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Economic Duress in Contract Law: Definition & Cases

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  • 0:01 Definition
  • 0:33 Elements of Economic Duress
  • 0:58 Examples of Economic Duress
  • 2:19 Lesson Summary
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Lesson Transcript
Instructor: Jessica Schubert

Jessica is a practicing attorney and has taught law and has a J.D. and LL.M.

After you complete this lesson, you will understand what constitutes economic duress. You will also learn the elements of economic duress and review several examples.

Definition

Economic duress in contracts occurs where a party to a contract threatens to cancel a contract unless the other party agrees to their demands. The economic duress occurs when the other party is stuck, as there are no other practical options but to agree to the new terms of the contract.

In other words, you are under economic duress when you have no choice and your back is against the wall, forcing you to agree to another party's terms. Fortunately, if you can prove you entered into a contract under economic duress, you can take the other party to court.

Elements of Economic Duress

In order for you to claim you entered a contract under economic duress, you must prove several elements. All of the following elements must be demonstrated:

  • An ongoing contract must exist between you and the party
  • The other party has threatened to cancel this contract
  • You accepted the new terms to the contract because you were under duress and there were no other alternatives available to you

Examples of Economic Duress

Let's look at one example of economic duress in action. Two parties, Abe and Bob, have a contract where Abe is supposed to sell cases of a special kind of wine to Bob. Abe contacts Bob and informs Bob that he cannot sell the wine unless Bob agrees to a price increase. Bob tries to find alternative sources for the special wine, but he cannot do so, and he has no stock in his store without this wine. Since there is no other supplier, Bob gives in to Abe and agrees to pay the higher price. Bob has accepted under economic duress. Therefore, Bob can take Abe to court and try to have the contract voided and obtain damages based upon a defense of economic duress.

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