STA LEGAL LOG – May 2022
Co-Managing Partner (LI),
Kaufman Dolowich Voluck
Attorneys at Law Legal Counsel,
Subcontractors Trade Association
Economic Duress Is Extremely Hard to Prove
By: Andrew Richards, Co-Managing Partner(LI), Kaufman Dolowich Voluck, Attorneys at Law Legal Counsel, Subcontractors Trade Association
There are times in business when you believe that you have no choice but to capitulate to someone’s demand or settle a claim or case because you would have incurred extreme hardship had you not done so. Some people compromise their position thinking that they will be able to claim that they did so under economic duress and have a court review whether the new agreement may be rescinded. For example, a developer may have to choose between paying an architect additional sums to perform services which the parties dispute are contained in the original scope of services or pay another architect significantly more money to take over for the current architect if the current architect will not perform without acknowledgment by the developer that the services are additional.
While the developer may believe that he/she was blackmailed, it is very difficult to prove economic duress and have an agreement rescinded unless the injured party can prove fraudulent inducement. Common sense many times tells us that an agreement should be rescinded due to the obvious nature of the “blackmail”. However, legal research shows that over 90% of the reported cases on this issue do not find that an agreement may be rescinded due to economic duress. The ones that do require a party to show that they have exhausted all steps to have the services performed by another party and that it would be unconscionable for the compromised party to have to incur such significant extra fees. The key is that proof of the steps taken must be kept and that the party exhausted all reasonable means to obtain an alternative source. But keep in mind that there are very few instances where a court finds that the party had to rescind an agreement due to economic duress and that no party should expect to prevail on such a claim.
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