People sometimes feel pressure to sign a new contract, perhaps at the insistence of the other party. At what point does that pressure void the contract?
“Duress” (also called “coercion”) is a defense to breach-of-contract claims in Minnesota. The defense arises when one person uses a threat or physical force to pressure another person into signing a contract. A court can use the defense to deny relief to a plaintiff.
This article looks at the duress defense to breach-of-contract claims in Minnesota.
Basics of Duress and Coercion
When people think of duress and coercion, they think of movies where the villain holds a gun to the victim's head and forces the victim to sign a one-sided contract. This can certainly be duress or coercion, but the concept has broader application.
“Duress” and “coercion” are often used interchangeably in the civil legal context, but “duress” is generally seen as name of the breach-of-contract defense. Duress involves an unlawful threat, use of force, or other action that overcomes the free will of the other party to the contract.
Usually, a defendant uses a duress defense to persuade the court not to enforce the contract. Sometimes, a plaintiff may be able to use the concepts to declare the contract void, but otherwise Minnesota generally does not have an independent “cause of action” for financial duress (sometimes called “economic duress” or “business compulsion”. St. Louis Park Inv. Co. v. R.L. Johnson Inv. Co., 411 N.W.2d 288, 291 (Minn. App. 1987), review denied (Minn. Oct. 30, 1987).
Criminal Actions as Duress
Criminal actions by the other party create a compelling duress defense if those actions procured the other party's signature on a contract. The criminal activity may involve an assault, terroristic threat, extortion or blackmail, swindle, fraud, or another unlawful act. A successful prosecution would seemingly give the other party a “slam dunk” case for duress.
But a criminal conviction is not necessary for a duress defense. There are many acts that could technically be a criminal offense that are never charged by a prosecutor. A party could develop and use these criminal acts to support the duress defense.
Situations That Do Not Involve Duress
On the other hand, certain things pressure the other party to sign a contract but do not rise to the level of duress. Here are some examples:
- A person without any income is forced to get a loan or sign up for a credit card to pay for things. The bank or credit card company use a compelling sales pitch. The consumer feels pressure to get the loan or credit card, but he or she will generally not have a duress defense without further evidence.
- A person threatens to bring a lawsuit unless the other party signs an agreement, such as a settlement or contract modification. That generally will not be enough to support a duress defense, as threatening a lawsuit is usually not an unlawful act.
- One party aggressively negotiates and “drives a hard bargain” to protect his or her interests. There is nothing illegal about being a hard bargainer on a contract.
Overwhelming a Person's Free Will
A person's actions must overwhelm the “free will” of the other person. In other words, the other person would not have signed the contract but for the wrongful action.
Minnesota courts have indicated in the probate context that to determine whether a person acts of her own free will it is necessary to consider the person's age, intelligence, experience, physical and mental health, and strength of character. Agner v. Bourn, 281 Minn. 385, 392, 161 N.W.2d 813, 818 (1968).
Legal Standards for Duress Defense
The legal standards for duress generally come from case law.
“Minnesota courts only recognize duress as a defense to a contract when there is coercion by means of physical force or unlawful threats, which destroys one's free will and compels compliance with the demands of the party exerting the coercion.” St. Louis Park Inv. Co. v. R.L. Johnson Inv. Co., 411 N.W.2d 288, 291 (Minn. App. 1987), review denied (Minn. Oct. 30, 1987). “Merely driving a hard bargain or wresting advantage of another's financial difficulty is not duress.” Id.
“The limitation of alternatives imposed by one's own financial problems does not constitute duress.” Bond v. Charlson, 374 N.W.2d 423, 428 (Minn. 1985).
“[A] claim of duress will not be sustained when the claimant entered into the contract with full knowledge of all the facts, advice from an attorney, and ample time for reflection.” St. Louis Park Investment Co. v. R.L. Johnson Inv. Co., 411 N.W.2d 288, 291 (Minn. App. 1987), review denied (Minn. Oct. 30, 1987).
Duress is only a defense if the threat “destroys the victim's free will and compels him to comply with some demand of the party exerting the coercion.” Wise v. Midtown Motors, Inc., 231 Minn. 46, 51, 42 N.W.2d 404, 407 (1950). Generally, there is no duress based on an alleged threat when the defendant is attempting “to enforce a lawful demand [ ] or one which he [or she] in good faith believes to be lawful.” Id.
