Kelsey-Hayes Co. v. Galtaco Redlaw Castings Corp.

749 F. Supp. 794

 

RULE:

Under Michigan state law, a contract is voidable if a party's manifestation of assent is induced by an improper threat by another party that leaves the victim no reasonable alternative. Essentially, economic duress can exist in the absence of an illegal threat; the threat must merely be wrongful. Even acts lawful and non-tortious may be wrongful depending on the circumstances.

FACTS:

Plaintiff entered into a requirements contract with defendant, for the purchase of castings. The contract was for a three-year term and it included fixed price terms. Defendant began to suffer financial difficulties and made an offer to its customers that it would keep operating in exchange for a price increase of thirty percent. Plaintiff was not able to find an alternative source of castings so it accepted Defendant’s offer, although it claimed the offer amounted to a breach of contract. Defendant’s other customers found alternate supplies of castings and defendant offered plaintiff an additional 30% increase in exchange for remaining in operation for plaintiff's benefit. Plaintiff felt it had no choice but to accept, as it still had not found a reasonable alternate source for castings. Plaintiff also feared that if it did not accept, it would cause its major client, Ford Motor Co., to stop production and destroy plaintiff’s business reputation. Plaintiff sued for breach of contract, asking for a declaratory judgment releasing it from paying the increased prices. Defendant moved for summary judgment, contending that the price modification invalidated the previous contract.

ISSUE:

Whether an individual has to be subjected to a threat of a tort/crime in order to sustain a claim of duress?

ANSWER:

No, an individual does not have to be subjected to a threat of a tort/crime in order to sustain a claim of duress.

CONCLUSION:

In denying the motion for summary judgment, the court held that the plaintiff presented a triable issue of fact as to whether the superceding agreements were executed under economic duress or "business compulsion." The court also found that the plaintiff presented a triable issue as to whether it had protested the higher price and thus put the supplier on notice that the superceding modifications were not entered into freely.

Click here to view the full text case and earn your Daily Research Points.