This section is from the book "The Law Of Contracts", by William Herbert Page. Also available from Amazon: Commercial Contracts: A Practical Guide to Deals, Contracts, Agreements and Promises.
Taking advantage of a creditor's financial necessities, if not caused by the debtor otherwise than by withholding payment of the debt in question, and thereby compelling him to make some concession to the debtor in consideration of payment by the latter, is not duress.1 A threat of enforcing an existing valid contract is not duress,2 as a threat to forfeit collateral securities for non-payment under a prior existing contract.3 If a vendor has a right to sell the property in case the vendee doe3 not comply with the contract, the vendor's threat to sell the property is not duress, although the vendee is financially unable to perform.4 The fact that a creditor has a right to declare the entire debt due because certain payments thereon are overdue and that he demands an additional payment before he will accept the entire debt and release the security therefor, does not amount to duress.5
10Shelton v. Jackson, 20 Tex. Civ. App. 443, 49 S. W. 415.
11Silliman v. United States, 101 U. S. 465, 25 L. ed. 987.
12 Southern Sand & Material Co. v. People's Savings Bank & Trust Co., 101 Ark. 266, 142 S. W. 178.
13 Smithwick v. Whitley, 152 N. Car. 369, 67 S. E. 913.
14 March v. Bricklayers' & Plasterers' Union No. 1, 79 Conn. 7, 4 L. R. A. (N.S.) 1198, 63 Atl. 201. See Sec. 1530 et seq.
1 French v. Shoemaker, 81 U. S. (14 Wall) 314, 20 L. ed. 852; Louisville Veneer Mills Co. v. Clemonts, (Ky.), 109 S. W. 308; Hackley v. Headley, 45 Mich, 569, 8 N. W. 511. In cases like this there is often no consideration for the new promise. See Sec. 595. So in Adams v. Schiffer, 11 Colo. 15, 7 Am. St. Rep. 202, 17 Pac. 21, is an obiter that A's merely taking advantage of B's financial needs to withhold A's debt to 6 and thereby force B to make a settlement favorable to A is not duress.
2 0tt v Pace, 43 Mont. 82, 115 Pac. 37.
3 0tt v. Pace, 43 Mont. 82, 115 Pac. 37.
4 Miller v. Davis' Estate, 52 Colo. 485, 122 Pac. 793.
5Hamilton v. Kentucky Title Sav. Bank & T. Co., 159 Ky. 680, L. R. A. 1915B, 498, 167 S. W.898.
Refusal to enter into a contract is not duress,6 such as a refusal to act as one's surety for his future liability to his workmen, though he is thereby forced to give up a contract for grading a section of a railroad;7 or refusal to advance money for operating a mine, so as to induce the other member of such mining partnership to enter into a contract;8 or refusal of the officers of a town to call a special election upon the question of a public improvement, unless certain property owners would agree to pay a certain proportion of the cost thereof.9 The fact that one who lends money to a debtor who is financially embarrassed demands ample collateral security for such loan, does not amount to duress.10 A contract by one who is in great financial straits, by which he sells certain, bonds belonging to his corporation for ninety cents on the dollar, and to indemnify X against any liability on X's contract to repurchase such bonds from the holders thereof in three years at one hundred and eleven cents on the dollar, is not to be regarded as made under duress if both parties to such contract took a risk.11 The fact that an injured employe is in such financial distress that he is induced to release a claim for personal injuries for an inadequate consideration, does not amount to duress.12 The fact that A enters into a contract of compromise because his wife is not expected to live, and he wishes to return home, and because A does not wish to stay to look after certain personal property himself, but wishes to induce the adversary party to take care of such personalty, is said not to amount to duress, especially since it is not shown that the adversary party demanded such contract of compromise, and since A could have gone home without entering into such contract.13 The fact that an invalid assessment is paid because the mortgages upon the property which is assessed contain provisions for their maturity if the taxes are not paid regularly, is said not to amount to duress.14
Under circumstances of especial hardship and oppression an actual or threatened breach of contract may amount to duress.15
6 MoCormick v. Dalton, 53 Kan. 146, 35 Pac. 1113.
7McCormick v. Dalton, 53 Kan. 146, 35 Pac. 1113.
8Connolly v. Bouck, 174 Fed. 312, 98 C. C. A. 184.
9Electric Plaster Co. v. Blue Rapids City Township, 77 Kan. 580, 96 Pac. 68.
10Colonial Trust Co. v. Hoffstot, 219 Pa. St. 497, 69 Atl. 52.
11Colonial Trust Co. v. Hoffstot, 219 Pa. St. 497, 69 Atl. 52.
12 Louisville Veneer Mills Co. v. Clemonts (Ky.), 109 S. W. 308.
13 Horn v. Davis, 70 Or. 498, 142 Pac. 544.
14Brunson v. Board of Directors, 107 Ark. 24, 44 L. R. A. (N.S.) 293, 153 S. W. 828.
