonstrates pressure that deprives a party of its free will?
According to the ruling in Austin Instrument, Inc. v. Loral Corp., what would be the likely outcome if Loral had been able to secure the parts from another vendor in time?
According to the ruling in Austin Instrument, Inc. v. Loral Corp., what would be the likely outcome if Loral had been able to secure the parts from another vendor in time?
In the Totem Marine Tug & Barge, Inc. v. Alyeska Pipeline Service Co. case, what was Totem's primary argument for rescinding the release agreement?
In the Totem Marine Tug & Barge, Inc. v. Alyeska Pipeline Service Co. case, what was Totem's primary argument for rescinding the release agreement?
According to the Totem Marine Tug & Barge, Inc. v. Alyeska Pipeline Service Co. case, what is the role of a wrongful act in establishing economic duress?
According to the Totem Marine Tug & Barge, Inc. v. Alyeska Pipeline Service Co. case, what is the role of a wrongful act in establishing economic duress?
In the Totem Marine Tug & Barge, Inc. v. Alyeska Pipeline Service Co. case, what was the central circumstance that led Totem to accept the settlement offer from Alyeska?
In the Totem Marine Tug & Barge, Inc. v. Alyeska Pipeline Service Co. case, what was the central circumstance that led Totem to accept the settlement offer from Alyeska?
In the Totem Marine Tug & Barge, Inc. v. Alyeska Pipeline Service Co. case, how did the court define economic duress?
In the Totem Marine Tug & Barge, Inc. v. Alyeska Pipeline Service Co. case, how did the court define economic duress?
In the context of economic duress, when is a legal remedy considered inadequate?
In the context of economic duress, when is a legal remedy considered inadequate?
In a claim of economic duress, what must the plaintiff demonstrate beyond mere reluctance to accept the terms?
In a claim of economic duress, what must the plaintiff demonstrate beyond mere reluctance to accept the terms?
If Alaska Packers were decided as a duress case, how would the analysis of the sailors' demand for increased wages change?
If Alaska Packers were decided as a duress case, how would the analysis of the sailors' demand for increased wages change?
In Problem 11-1, Mary Inventor's agreement to give Shark a 51% ownership interest might be challenged based on duress. Besides the unequal ownership terms, what additional factor is most relevant to this determination?
In Problem 11-1, Mary Inventor's agreement to give Shark a 51% ownership interest might be challenged based on duress. Besides the unequal ownership terms, what additional factor is most relevant to this determination?
In Problem 11-2, regarding the U.S. government contracting with a shipbuilder during World War I, what argument could the government use to claim duress given the shipbuilder's favorable contract terms?
In Problem 11-2, regarding the U.S. government contracting with a shipbuilder during World War I, what argument could the government use to claim duress given the shipbuilder's favorable contract terms?
In Problem 11-2, considering the power dynamics between the U.S. government and the shipbuilder, how might a court evaluate whether duress existed?
In Problem 11-2, considering the power dynamics between the U.S. government and the shipbuilder, how might a court evaluate whether duress existed?
What crucial element must a release contain to ensure its enforceability when an insurance company compensates someone for injuries?
What crucial element must a release contain to ensure its enforceability when an insurance company compensates someone for injuries?
What is the most likely reason why a party might delay disaffirming a contract they entered into under duress?
What is the most likely reason why a party might delay disaffirming a contract they entered into under duress?
An attorney is drafting a release for an insurance company. To strengthen the release against claims of duress, what can the the attorney do?
An attorney is drafting a release for an insurance company. To strengthen the release against claims of duress, what can the the attorney do?
If a party had multiple viable alternative options but still chose to yield to a demand, how would this impact a claim of economic duress?
If a party had multiple viable alternative options but still chose to yield to a demand, how would this impact a claim of economic duress?
If Alyeska had merely breached its contract with Totem, but Totem was not facing impending bannkruptcy, what is the likely outcome of a duress claim?
If Alyeska had merely breached its contract with Totem, but Totem was not facing impending bannkruptcy, what is the likely outcome of a duress claim?
Which factor is least relevant when determining whether economic duress exits?
Which factor is least relevant when determining whether economic duress exits?
Which of the following is the key element that a plaintiff must demonstrate to successfully assert a claim of economic duress or business compulsion?
Which of the following is the key element that a plaintiff must demonstrate to successfully assert a claim of economic duress or business compulsion?
When can a threat to breach a contract or to withhold the payment of an admitted debt be considered a tortious act?
When can a threat to breach a contract or to withhold the payment of an admitted debt be considered a tortious act?
In which context is the adequacy of remedy normally tested?
In which context is the adequacy of remedy normally tested?
In the Totem Marine Tug & Barge, Inc. v. Alyeska Pipeline Service Co. case, what action would most likely prove whether or not wrongful pressure was exerted and money was wrongfully withhed?
