CACI 333 Affirmative Defense—Economic Duress

California Civil Jury Instructions CACI

333 Affirmative Defense—Economic Duress

[Name of defendant] claims that there was no contract because [his/her/nonbinary pronoun/its] consent was given under duress. To succeed, [name of defendant] must prove all of the following:

1.That [name of plaintiff] used a wrongful act or wrongful threat to pressure [name of defendant] into consenting to the contract;

2.That a reasonable person in [name of defendant]’s position would have believed that there was no reasonable alternative except to consent to the contract; and

3.That [name of defendant] would not have consented to the contract without the wrongful act or wrongful threat.

An act or a threat is wrongful if [insert relevant rule, e.g., “a bad-faith breach of contract is threatened”].

If you decide that [name of defendant] has proved all of the above, then no contract was created.

New September 2003; Revised December 2005, June 2011, December 2011, May 2020

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Directions for Use

Different elements may apply if economic duress is alleged to avoid an agreement to settle a debt. (See Perez v. Uline, Inc. (2007) 157 Cal.App.4th 953, 959–960 [68 Cal.Rptr.3d 872].)

Element 2 requires that the defendant have had “no reasonable alternative” other than to consent. Economic duress to avoid a settlement agreement may require that the creditor be placed in danger of imminent bankruptcy or financial ruin. (See Rich & Whillock, Inc. v. Ashton Development, Inc. (1984) 157 Cal.App.3d 1154, 1156–1157, 204 Cal.Rptr. 86].) At least one court has stated this standard in a case not involving a settlement (see Uniwill v. City of Los Angeles (2004) 124 Cal.App.4th 537, 545 [21 Cal.Rptr.3d 464]), though most cases do not require that the only alternative be bankruptcy or financial ruin. (See, e.g., Chan v. Lund (2010) 188 Cal.App.4th 1159, 1173–1174 [116 Cal.Rptr.3d 122].)

In the next-to-last paragraph, state the rule that makes the alleged conduct wrongful. (See Restatement 2d of Contracts, § 176, When a Threat is Improper.) The conduct must be something more than the breach or threatened breach of the contract itself. An act for which a party has an adequate legal remedy is not duress. (River Bank America v. Diller (1995) 38 Cal.App.4th 1400, 1425 [45 Cal.Rptr.2d 790].)

Sources and Authority

When Consent Not Freely Given. Civil Code sections 1567, 1568.

“The doctrine of ‘economic duress’ can apply when one party has done a wrongful act which is sufficiently coercive to cause a reasonably prudent person, faced with no reasonable alternative, to agree to an unfavorable contract. The party subjected to the coercive act, and having no reasonable alternative, can then plead ‘economic duress’ to avoid the contract.” (CrossTalk Productions, Inc. v. Jacobson (1998) 65 Cal.App.4th 631, 644 [76 Cal.Rptr.2d 615], internal citation omitted.)

The nonexistence of a “reasonable alternative” is a question of fact. (CrossTalk Productions, Inc., supra, 65 Cal.App.4th at p. 644.)

“ ‘At the outset it is helpful to acknowledge the various policy considerations which are involved in cases involving economic duress. Typically, those claiming such coercion are attempting to avoid the consequences of a modification of an original contract or of a settlement and release agreement. On the one hand, courts are reluctant to set aside agreements because of the notion of freedom of contract and because of the desirability of having private dispute resolutions be final. On the other hand, there is an increasing recognition of the law’s role in correcting inequitable or unequal exchanges between parties of disproportionate bargaining power and a greater willingness to not enforce agreements which were entered into under coercive circumstances.’ ” (Rich & Whillock, Inc., supra, 157 Cal.App.3d at p. 1158.)

“ ‘As it has evolved to the present day, the economic duress doctrine is not limited by early statutory and judicial expressions requiring an unlawful act in the nature of a tort or a crime. … Instead, the doctrine now may come into play upon the doing of a wrongful act which is sufficiently coercive to cause a reasonably prudent person faced with no reasonable alternative to succumb to the perpetrator’s pressure. … The assertion of a claim known to be false or a bad faith threat to breach a contract or to withhold a payment may constitute a wrongful act for purposes of the economic duress doctrine. … Further, a reasonably prudent person subject to such an act may have no reasonable alternative but to succumb when the only other alternative is bankruptcy or financial ruin. …’ ” (Chan, supra, 188 Cal.App.4th at pp. 1173–1174.)

“ ‘It is not duress … to take a different view of contract rights, even though mistaken, from that of the other contracting party, and it is not duress to refuse, in good faith, to proceed with a contract, even though such refusal might later be found to be wrong. [¶] … “A mere threat to withhold a legal right for the enforcement of which a person has an adequate [legal] remedy is not duress.” ’ ” (River Bank America, supra, 38 Cal.App.4th at p. 1425.)

“[W]rongful acts will support a claim of economic duress when ‘a reasonably prudent person subject to such an act may have no reasonable alternative but to succumb when the only other alternative is bankruptcy or financial ruin.’ ” (Uniwill, supra, 124 Cal.App.4th at p. 545.)

“Economic duress has been recognized as a basis for rescinding a settlement. However, the courts, in desiring to protect the freedom of contracts and to accord finality to a privately negotiated dispute resolution, are reluctant to set aside settlements and will apply ‘economic duress’ only in limited circumstances and as a ‘last resort.’ ” (San Diego Hospice v. County of San Diego (1995) 31 Cal.App.4th 1048, 1058 [37 Cal.Rptr.2d 501].)

“Required criteria that must be proven to invalidate a settlement agreement are: ‘(1) the debtor knew there was no legitimate dispute and that it was liable for the full amount; (2) the debtor nevertheless refused in bad faith to pay and thereby created the economic duress of imminent bankruptcy; (3) the debtor, knowing the vulnerability its own bad faith had created, used the situation to escape an acknowledged debt; and (4) the creditor was forced to accept an inequitably low amount. …’ ” (Perez, supra, 157 Cal.App.4th at pp. 959–960.)

Secondary Sources

1 Witkin, Summary of California Law (11th ed. 2017) Contracts, §§ 315–317
17 California Forms of Pleading and Practice, Ch. 215, Duress, Menace, Fraud, Undue Influence, and Mistake, §§ 215.22, 215.122 (Matthew Bender)
9 California Points and Authorities, Ch. 92, Duress, Menace, Fraud, Undue Influence, and Mistake, § 92.24 (Matthew Bender)
1 Matthew Bender Practice Guide: California Contract Litigation, Ch. 8, Seeking or Opposing Equitable Remedies in Contract Actions, 8.07
1 Matthew Bender Practice Guide: California Contract Litigation, Ch. 17, Attacking or Defending Existence of Contract—Fraud, Duress, Menace, and Undue Influence, 17.03–17.06, 17.20–17.24[2]