15 Illinois. Chicago v. Northwestern
Thus a threat of cutting off the supply of water16 or gas,17 may amount to duress where such conduct will cause great damage. A's refusal to furnish B with water for irrigation from a ditch which B is entitled to use, and thus endangering B's crops, unless B would sign a contract, is duress.18 Where A by his wrongful conduct reduces B to financial straits and then takes advantage of his position to extort a contract that B would not otherwise have made, duress exists.19 So duress exists where A, a debtor of B's, induces other debtors of B's to stop payments to B, and takes advantage of the financial necessity thus produced to compel B to sign the contract demanded by A.20 Where A, a depositor in B's bank, deeded land to B and was paid therefor, and B afterwards bought up C's unfounded claim to such land and refused to honor B's checks unless A paid B a part of what B had paid C, duress was held to exist, since B's wrongful act is the direct cause of A's necessities.21 So it is duress where a railroad company forces a construction company into practical insolvency by withholding payments due and thus compels it to accept a thousand dollars per mile less than the contract price.22 So it is duress where an insured after a fire pays to his lessor an amount which he does not owe, to induce him to join in executing proofs of loss and in indorsing drafts, the insurance being payable to lessor and lessee as their interest should appear.23 A threat by a lessor of realty, in whose possession policies of fire insurance were left, to destroy such policies so as to prevent the lessee from recovering his interest therein after loss, is such duress as to enable the lessee to resist enforcement of a contract induced by such threats.24 So where A was badly injured in an accident caused by the negligence of a railroad company, and had no money and the company refused him transportation or compensation for his injuries unless he would accept it as performance of an invalid contract of release, A was allowed to avoid such contract.25 If A has been in exclusive charge of B's business, understands such business thoroughly, has entered into a number of contracts on B's behalf, involving large sums of money, has in his possession a considerable amount of money which he has collected for A, and many written contracts and other documents relating to B's business, and if no one else could carry on B's business without a considerable loss for the time being, A's threat to leave B's employment and to take with him B's contracts and other property, may amount to duress, especially if A had planned such state of affairs in order to coerce B into executing certain notes payable to A.26 The act of a purchaser in possession, in refusing to pay the purchase price so that a mortgage thereon could be discharged, or to release his interest therein, thereby exacting a bargain which is very unfair to the vendor, is duress.27 A refusal to accept payment of a mortgage debt with interest and costs and to discharge a pending foreclosure proceeding, amounts to duress.28 If a refusal to pay illegal fees for the administration of an estate and an attempt to seek redress by a legal proceeding without paying them would involve a delay which would be injurious both to the estate and to third persons, the demand for such fees is duress.29
Mut. L. Ins. Co., 218 111. 40, 1 L. R. A. (N.S.) 770, 75 N. E. 803.
Michigan. Pingree v. Gas Co., 107 Mich. 156, 65 N. W. 6.
Minnesota. Panton v. Duluth, etc., Co., 50 Minn. 175, 36 Am. St. Rep. 635, 52 N. W. 527.
New York. Kilpatrick v. Germania L. Ins. Co., 183 N. Y. 163, 2 L. R. A. (N.S.) 574, 75 N. E. 1124.
North Dakota. Malin v. LaMoure, 27 N. D. 140, 50 L. R. A. (N.S.) 997, 145 N. W. 582.
16Green v. Byers, 16 Ida. 178, 101 Pac. 79; Chicago v. Northwestern Mut. L. Ins. Co., 218 111. 40, 1 L. R. A. (N.S.) 770, 75 N. E. 803; Panton v. Duluth, etc., Co., 50 Minn. 175, 36 Am. St. Rep. 635, 52 N. W. 527; St. Louis Brewing Association v. St. Louis, 140 Mo. 419, 37 S. W. 525, 41 S. W. 911.
17 Indiana, etc., Co. v. Anthony, 26 Ind. App. 307, 58 N. E. 868. So a refusal to furnish gas as required by law unless the owner of the house will agree to pay a gas bill incurred by a former owner is duress. Such promise also lacks consideration. New Orleans, etc., Co. v. Paulding, 12 Rob. (La.) 378.
18 Green v. Byers, 16 Ida. 178, 101 Pac. 79.
19 Adams v. Schiffer, 11 Cc!o. 15, 7 Am. St. Rep. 202, 17 Pac. 21; Brueg-gestradt v. Ludwig, 184 111. 24, 56 N. E. 419 [affirming 82 111. App. 435]; Vyne v. Glenn, 41 Mich. 112, 1 N. W. 997; Fitzgerald v. Construction Co., 44 Neb. 463, 62 N. W. 899.
20Vyne v. Glenn, 41 Mich. 112, 1 N. W. 997.
21 Adams v. Schiffer, 11 Colo. 15, 7 Am. St. Rep. 202, 17 Pac. 21. Where a similar promise was made because the bank threatened to attach A's deposit, it was held that duress did not exist. Flack v. Bank, 8 Utah 193, 17 L. R. A. 583, 30 Pac. 746.
22 Fitzgerald v. Construction Co., 44 Neb. 463, 62 N. W. 899.