A contract may be unenforceable by reason of economic duress or business compulsion where undue or unjust advantage has been taken of a person's economic necessity or distress to coerce him into making the agreement.
Plaintiff and respondent entered into a lease agreement which involved a large sum of money. However, the respondent took plaintiff to court when the latter only paid a small percentage of what was owed. Plaintiff, in his defense, alleged that he signed the contract during a time where he was under dire financial straits, thus depriving him of his will.
Did coercion attend the perfection of the contract?
The court held that plaintiff sufficiently pleaded the affirmative reply of economic duress by alleging that he informed defendant that he was in dire financial straits. It was successfully shown that he accepted defendant's payment, a fraction of what was owed, to prevent foreclosure of his home. The defendant threatened that unless plaintiff signed the release defendant's attorneys would prevent plaintiff from obtaining payment of any portion of the sum.