In the Totem Marine Tug & Barge, Inc. v. Alyeska Pipeline Service Co. case, what action would most likely prove whether or not wrongful pressure was exerted and money was wrongfully withhed?
Why is it critical while drafting a release for the people whom an insurance company has compensated to draft with specificity, even if doing so sacrifices brevity?
Why is it critical while drafting a release for the people whom an insurance company has compensated to draft with specificity, even if doing so sacrifices brevity?
Which factor would be most detrimental to a claim of economic duress if demonstrated? The party...
Which factor would be most detrimental to a claim of economic duress if demonstrated? The party...
In the context of contract law, what factor distinguishes economic duress from hard bargaining?
In the context of contract law, what factor distinguishes economic duress from hard bargaining?
Which scenario exemplifies a situation where the 'ordinary remedy of an action for breach of contract' most likely would not be adequate, potentially supporting a claim of economic duress?
Which scenario exemplifies a situation where the 'ordinary remedy of an action for breach of contract' most likely would not be adequate, potentially supporting a claim of economic duress?
Under the principle of economic duress, what is meant by a 'wrongful act'?
Under the principle of economic duress, what is meant by a 'wrongful act'?
In the context of 'economic duress,' how does the concept of 'free will' apply to corporations?
In the context of 'economic duress,' how does the concept of 'free will' apply to corporations?
In assessing a claim of economic duress, which factor would a court likely view as most indicative that a party did have a reasonable alternative and therefore was not subject to duress?
In assessing a claim of economic duress, which factor would a court likely view as most indicative that a party did have a reasonable alternative and therefore was not subject to duress?
What is the most crucial element of good faith in a contract agreement?
What is the most crucial element of good faith in a contract agreement?
In a situation where a contract modification is challenged for lacking good faith under the U.C.C., how does this affect the need for also claiming economic duress?
In a situation where a contract modification is challenged for lacking good faith under the U.C.C., how does this affect the need for also claiming economic duress?
In Totem Marine Tug & Barge, Inc. v. Alyeska Pipeline Service Co., what demonstrates Alyeska's potential abuse of power?
In Totem Marine Tug & Barge, Inc. v. Alyeska Pipeline Service Co., what demonstrates Alyeska's potential abuse of power?
What element constitutes 'wrongful and oppressive conduct' in the context of economic duress?
What element constitutes 'wrongful and oppressive conduct' in the context of economic duress?
What makes a financial situation rise to the level of economic duress?
What makes a financial situation rise to the level of economic duress?
Why should counsel 'mind the ascent'?
Why should counsel 'mind the ascent'?
In drafting a release form, what needs to be added to make it more likely that courts will enforce the release as written and reject any duress challenge to it?
In drafting a release form, what needs to be added to make it more likely that courts will enforce the release as written and reject any duress challenge to it?
In Problem 11-1, what part of the Shark's proposed deal raises duress concerns?
In Problem 11-1, what part of the Shark's proposed deal raises duress concerns?
Under what condition may a threat to withhold payment of an admitted debt be considered a wrongful act?
Under what condition may a threat to withhold payment of an admitted debt be considered a wrongful act?
In the context of economic duress, how do you test the adequacy of remedy?
In the context of economic duress, how do you test the adequacy of remedy?
Flashcards
Duress (as a contract defense)
Duress (as a contract defense)
A defense where a contract can be voided if a party's free will was overcome by a threat of death, imprisonment, or serious physical injury.
Economic Duress
Economic Duress
When a party is forced to agree to a price increase due to a supplier withholding necessary goods, potentially voiding the new agreement.
Voidable Contract
Voidable Contract
A situation where a party agrees to new terms due to a wrongful threat that prevents them from exercising free will.
Elements of Economic Duress
Elements of Economic Duress
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Burden of Proof in Economic Duress
Burden of Proof in Economic Duress
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Wrongful Act (in context of duress)
Wrongful Act (in context of duress)
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Reasonable Alternatives
Reasonable Alternatives
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Inadequate Alternatives
Inadequate Alternatives
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Timely Disaffirmation
Timely Disaffirmation
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Duress
Duress
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Liquidated Damages
Liquidated Damages
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Study Notes
Duress Overview
- Duress is a defense against contract formation rooted in the idea that free will is required for a binding agreement.
- Early common law viewed duress as negating free will due to threats of death, imprisonment, or serious physical injury.
- The concept has expanded to include economic duress, particularly when there is no alternative source of supply.
- Courts still use the language of "free will," even when dealing with corporate entities.
Austin Instrument, Inc. v. Loral Corp.
- Loral Corp. sought to avoid payment to Austin Instrument, Inc., arguing economic duress forced them to agree to a price increase.
