California Civil Jury Instructions (CACI) (2017)

333. Affirmative Defense—Economic Duress

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333.Affirmative Defense—Economic Duress
[Name of defendant] claims that there was no contract because [his/her/
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 he or she had 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
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. 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 (10th ed. 2005) Contracts, §§ 313–315
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]