Brief Fact Summary. Plaintiff Austin Instrument, Inc. was a subcontractor that Defendant Loral Corporation, utilized as a supplier of components to make radar sets for the Navy. After Plaintiff was awarded subcontracts for only those components on which it was the low bidder, Plaintiff refused shipment on an existing subcontract unless Defendant consented to substantial price increases and placed an order with Plaintiff for all 40 components needed on the second subcontract.
Synopsis of Rule of Law. A contract is voidable by reason of duress if the aggrieved party was forced to agree to the contract by means of a wrongful threat precluding the exercise of free will.
Issue. Are the subcontracts voidable by Defendant, as they were procured under duress?
Held. Yes. A contract is voidable on the ground of duress if the “immediate possession of needful goods is threatened” and the threatened party could not obtain the goods from another source. Here, Plaintiff not only threatened Defendant with a stoppage in deliveries if Defendant failed to meet its demands, but Plaintiff actually stopped deliveries. Defendant consulted 10 other suppliers to inquire as to whether they could provide the components and no one could. Defendant has sufficiently proved that it acted under duress.
Dissent. The facts adduced at trial do not support a conclusion that Defendant acted under duress by Plaintiff.
Discussion. A contract cannot be voided by reason of duress unless the aggrieved party can prove that it was deprived of free will and the duties under the contract cannot be satisfied by a third party.