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

749 F. Supp. 794 (E.D. Mich. 1990)

 

RULE:

Courts in Michigan recognize the doctrine of economic duress or "business compulsion." 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. In other words, 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 manufacturer sought recovery from defendant parts supplier for breach of a three-year contract to supply parts and for a declaratory judgment that it did not have to pay the supplier price increases that the manufacturer allegedly agreed to under duress. The supplier counterclaimed for the monies owed under the modified agreements and sought a summary judgment on the manufacturer's claims and on its counterclaim. The Court denied the supplier's motion for a summary judgment on the manufacturer's complaint for breach of contract.

 

ISSUE:

Were the succeeding agreements executed under economic duress or "business compulsion" thus justifying the denial of summary judgment?

ANSWER:

Yes.

CONCLUSION:

Manufacturer presented a triable issue of fact as to whether the superceding agreements were executed under economic duress or "business compulsion." A subsequent contract or modification is invalid and therefore does not supersede an earlier contract when the subsequent contract was entered into under duress. There is sufficient evidence to allow a reasonable finder of the facts to determine that Kelsey-Hayes was under duress when it executed the 1989 agreements.

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