It is clear cut that if someone threatens you physically to sign a contract, this gives you a right to end the contract. But what if there was economic pressure or other coercion, is this allowed? Find about what is and not allowed regarding pressure in contracts by learning the law of duress.

What is Duress?

It to ‘illegitimate pressure’ that affects one party by the other party in a contract. This can occur when the contract is formed, or in the carrying out of contractual duties. A contract will be voidable if there is duress. The ‘innocent’ party can choose to terminate voidable contracts.  A more obvious type is physical, where a contract becomes voidable because there was a threat of physical violence. However it can also occur if there is illegitimate economic pressure on one party by the other.

When is economic pressure illegitimate?

It is important to note that not all forms of economic pressure are illegitimate. Therefore, you cannot always claim duress when affected by economic pressure or ‘threats’ by the other party. There are numerous forms of ‘legitimate’ economic pressure that can be used on you to perform the contract. It is not duress if the other party says they will repudiate the contract if you don’t perform it. Or if the party says it will sign with another party this may not be duress. However, threats of unlawful action are economic duress, so keep it in mind if you feel forced in a contract. Remember it has to be by the other party, and not just general economic pressures that ‘force’ you to sign the contract.

What if I still want the contract to go ahead?

While there may be duress, you may want the contract to still go ahead. There is nothing to stop you choosing to continue in a contract. However, this relies on you being the ‘innocent’ party to have this choice. Also if you elect to continue the contract you may lose your right to claim duress at a later stage. Consult a lawyer to more accurately know your legal position and rights.

If you are the ‘guilty’ party, the other party decides if they want to continue the contract. Of course, the best strategy is not to engage in any behaviour that has the potential to be duress.

Conclusion

Thus, if contracts are signed, performed or enforced because of duress, they can be terminated. It however is often difficult to determine whether it has occurred, especially when economic pressure has occurred so having legal advice is essential.

Feel unfairly forced or coerced in a contract? Contact a LawPath consultant on 1800 529 728 to learn more about customising legal documents and obtaining a fixed-fee quote from Australia’s largest legal marketplace.

Lachlan Ward

Lachlan is an intern at LawPath as part of the content team. He is currently studying a Juris Doctor at the University of Sydney. Lachlan has a keen interest in corporate law and commercial litigation.