Rich & Whillock, Inc. v. Ashton Dev., Inc. - 157 Cal. App. 3d 1154, 204 Cal. Rptr. 86 (1984)

Rule:

The doctrine is equitably based and represents but an expansion by courts of equity of the old common-law doctrine of duress. As it has evolved to the present day, the economic duress doctrine is not limited by early statutory and judicial expressions requiring an unlawful act in the nature of a tort or a crime. Cal. Civ. Code § 1569(2). Instead, the doctrine now may come into play upon the doing of a wrongful act which is sufficiently coercive to cause a reasonably prudent person faced with no reasonable alternative to succumb to the perpetrator's pressure. The assertion of a claim known to be false or a bad faith threat to breach a contract or to withhold a payment may constitute a wrongful act for purposes of the economic duress doctrine. Further, a reasonably prudent person subject to such an act may have no reasonable alternative but to succumb when the only other alternative is bankruptcy or financial ruin.

Facts:

Rich & Whillock, Inc. sued Ashton Development, Inc. for the balance due under a grading and excavating contract. The fact showed Rich & Whillock encountered rock during its performance of the contract, and Ashton Development agreed to pay the extra cost required for blasting. Rich & Whillock submitted bills for the work regularly and they were paid. After completion of the work, Rich & Whillock submitted a final bill which Ashton Development and Bob Britton, Inc. refused to pay. Rich & Whillock then signed an agreement for a final compromise payment and a release. The trial court awarded Rich & Whillock the balance due under the contract, finding the settlement agreement and release signed by Rich & Whillock were the products of economic duress and therefore were unenforceable.

Issue:

Did the trial court correctly conclude that Ashton Development and Bob Britton were liable for the $ 22,286.45 balance due under the contract?

Answer:

Yes.

Conclusion:

The court held that there was substantial evidence to support the trial court's implied finding that defendants acted in bad faith when they refused to pay the final billing and that the settlement and release were the product of economic duress, where defendants had never really disputed the actual amount owed, where they knew Rich & Whillock was a new company overextended to creditors and subcontractors and was faced with imminent bankruptcy if not paid, where Rich & Whillock strenuously protested defendants' course of tactics, and where it succumbed to them only to avoid economic disaster to itself and the adverse ripple effects of its bankruptcy on those to whom it was indebted.