Could Coercion or Duress Affect Your Business Agreements?
The ability of our businesses to thrive—or just survive—often depends on the agreements and contracts they enter into. If those who agree to do something or pay something to our business are able to back away from their agreements, there would be no way for our business to properly function and budget.
Obviously, there is no way to compel compliance, or to see the future and predict who will honor and who will default on their agreements. But we can do our best to use best practices to make it as unlikely as possible that any potential defenses to a breach of contract action will fail.
Coercion and Duress
One large area of contract litigation is in the area of coercion or duress. Often, those who are sued for breaching an agreement, or who are seeking to evade the obligations of a contract they entered into, will use these defenses.
Courts must use a balancing act. On the one hand, if someone who just felt subjectively pressured could claim coercion and get out of a contract, there would be no legal certainty in contracts and no way for anybody to enforce an agreement.
In fact, in many cases, someone may be under what appears to be duress when signing an agreement. Someone out of work may feel pressured to take out a loan. Someone whose business computers stop working may feel pressured and coerced into signing that contract with the technical support company. Someone whose roof is leaking may feel compelled to sign that roof repair agreement.
On the other hand, courts recognize that there are scenarios where someone is legitimately pressured, or where undue influence is improperly used against someone to sign an agreement.
Proving the Defenses
As a general rule, someone who is threatened with anything illegal unless they sign an agreement will be considered to have signed under duress. There must be such conduct by the other side that the person seeking to avoid the contract was almost compelled to sign involuntarily. In some cases, courts have held that a party must also show that there was no reasonable alternative other than signing the agreement.
For example, telling someone “if you don’t get that roof fixed it will cave in,” would not be considered coercion or duress. Telling them that if they don’t hire your company you will report the marijuana you found in their garage to the police would be coercion or duress, and possibly extortion.
To be considered duress, the pressure must come from you, not external forces. For example, someone under severe financial trauma won’t be able to evade an agreement on that basis, assuming you did nothing to cause that trauma.
The best policy when dealing with others is to not exert any excess or undue pressure. Selling yourself or your services is fine. Just be careful with people who appear hesitant, and make sure that in selling, you aren’t making what could be considered threats.
Make sure your business contracts are enforceable and that they don’t get your business into trouble. Contact Tampa business, asset and probate attorney David Toback to discuss protecting your business in all situations.