k8k2 - Katherine Mohr K2 - Daicoff CHAPTER SIX: MARKET...

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Katherine Mohr K2 - Daicoff CHAPTER SIX: MARKET MISCONDUCT OR ERROR P 405 the test for duress is a subjective one (“preclude the exercise of the victim’s free will”; cts will consider experience, sophistication and other personal characteristics of the victim); while the test for economic duress is an objective one Duress by Actual Physical Compulsion [see Rest. 2d § 174 CB p 895] ELEMENTS: - actual physical compulsion exerted upon the victim, - by a party to the K or by a third party, - which causes the victim to enter into the K [“causal connection”] - RESULT: K is VOID Old Rule for Duress: actual imprisonment; fear of life or limb req’d. to make K void. Current Trend: “any wrongful act or threat that overcomes the free will of the contracting party.” Void means: (1) K is not enforceable by anyone - not even by an innocent third party or a subsequent assignee - even in the face of reasonable reliance (2) K cannot be ratified by the victim Bond (MINORITY) Rule // MD = 3-Tier // Rest. = 2 tier Duress by Improper Threat = K VOIDABLE [see Rest. 2d § 175 CB p 895]. Improper Threats, Generally: [see Rest. 2d § 176 ] - can be express or implied - “hard bargaining” not sufficient to constitute duress [refusal to sign K unless you agree to my terms] - Rest. req’s. resulting K to be “unfair & more” (BLL outline) Examples of Improper Threats : - violence or threats of violence (includes battery) - threat to commit crime/tort to injure person, family or property - threats of imprisonment - threat to wrongfully seize or withhold goods or real property ** o add’l element necessary: “no reasonable alternative” but to agree - threat to terminate employment unless emp’ee agrees to a new K term which is unrelated to employment [economic duress] - blackmail - ?? threats not to engage in business dealings with the victim, such as refusing to sell goods to them or refusing to buy goods produced [this also usually violates antitrust laws so it is also criminal] - Threat that is a breach of the (implied) duty of good faith and fair dealing under an existing K with the victim. Voidable means: (1) K is not enforceable by the threatening party to the K, even if he/she gave value for or relied materially on the K; (2) K can be ratified or aff’d. by the victim once the duress stops; (3) K is enforceable against the victim by an innocent party [to the K or a subsequent assignee] provided that the third party is reasonably unaware [and has no reason to know] of the duress AND either relies on the K to his or her detriment or gives value for the K [Rest. = “relies materially on the transaction or gives value.”] “Borderline” Cases: 1) A bad faith threat to breach a K or not to perform a K used as a way to force someone to enter into a new K (or modify the old K) - the extortion of a Kual Page 1 of 22
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Katherine Mohr K2 - Daicoff modification from the other party – can constitute duress if the breach would result in
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k8k2 - Katherine Mohr K2 - Daicoff CHAPTER SIX: MARKET...

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