The defense of duress is not unusual in criminal cases. It’s when a defendant says he or she was forced to commit a crime by another person. In criminal law, an offense is sometimes excused if a jury believes the defendant was under duress.

Duress also is a claim in business and corporate litigation — specifically, economic duress. Different than in criminal cases, economic duress can be a heavy burden to prove in most states, including California. Even so, economic duress happens. It can, for instance, result from a business deal when one side is facing financial ruin if the deal itself ultimately isn’t made.

In California, a defendant in civil court can claim that there was no deal in place, however, because consent was given under duress. To succeed, the defendant must prove that the plaintiff used a wrongful act or a wrongful threat to pressure the defendant into the contract, according to the California Civil Code. The defendant’s attorney also would likely try to show that a reasonable person would not have agreed to the deal unless he or she was under a considerable wrongful act or wrongful threat. With economic duress, the wrongful act or wrongful threat is usually bankruptcy or other financial disaster. According to the state civil code, consent is not free when it’s obtained through duress, menace, undue influence or mistake. If the courts decide that the defendant has proved economic duress, then the deal was never in place to begin with, and no breach of contract took place.

California courts have recognized economic duress as a basis for rescinding a settlement. But they also want to protect businesses’ right to form and count on the validity of contracts. That being said, most courts will apply economic duress in a decision only under special circumstances and only as a last resort.

Economic duress is a unique claim. If you believe you agreed to a costly business deal under economic duress, or if you are being sued and the grounds of the litigation is economic duress, you need an experienced corporate attorney on your side to handle your case in and out of the courtroom.

Each business and business entity is unique. To understand the different options and which direction will be best for your situation, you need to consult with an experienced corporate attorney. Michael Leonard, Esq., of San Diego Corporate Law, named “Best of the Bar” by the San Diego Business Journal in 2016, has the expertise to guide you through everything from forming your business, to creating buy-sell agreements, to executing contracts and anything in between. To schedule a consultation to discuss any business-related matter, please contact Mr. Leonard by visiting San Diego Corporate Law or by telephone at (858) 483-9200.