Duress is an “affirmative defense” under Minn. R. Civ. P. 8.03. That means the defendant must raise the defense in the first pleading. It also means that the defendant has the burden of proving the defense by a preponderance of the evidence.
The duress defense to breach of contract does not require a criminal conviction. But a criminal conviction or evidence of criminal behavior can create a compelling duress defense.
Minnesota has a criminal coercion law that illustrates the type of behavior that might be considered duress in a civil case. The coercion statute at Minn. Stat. § 609.27 lists several acts that constitute coercion:
Subdivision 1. Acts constituting.
Whoever orally or in writing makes any of the following threats and thereby causes another against the other's will to do any act or forbear doing a lawful act is guilty of coercion and may be sentenced as provided in subdivision 2:
(1) a threat to unlawfully inflict bodily harm upon, or hold in confinement, the person threatened or another, when robbery or attempt to rob is not committed thereby; or
(2) a threat to unlawfully inflict damage to the property of the person threatened or another; or
(3) a threat to unlawfully injure a trade, business, profession, or calling; or
(4) a threat to expose a secret or deformity, publish a defamatory statement, or otherwise to expose any person to disgrace or ridicule; or
(5) a threat to make or cause to be made a criminal charge, whether true or false; provided, that a warning of the consequences of a future violation of law given in good faith by a peace officer or prosecuting attorney to any person shall not be deemed a threat for the purposes of this section; or
(6) a threat to commit a violation under section 617.261.
Similarly, an attempt to commit one of these acts is also a punishable criminal act under Minn. Stat. § 609.275.
These prohibited acts illustrate a range of activity that would support a civil duress defense, but a party is not limited to this range of behavior.
Duress in Various Contexts
There are many types of contracts and many situations where duress issues could arise.
Duress may involve arguments or threats between owners of a business over transfer of control of the business. It also may involve actions against a business partner, vendor, supplier, customer, or other stakeholder. More broadly, it could potentially involve any contract of the company that was procured through duress. A sophisticated business may have a hard time presenting a compelling duress defense, while an unwary consumer may have a higher chance of success.
Duress in the construction context may involve arguments on site between contractors regarding change orders, payment modifications, project plans, or other aspects of the construction contract. Similar disputes could arise between homeowners and the contractor or builder. The licensed contractor should be careful, as a successful duress defense against it could potentially serve as grounds for license sanctions.
Duress in the real estate context may involve family fights over transfers of jointly-owned land. It may also involve threats to procure an easement, lien, or other interest in land. Likewise, it could involve unreasonable pressure by an agent to get a buyer or seller to close a deal.
Duress could come up in the family law context between parents or spouses. It is not uncommon to see parties try to invalidate a mediated settlement or negotiated settlement using duress-type arguments. Duress may also come up in the context of prenuptial agreements, which have strict formation requirements. See, e.g., Kremer v. Kremer, 912 N.W.2d 617 (Minn. 2018) (prenuptial invalid where husband forced wife to sign it three days before leaving for destination wedding).
Legal settlements and releases are contractual in nature, so their validity is evaluated using basic principles of contract law. Beach v. Anderson, 417 N.W.2d 709, 711 (Minn. Ct. App. 1988), review denied (Minn. Mar. 23, 1988).
Courts have said that they would set aside or void settlements “(1) [f]or fraud or collusion; (2) for mistake; or, (3) where the stipulation was improvidently made and in equity and good conscience should not be allowed to stand.” Keller v. Wolf, 239 Minn. 397, 399, 58 N.W.2d 891, 894 (1953).
Duress and undue influence on a party may amount to a fraud. Blattner v. Blattner, 411 N.W.2d 24, 27 (Minn. Ct. App. 1987), review denied (Minn. Oct. 30, 1987). Settlement releases may therefore be subject to the duress defense. Sorensen v. Coast-To-Coast Stores, 353 N.W.2d 666, 670 (Minn. Ct. App. 1984); Wallner v. Schmitz, 239 Minn. 93, 57 N.W.2d 821 (1953); Tomscak v. Tomscak, 352 N.W.2d 465-66 (Minn. Ct. App. 1984) (stipulations may be vacated for fraud, duress, or mistake).
Wills, trusts, and powers of attorney are basically contracts. Duress-type arguments are used in will contests and to challenge other estate-planning documents, such as trusts or powers of attorney.
For example, older people with capacity issues may be vulnerable to pressure. Family members may want to be included in the person's estate plan and want others to be excluded.
