Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Duress

What it is:

Duress is pressure that one person or entity puts on another person to do something that he or she would normally not do.

How it works (Example):

Let's say Artie owns a restaurant called Vesuvio. One day, a big bald guy comes into the place and tells Artie that he has to sign a contract to start buying linens from his friend or he'll "make life hard."

Artie, fearing that he'll be harmed physically or that the restaurant will be vandalized, agrees to buy linens from the friend, even though they cost twice as much as those from other distributors.

Artie has made the agreement under duress.

Why it Matters:

Using force, false imprisonment, threats or psychological pressure to make someone do something he or she normally wouldn't do is illegal and can negate any contracts that result from duress.

Accordingly, in our example, if Artie were brave enough to stop buying the linens, he could tell the court that he signed the contract under duress.