The fundamental issue in a duress case is not the victim's state of mind but whether the statement that induced the promise is the kind of offer to deal that should be discouraged, hence a "threat."
Defendant contractor failed to fulfill its contractual obligations to plaintiff subcontractor by, among other things, failing to supply necessary materials on time, resulting in extra costs of completion. Plaintiff, who was in desperate financial straits, accepted defendant's oral offer to pay the additional costs rather than terminating the contract. Defendant refused to pay all that plaintiff demanded. Plaintiff accepted what was offered. Thirty months later, plaintiff filed suit requesting a larger sum, plus damages, and claiming that the settlement agreement was invalid because it was procured by "economic duress." The district court granted defendant summary judgment. Plaintiff appealed. The court affirmed the judgment.
Was the settlement agreement invalid for being procured by "economic duress?"
Plaintiff subcontractor was not acting under duress when it made the settlement that years later it tried to repudiate. The entire contract price had been paid, plus the extras, and plaintiff had waived its subcontractor's lien, indicating that it had been paid in full. Plaintiff could have terminated the contract without penalty because of defendant contractor’s default but chose not to do so. Plaintiff's cash needs alone did not entitle him to trial on the settlement's validity. Hence, the settlement agreement could not be invalidated on account of “economic duress”.