Under current evaluations wrongful acts that are sufficiently coercive to cause a reasonably prudent person faced with no reasonable alternative to succumb to the perpetrator’s pressure will support a claim of economic duress. The current legal standard under the doctrine of economic duress discards the requirement of the commission of a tort or crime. The economic duress doctrine serves as a last resort to correct these aberrations when conventional alternatives and remedies are unavailing. Such exchanges make a mockery of freedom of contract and undermine the proper functioning of our economic system. They include equitable notions of fairness and propriety which preclude the wrongful exploitation of business exigencies to obtain disproportionate exchanges of value. Those rules are not limited to precepts of rationality and self-interest. That system can be viewed as a game in which everybody wins, to one degree or another, so long as everyone plays by the common rules. Hard bargaining, “efficient” breaches and reasonable settlements of good faith disputes are all acceptable, even desirable, in our economic system. The underlying concern of the economic duress doctrine is the enforcement in the marketplace of certain minimal standards of business ethics. 3d 1154, 1158.Īs described in frequently cited opinion, Rich & Whillock, Inc. Rather, economic duress may consist of a wrongful act that is sufficiently coercive to cause a reasonably prudent person faced with no reasonable alternative to succumb to the perpetrator’s pressure. However, as it has evolved, it is no longer subject to these limitations. 3d 1058, 1077, (threat to expose former Philippine President Marcos’s investments in U.S. Philippine Export & Foreign Loan Guarantee Corp. In its infancy it was limited to the early statutory and judicial interpretation requiring the commission of an unlawful act in the nature of a tort or crime. It represents “but an expansion by courts of equity of the old common-law doctrine of duress.” Sistrom v. An example would be a claim that, in a negotiation, one party would lose most or all of their assets if they didn’t agree to the deal, which, on its face appears quite one sided.Ĭalifornia courts have recognized the economic duress doctrine in private sector cases for at least fifty years. Litigators on both sides of the bar should be aware of this powerful doctrine. While the doctrine has developed significantly over the last fifty years, it does not have the notoriety of the traditional doctrine of duress. One often overlooked, and frequently misunderstood, form of duress is “economic duress.” This claim can be seen as an affirmative claim in cases of rescission or as an affirmative defense in cases of breach of contract. Typically, duress, menace, and undue influence are raised in business, elder abuse, and other matters involving intentional torts.
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