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Duress and Undue Influence in Contract Enforcement

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  • 0:06 Contract Formation
  • 1:29 Duress
  • 4:27 Undue Influence
  • 7:12 Lesson Summary
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Lesson Transcript
Instructor: Ashley Dugger

Ashley is an attorney. She has taught and written various introductory law courses.

Contracts must be entered into freely by both of the parties and include mutual assent. Sometimes mutual assent can be affected by coercion or pressure to enter the contract. Duress and undue influence are situations that affect mutual assent and make a contract void or voidable. This lesson explains duress and undue influence in contract formation.

Contract Formation

You're the judge! Here's the case on your docket today: Molly and Mark enter an agreement. Molly is going to sell all of her stock in ABC House Builders to Mark, and Mark is going to pay Molly $10,000.

As the judge, you know that there are several requirements that must be met in order to form a legally binding agreement. One of those requirements is mutual assent. Mutual assent is a meeting of the minds, or an agreement between the parties.

Sometimes the parties' words or actions imply that they have an agreement, but there wasn't really mutual assent. If mutual assent was lacking, the contract will be void or voidable. These concepts are similar, and both affect the enforceability of the contract. A void contract is invalid and can't be enforced by either party. A voidable contract is binding on one of the parties, while the other party has the option to withdraw from the contract or to enforce it.

Today, you'll have to determine whether or not Molly and Mark entered their agreement freely, willfully and with mutual assent. Let's take a look at a couple of situations where mutual assent will be lacking.

Duress

In your courtroom, you see a lot of contracts. You know that one of the requirements of a valid, legal contract is that both of the parties freely entered into the contract. A contract can't be enforced against a person who was forced or coerced into entering the contract.

Duress is a defense to a contract. Duress is wrongful pressure exerted upon a person in order to coerce that person into a contract that he or she ordinarily wouldn't enter. Duress involves an intentional use of force or threat of force in order to induce the contract. It can be either physical or mental coercion, but the coercion must be to the extent that it deprives the other person of free will or freedom of choice. This means that the person is left with no reasonable alternative other than to enter the contract.

There are several different types of duress, and as a judge, you've seen them all. The first type involves a contract made under some sort of compelling physical force. Though rare, this is the most serious form of duress in contract law. For example, this type of duress includes a contract made at gunpoint or during a battery. These contracts are void. No mutual assent exists.

Other types of duress make a contract voidable, rather than void. In other words, the party that was forced into the contract can choose whether or not to enforce the contract. These contracts still involve an improper or wrongful threat. Some examples include:

  1. A party threatens to physically harm another person or that person's family member or that person's property.
  2. A party threatens to disgrace another person or that person's family member.
  3. A party threatens to have another person criminally prosecuted or civilly sued, without grounds for that legal action.
  4. A party threatens economic loss to another person, and that person shows that the improper threat can actually result in his or her economic loss.

For example, let's say that Molly presents evidence that she didn't assent to the contract with Mark. Molly says that Mark threatened to burn her house down if she didn't agree to sell her stock in ABC to him. Molly agreed to sell because she felt like she had no choice. If you decide that Molly was under duress when she made the contract, you'll order that Mark can't enforce the contract. It's voidable. This means that Molly can refuse to sell, or she can go through with the transaction. The choice is Molly's.

Undue Influence

In your courtroom, you sometimes see other types of cases that involve a lack of mutual assent. Duress is sometimes confused with undue influence. Undue influence is also a defense to a contract and is also a situation that affects mutual assent.

Undue influence is taking advantage of another person, through a position of trust, in the formation of a contract. Undue influence always involves a relationship between the two parties, with one party in a superior position over the other. Undue influence doesn't involve a direct threat, like duress does. Instead, it involves excessive pressure by the party in the dominant position on the party in the inferior position.

It's important to note that persuasion alone is not undue influence. In order to be undue influence, the persuasion must amount to excessive pressure that affects a person's freedom of choice.

Undue influence always makes a contract voidable. The person who was wrongfully influenced into making the contract may choose whether or not to enforce the contract. There are many situations in which a trusted person can exercise control over another person's free will or exercise of free choice. Some examples include:

  1. An attorney wrongfully influences his client.
  2. A husband wrongfully influences his wife, or the wife wrongfully influences the husband.
  3. A trustee wrongfully influences a beneficiary.

For example, let's say that Mark is Molly's boss. They work for ABC House Builders. Mark is trying to become a majority shareholder. Mark doesn't threaten Molly, but she feels like she has to do what he asks. She really can't afford to lose her job. She felt like she had no choice but to agree to sell her stock to Mark.

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