The Supreme Court unanimously held that statutory economic coercion exists in principle as a doctrine of English law, but concluded that in this case it did not give the plaintiff the right to terminate the new contract. In reaching this conclusion, Lords Hodge and Burrows took slightly different approaches to what constitutes an illegitimate threat or pressure. Simply put, common law coercion requires the offending party to an agreement to exert illegitimate pressure to force the other party to enter into an agreement (or amend an existing agreement), thereby giving an advantage to the offending party. When coercion is detected, it is not based on the pressure exerted on the person, but on their state of mind. In court proceedings in contract law, there must be an illegal or illegal act for coercion to occur. When a lawsuit for coercion is brought, it is because a party wants to prove that its consent to a contract was not made in good faith, thus not satisfying the essential requirements necessary for the conclusion of a contract. If one party invokes coercion because another party threatens to sue for more money, that would be an invalid reason because filing a lawsuit is a legal action. The Supreme Court ruled that there was no evidence that the defendant had used any reprehensible means to maneuver the plaintiff into a position of vulnerability. Under the existing contractual provisions, the defendant was entitled to reduce the plaintiff`s flight quotas and to terminate the contract with one month`s notice.

Although the offer to the plaintiff to sign the new contract (which waived any claim for unpaid commissions) amounted to “persistent business negotiations that exploited [the defendant`s] position as a monopoly supplier”, it was not an unscrupulous means of exerting pressure that would lead to lawful economic coercion. The defendant`s sincere belief, established by the High Court, that he had defended himself against the plaintiff`s claim was further evidence that his conduct had not been unscrupulous. The courts will not come to the aid of a party who has simply made a bad deal under potentially difficult economic conditions, but if economic coercion is proven, the primary remedy is annulment of the contract and/or damages. The contract is voidable, i.e. terminable at the choice of the innocent party. The doctrine of economic coercion has also been applied in the context of family law. L`opinion In re Marriage of Baltins (1989) 212Cal. App.3D 66, is an excellent example of the application of the doctrine in family law. The husband drafted a marriage contract that granted his wife only 10 to 15 percent of the marital community`s property. The wife only signed the agreement after the husband threatened to declare bankruptcy and avoid payment to the wife (or her daughter) if she did not sign immediately. Although the wife was represented by counsel, the lawyer was not consulted about the settlement agreement (as the husband told her he would not negotiate with lawyers), and the wife was clearly desperate, desperate and having difficulty coping. The court noted that “the most important feature [evidence of coercion] is the wife`s consent to a manifestly unfair agreement under which she received only 10-15% of the joint property and insufficient support for herself and the minor child.

The evidence shows no consideration for such an unequal agreement. Thus, the court applied the doctrine of economic hardship and the wife had the right to have the judgment on the dissolution of the marriage amended. There is also economic coercion if party A threatens to terminate an existing contract without legal justification if the other party, B, does not agree (within a few days) to a 10% increase in the contract price. B would have lost an extremely lucrative contract with a third party in the event of termination and would therefore have accepted the claim subject to reservation. Coercion refers to the act of using threats or psychological pressure to force someone to behave in a way contrary to their desires. In contract law, coercion is used as a form of defense against a crime in which the defendant uses threats to force the plaintiff to commit a crime that is against his will. A party who is compelled to perform an act or contract under duress may terminate the contract and render it null and void. Defending necessity involves committing an illegal act to prevent the risk of harm to another person. The defence of necessity and the defence of coercion can be used in court to show that there was no alternative but to commit the unlawful act. However, the two terms differ in that coercion is caused by the actions of another party, while necessity is a choice between two evils.

We were recently confronted with a case where our lending client`s client claimed that the authorizations he and his affiliates had given to the lender were questionable because they had been obtained due to economic constraints. The installations in question were not subject to consumer credit protection and the customer invoked coercion under ordinary law. The doctrine of economic coercion is similar to the general doctrine of coercion, threat and undue influence. However, each contains subtle differences and individual determinations. Although they often seem interchangeable and sometimes involve similar analyses, each requires individual determination and evaluation. Given the similar analysis, a party`s actions may hold it accountable under one or all theories. However, the refusal to supply goods in breach of contract, unless the buyer has provided additional consideration, does not constitute an economic constraint if other supplies are readily available elsewhere in the market. In such cases, the innocent party has a realistic alternative to submitting to coercion: he can buy elsewhere and then claim damages for breach of contract.

However, Lord Hodge (whom the other judges agreed) focused on the influence of fairness and the notion of “unscrupulousness” on the development of coercive law, noting that in cases where English courts have found coercion to be lawful, courts have treated the conduct in question as unscrupulous and have used “illegitimate” as a synonym for “unscrupulous”. Lord Hodge added that unscrupulousness was not a primary test to be applied generally, regardless of the context, noting that fairness takes into account the factual and legal context of a case. However, there will be cases where a Party will have no practical choice but to accept new unreasonable terms. If illegal pressure has been exerted on them, a right to economic pressure will arise. Historically, in contract law, an action according to which a contract was voidable on the ground of coercion could only succeed if a threat against the person (i.e. physical coercion) had caused the contract. Now, however, a contract can be cancelled due to economic coercion. The essential elements are that an unlawful threat has been made (for example, to violate an existing contract or to commit a crime) and that the injured party has no practical choice but to accept the conditions set by the threatening person.