In the wills and trusts context, the term “undue influence” is generally used instead of duress. Undue influence involves a situation in which “confidential relations exist between parties and one of them uses the relationship to secure an inequitable advantage [.]” Agner v. Bourn, 281 Minn. 385, 390, 161 N.W.2d 813, 817 (1968). Here is a good resource for undue influence issues.
Here is a summary of the undue-influence concept from In re Estate of Torgersen, 711 N.W.2d 545, 551-52 (Minn. Ct. App. 2006) review denied (Minn. June 20, 2006):
To invalidate a will for undue influence, a contestant must show that another person exercised influence at the time the testator executed the will to the degree that the will reflects the other person's intent instead of the testator's intent. In re Estate of Reay, 249 Minn. 123, 126, 81 N.W.2d 277, 280 (1957). Conjecture and suspicion are insufficient to prove undue influence. Id.; In re Estate of Novotny, 385 N.W.2d 841, 843 (Minn. App. 1986) (holding will contestant's burden of establishing undue influence was not met merely by relying on presumption of undue influence). The evidence must show that the influence exerted "was so dominant and controlling of the testator's mind that, in making the will, he ceased to act of his own free volition and became a mere puppet of the wielder of that influence." In re Estate of Congdon, 309 N.W.2d 261, 268 (Minn.1981) (quotation omitted).
Courts consider several factors when determining whether a testator was unduly influenced, including (1) an opportunity to exercise influence; (2) the existence of a confidential relationship between the testator and the person claimed to have influenced the testator; (3) active participation by the alleged influencer in preparing the will; (4) an unexpected disinheritance or an unreasonable disposition; (5) the singularity of will provisions; and (6) inducement of the testator to make the will. In re Estate of Peterson, 283 Minn. 446, 449, 168 N.W.2d 502, 504 (1969); In re Estate of Wilson, 223 Minn. 409, 413, 27 N.W.2d 429, 432 (1947).
The bottom line is that courts invalidate estate plans on grounds of undue influence, much like courts void contracts that are the result of duress. However, undue influence may be an easier concept to prove because it does not necessarily involve illegal behavior.
Legal Theories Related to Duress
Duress is an independent ground on which to defend against a breach-of-contract claim. However, there are several other legal theories that use similar reasoning and which a party may consider raising in the case.
If there is not enough wrongful conduct to support a duress defense but the contract is very unfair, the party may have an “unconscionability” defense. This is sometimes called a “contract of adhesion” defense.
Under Minnesota law, “a contract is unconscionable if no clear-thinking person would make it, or if no such person would accept it.” Wold v. Dell Fin. Servs., 598 F. Supp.2d 984, 988 (D. Minn. 2009). Put another way, “[a] contract is unconscionable if it is such as no man in his senses and not under delusion would make on the one hand, and as no honest and fair man would accept on the other.” Kauffman, Stewart, Inc. v. Weinbrenner Shoe Co., 589 N.W.2d 499, 502 (Minn. Ct. App. 1999) (quotation omitted).
Whether a contract is unconscionable is a question of law. Osgood v. Med., Inc., 415 N.W.2d 896, 901 (Minn. Ct. App. 1987), review denied (Minn. Feb. 12, 1988). A party must show two things in order to show unconscionability:
(1) it had no “meaningful choice” but to accept the contract term as offered, and (2) that the termination clause was “unreasonably favorable” to the other party.
Dorso Trailer Sales v. Amer. Body , 372 N.W.2d 412, 415 (Minn. Ct. App. 1985).
A situation might not involve a threat or show of force for duress, but it could still be fraud. Fraud basically involves one person tricking the other person into signing a contract.
Fraud could potentially serve as its own ground to defend against a breach-of-contract claim, or it could serve as the party's own affirmative claim against the other party.
In order to make out a claim of fraud a party must prove:
(1) a false representation of a past or existing material fact susceptible of knowledge; (2) the representation was "made with knowledge of the falsity of the representation or made without knowing whether it was true or false;" (3) intent to induce reliance on the false representation; (4) actual reliance; and (5) damages as a result of the reliance.
Valspar Refinish, Inc. v. Gaylor's, Inc., 764 N.W.2d 359, 368 (Minn. 2009).
A situation may involve behavior that looks more like fraud than duress. In addition to fraud, a party may raise an “equitable estoppel” argument.