- Loral had a contract with the Navy for radar sets, including liquidated damages and cancellation clauses for late deliveries.
- Loral subcontracted with Austin for 23 precision gear components, later needing 40 parts for a second Navy contract.
- Austin refused to accept an order for less than all 40 parts and threatened to stop deliveries unless Loral agreed to significant price increases.
- Loral, unable to find another supplier to meet its Navy commitments, agreed to Austin's demands.
- Loral later sought to recover the price increases, claiming economic duress.
- A contract is voidable for duress if a party is forced to agree by a wrongful threat that precludes free will.
- Economic duress is shown when immediate possession of needed goods is threatened, or a party threatens to breach the contract by withholding goods unless further demands are met.
- A mere threat to breach a contract is not enough; the threatened party must also be unable to obtain the goods from another source, and the ordinary remedy of breach of contract must be inadequate.
- Austin's threat to stop deliveries deprived Loral of free will, considering Loral's contract with the government, potential for liquidated damages and cancellation, and the impact on future contracts.
- Loral contacted 10 manufacturers and found that no one could produce the parts in time to avoid defaulting its contract with the Navy.
- Suing for damages would have been inadequate, Loral had no practical choice but to agree to Austin's prices.
- Loral's delay in seeking a refund until after the last delivery was reasonable due to fear of further delivery stoppages.
- The court found that Loral agreed to the price increases due to economic duress employed by Austin and the case was remanded to the trial court to assess damages.
- A well-crafted letter can create a factual record for later litigation, proving a lack of alternative supply sources and the need to accede to the wrongful demand.
- Preparing for litigation can help avoid it by signaling preparedness and highlighting weaknesses in the opposing party's position.
Totem Marine Tug & Barge, Inc. v. Alyeska Pipeline Service Co.
- Totem sued Alyeska, seeking to rescind a settlement and release based on economic duress, and to recover the balance allegedly due on the original contract.
- Totem contracted with Alyeska to transport pipeline construction materials from Houston to Alaska.
- Totem encountered numerous problems, including misrepresented cargo weight, delays, and disputes over a second tug.
- Alyeska terminated the contract, leading to termination invoices from Totem. Needing immediate cash to avoid bankruptcy, Totem accepted a settlement offer from Alyeska for $97,500, releasing Alyeska from all claims.
- Totem then sued to rescind the release, alleging economic duress due to Alyeska's wrongful termination, knowledge of Totem's financial distress, and withholding of funds.
- Early common law required fear of loss of life or limb for duress, but the concept broadened to include economic coercion over time.
- Courts balance freedom of contract with correcting unequal exchanges between parties of disproportionate bargaining power.
- Duress is defined as a wrongful threat that induces a transaction through fear, precluding free will and judgment.
- The elements of economic duress are (1) a wrongful act or threat and (2) deprivation of unfettered will, (3) involuntary accepting terms with no other alternative, and (4) such circumstances were the result of coercive acts from the other party.
- Economic duress requires wrongful acts or threats that intentionally cause the other party to involuntarily enter into a transaction.
- A threat to breach a contract or withhold payment of an admitted debt can be a wrongful act, if done in bad faith.
- The victim must have no reasonable alternative but to agree otherwise face serious financial hardship for economic duress.
- An available legal remedy, like breach of contract, may provide an alternative, but must be adequate which is a question of fact.
- The adequacy of a remedy considers the exigencies of the situation, and if the delay would cause immediate and irreparable loss.
- Totem's allegations, if proven, would support a finding of economic duress as Alyeska withheld payment knowing Totem's financial state and Totem was unable to meet its debts other than by accepting the immediate cash payment offered by Alyeska.
- The events leading to the termination would be probative as to whether Alyeska exerted any wrongful pressure on Totem and whether Alyeska wrongfully withheld payment from Totem.
Notes and Questions
- R2d §§ 175 and 176 state the modern laws of duress.
- UNIDROIT Principles cover duress in Articles 3.9 (threat) and 3.10 (gross disparity).
Problem 11-1
- Mary Inventor needs money and Shark demands 51% ownership.
- The doctrine of duress may help her case under the R2d and the UNIDROIT principles if Shark acted improperly.
- She must not allow Shark to coerce her without any possible legal remedy.
- She may have a claim against Shark, but likely not against Bank unless Bank and Shark were working together.
Problem 11-2
- The government agreed to a contract with a shipbuilder during WWI with very favorable terms for the shipbuilder.
- Under the R2d and UNIDROIT principles, the court would consider whether the government had any reasonable alternative, and would likely decide for the shipbuilder.
- This is because of the pressure of the war, and the limited availability of shipbuilders at the time.
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Description
Overview of the duress defense in contract law, focusing on its impact on free will and contract formation. Includes discussion of economic duress. Examination of Austin Instrument, Inc. v. Loral Corp.
