Brief Fact Summary. This case involves a requirements contract where the supplier threatened to stop production if the buyer did not agree to pay a higher price for the product.
Synopsis of Rule of Law. A contract is voidable if made under economic duress.
To render an agreement voidable on grounds of duress it must be shown that the party's manifestation of assent was induced by an improper threat which left the recipient with no reasonable alternative save to agree.View Full Point of Law
Issue. Must a person be subjected to an unlawful act such as threat of a tort or crime in order to make a claim of duress?
Held. No. Motion for summary judgment denied. Declaratory judgment granted in favor of Plaintiff.
Michigan courts recognize the doctrine of economic duress and Defendant’s offer to Plaintiff amounted to economic duress.
Economic duress can exist even in the absence of criminal or tortuous activity, so long as assent is induced by an improper threat and the victim is left with no reasonable alternative.
Discussion. The court looked to Michigan law to define economic duress. In the instant case, it seemed clear that Plaintiff was left with no reasonable alternative and had no choice, but to assent to Defendant’s offer. Although Plaintiff assented, it also vigorously complained that it viewed Defendant’s offer to be a breach of contract, giving Defendant notice that Plaintiff did not freely enter into the modification. The court noted that it would have been inadequate for Plaintiff to accept the breach and then sue for damages, as Plaintiff would have then been forced to stop production and risk damaging its business reputation. Finally, the court examined the UCC and found that its language supported the economic duress doctrine.