Equitable estoppel is “designed to prevent a party from taking unconscionable advantage of his own actions.” Bethesda Lutheran Church v. Twin City Constr. Co., 356 N.W.2d 344, 349 (Minn. Ct. App. 1984), review denied (Minn. Feb. 5, 1985). “An essential element of equitable estoppel is reasonable reliance” by the plaintiff. Anderson v. Minn. Ins. Guar. Ass'n, 534 N.W.2d 706, 709 (Minn. 1995).
The basic elements are:
- There must be conduct—acts, language, or silence— amounting to a representation or a concealment of material facts.
- These facts must be known to the party estopped at the time of . . . said conduct, or at least the circumstances must be such that knowledge of them is necessarily imputed . . . .
- The truth concerning these facts must be unknown to the other party claiming the benefit of the estoppel, at the time when such conduct was done, and at the time when it was acted upon . . . .
- The conduct must be done with the intention, or at least with the expectation, that it will be acted upon by the other party, or under such circumstances that it is both natural and probable that it will be so acted upon.
Del Hayes & Sons v. Mitchell, 230 N.W.2d 588, 591-92 (1975).
A duress defense can be more compelling when the person has reduced capacity to understand what is going on. But incapacity may also be an independent ground on which to invalidate the contract. If the situation does not involve a threat or use of force, then incapacity may be a more viable defense.
In Minnesota, a person is presumed to be competent. Fisher v. Schefers, 656 N.W.2d 592, 595 (Minn. Ct. App. 2003). “Mental competence is measured at the time the party executes the document.” Id. “Mere mental weakness does not incapacitate a person from contracting. It is sufficient if he has enough mental capacity to understand, to a reasonable extent, the nature and effect of what he is doing.” Id. at 595-96 (quoting Timm v. Schneider, 203 Minn. 1, 4, 279 N.W. 754, 755 (1938).
Medical evidence may be helpful in proving incapacity, but general observations of the person can also support the argument.
Reformation and Rescission
Even if the duress defense and other theories may not be successful, the situation might involve mistakes in the written contract or problems with how the contract was formed.
If the parties' disagreement stems from mistaken terms in the written contract, there may be a claim for “reformation”. Reformation “is available when a party seeks to alter or amend language in a contract so that the contract reflects the parties' true intent when they entered into the contract.” SCI Minn. Funeral Servs., Inc. v. Washburn-McReavy Funeral Corp., 795 N.W.2d 855, 864 (Minn. 2011). Reformation can be used offensively to correct the contract or defensively to avoid a breach-of-contract claim.
If there was significant confusion about important terms of the contract, a party defending a breach-of-contract claim may raise a “rescission” argument. Rescission is a court-ordered termination of a contract, generally due to a formation problem. A contract may be rescinded if “both parties were mistaken with respect to facts material to the agreement.” Id.
Practical Suggestions for Duress Issues
- Negotiate aggressively, but do not threaten the other person or use physical force.
- When in doubt, give the other reasonable time to consider the contract and, if necessary, allow that person to discuss the deal with an attorney.
- If there is any concern about duress, take note of the valid reasons why the other person is entering into the contract. Some of these reasons could even be listed in the “Recitals” portion of the contract.
- Be aware of how aggressively you push a person with deficits, such as those with mental illness, cognitive declines, sensory issues, or similar problems. These traits could make the person more vulnerable and make their duress defense more compelling.
- If you cannot persuade the other person to sign the contract through ordinary means, consider whether it is even worth contracting with that person. If you do contract with the person, consider making a record of the negotiations to protect yourself.
- If the other person has a plausible duress defense, understand the risk if the court refused to enforce your agreement.
- Be certain to raise duress as an affirmative defense in your initial pleading and develop facts to prove that defense.
Note: These are practical suggestions that may help people, but they are not meant to be a substitute for legal advice.
Pushing too hard to close a deal can be risky, as duress can be a full defense to a breach-of-contract claim.
The party arguing for duress must present affirmative evidence to support the defense, such as behavior that involves a threat or use of force. While a criminal conviction is not necessary, those types of criminal acts can create a compelling defense.
Duress will not apply to every case, but it can be an option for the victim of an oppressive contract.
If you need legal advice or representation on a contract dispute, Contact Us for a free consultation. With offices in Shakopee (Scott County) and Litchfield (Meeker County), we serve clients throughout the Twin Cities and Greater Minnesota.