Those wondering what is coercion in business law should know that, in short, it is the use of or threat to use prejudice, property, or any other act to force a party to enter into an agreement. It can happen physically or psychologically; direct coercion, for instance, occurs when a man is physically made to do something he doesn't want to do. The act can be directed to a person, not just to the other party. It can also come from a stranger to the contract.

Coercion may vary based on state and federal laws. One state may define coercion as someone who makes another person enter an agreement due to being threatened with physical damage. Another state may define it as a party who entered a contract by the other party's threat to take the first party's property. The Hobbs Act is federal protection for someone who is being coerced into a contract or agreement.

What Is Contract Coercion?

Contract coercion happens when you are threatened into an agreement. Federal and state laws require you to enter contracts by your own will. The contract won't be considered legal if you are made to go into a contract. This also applies to a contract's individual terms. The entire agreement must be agreed upon through the consent of both parties.

What Is the Effect of Coercion on a Contract?

The contract will be canceled or rescinded if coercion is suspected. Both parties will not be held responsible for any of the conditions laid out in the agreement if coercion has, in fact, occurred.

Examples of Coercion

  • A tells B he will hurt him if he doesn't give him his car. B gives A his car, causing his agreement to be coerced.
  • A threatens to hurt B if he doesn't give his son, C, a large sum of money. B believes the threat and gives C the money. This agreement is believed to be coerced.
  • A man is captured by the enemies of his home country who make him fight against his country by threatening his life.
  • A husband's wife may be thought to have been coerced by her husband if she commits a crime in his business.

Important Legal Rules for a Valid Coercion Case

  • It must be a committed act of coercion where the other party did something to cause you to agree to the terms of the contract.
  • It must be a threatened act of coercion, whether physical or psychological, which made you go into the agreement to avoid the threat from becoming a reality.
  • It must be the unlawful detainment or threat to take someone's property, such as a car or a home.
  • There must be evidence that the party had the intention to make you enter an agreement before presenting the contract.
  • It can be caused by any one person, not necessarily a party of individuals.
  • Threat of personal physical harm or suicide by the coercing party may be seen as coercion.

The Office of the Law Revision Counsel has a United States Code where these laws, and others, can be found for your convenience.

Are There Defenses to Contract Coercion?

In short, yes, there are defenses to contract coercion. For instance, “unclean hands” is a term used to avoid sole liability on one party. This claim can be used to place blame on the other party as well. It can be used to say both parties are guilty of coercion, causing the contract to be voided.

This defense may help avoid legal problems. It can also be used to avoid contract duties. A party may feel they do not need to do what the contract says because they were coerced into the agreement. Coercion, in this sense, can be used for contract defense.

Should I Use a Lawyer If I Suspect Contract Coercion?

Hiring a lawyer who is knowledgeable in business laws and contracts can be helpful if you suspect coercion applies to the agreement you have signed. The lawyer can give you legal advice and guide you throughout the case. Furthermore, a lawyer may be able to help throughout trial appearances to represent you.

If you need help with coercion in business law, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.