Legal Definitions - economic duress

Economic duress is a term used in contract law to describe a situation where one party uses improper or illegal tactics to force another party into a commercial agreement. This coercion can take the form of threats or other forms of pressure that cause the other party to fear economic hardship if they do not agree to the terms of the contract.

To prove economic duress, a party must demonstrate that:

• A pre-existing contract exists between the plaintiff and the defendant
• The defendant threatens to terminate the pre-existing contract
• The plaintiff, under duress, accepts the defendant's terms and enters into the new contract

For example, imagine that a small business owner has a contract with a supplier to purchase goods at a certain price. The supplier threatens to terminate the contract unless the business owner agrees to pay a higher price for the goods. Fearing economic hardship if they lose their supplier, the business owner agrees to the new terms under duress. In this case, the business owner may have a valid claim of economic duress.