This is a preview of how your content will look on export. To export the complete content in DOC format, click the blue export button in the upper right corner of this page.
IV. A. Duress
  • 1 Silsbee v. Webber.

    1
    171 Mass. 378
    50 N.E. 555
    2
    SILSBEE
    v.
    WEBBER.
    3
    Supreme Judicial Court of Massachusetts, Essex.
    4
    June 2, 1898.
    6

    Report from superior court, Essex county; Charles S. Lilley, Judge.

    7

    Action by Cordelia A. Silsbee against Parker J. Webber. A verdict was directed for plaintiff, and case reported, on request of the parties, for determination of the supreme judicial court. Verdict set aside.

    8


    [171 Mass. 379]J.H. Sisk, for plaintiff.

    9

    W.H. Niles & Geo. J. Carr, for defendant.

    10

    Field, C.J., and Knowlton and Lathrop, JJ., dissenting.

    11
    HOLMES, J.
    12

    This is an action to recover money alleged to have been got from the plaintiff by duress. In the court below, a verdict was directed for the defendant, and the case was reported. The plaintiff's son had been in the defendant's employ, had been

    13

    [50 N.E. 556]

    14

    accused by him of stealing the defendant's money, had signed a confession (whether freely or under duress is not material), and had agreed to give security for $1,500. There was a meeting between the plaintiff and the defendant, in the course of which, as the plaintiff testified, the defendant said he should have to tell the young man's father, the plaintiff's husband. At that time, according to her, her husband had trouble in his head, was melancholy, very irritable, and unable to sleep, so that she feared that, if he were told, the knowledge would make him insane. The plaintiff further testified that she previously had talked with the defendant about her husband's condition, and that she begged him not to tell her husband, and told him that he knew what her husband's condition was; but that he twice threatened to do it in the course of his inquiries as to what property she had, and that, to prevent his doing so, she, the next day, went, by agreement, to the office of the defendant's lawyer, and executed an assignment of her share in her father's estate. Her son was present, and, as he says, protested that this was extortion and blood money. It is under this assignment that the money sued for was collected. In the opinion of a majority of the court, if the evidence above stated was believed, we cannot say that the jury would not have been warranted in finding that the defendant obtained and knew that he was obtaining the assignment from the plaintiff solely by inspiring the plaintiff with fear of what he threatened to do; that the ground for her fear was, and was known to be, her expectation of serious effects upon her husband's health if the defendant did as he threatened; that the fear was reasonable, and a sufficiently powerful motive naturally to overcome self-interest; and, therefore, that the plaintiff had a right to avoid her act. [171 Mass. 380]Harris v. Carmody, 131 Mass. 51, 53, 54;Morse v. Woodworth, 155 Mass. 233, 250, 27 N.E. 1010, and 29 N.E. 525.

    15

    It is true that it has been said that the duress must be such as would overcome a person of ordinary courage. We need not consider whether, if the plaintiff reasonably entertained her alleged belief, the well-grounded apprehension of a husband's insanity is something which a wife ought to endure, rather than to part with any money, since we are of opinion that the dictum referred to is taken literally in an attempt to apply an external standard of conduct in the wrong place. If a party obtains a contract by creating a motive from which the other party ought to be free, and which, in fact, is, and is known to be, sufficient to produce the result, it does not matter that the motive would not have prevailed with a differently constituted person, whether the motive be a fraudulently created belief or an unlawfully created fear. Even in torts,-the especial sphere of external standards,-if it is shown that in fact the defendant, by reason of superior insight, contemplated a result which the man of ordinary prudence would not have foreseen, he is answerable for it; and, in dealing with contributory negligence, the personal limitations of the plaintiff, as a child, a blind man, or a foreigner unused to our ways, always are taken into account. Late American writers repudiate the notion of a general external measure for duress, and we agree with them. Clark, Cont. 357; Bish.Cont. (Ed. 1887) § 719. See James v. Roberts, 18 Ohio, 548, 562;Eadie v. Slimmon, 26 N.Y. 9, 12.

    16

    The strongest objection to holding the defendant's alleged action illegal duress is that, if he had done what he threatened, it would not have been an actionable wrong. In general, duress going to motives consists in the threat of illegal acts. Ordinarily, what you may do without liability you may threaten to do without liability. See Vegelahn v. Guntner, 167 Mass. 92, 107, 44 N.E. 1077; Allen v. Flood [1898] App.Cas. 1, 129, 165. But this is not a question of liability for threats as a cause of action; and we may leave undecided the question whether, apart from special justification, deliberately and with foresight of the consequences, to tell a man what you believe will drive him mad, is actionable if it has the expected effect. Spade v. Railroad, 168 Mass. 285, 290, 47 N.E. 88;White v. Sander, 168 Mass. 296, 47 N.E. 90. If it [171 Mass. 381]should be held not to be, contrary to the intimations in the cases cited, it would be only on the ground that a different rule was unsafe in the practical administration of justice. If the law were an ideally perfect instrument, it would give damages for such a case as readily as for a battery. When it comes to the collateral question of obtaining a contract by threats, it does not follow that, because you cannot be made to answer for the act, you may use the threat. In the case of the threat, there are no difficulties of proof, and the relation of cause and effect is as easily shown as when the threat is of an assault. If a contract is extorted by brutal and wicked means, and a means which derives its immunity, if it have immunity, solely from the law's distrust of its own powers of investigation, in our opinion the contract may be avoided by the party to whom the undue influence has been applied. Some of the cases go further, and allow to be avoided contracts obtained by the threat of unquestionably lawful acts. Morse v. Woodworth, 155 Mass. 233, 251, 27 N.E. 1010, and 29 N.E. 525;Adams v. Bank, 116 N.Y. 606, 23 N.E. 7; Williams v. Bayley, L.R., 1 H.L. 200, 210.

    17

    In the case at bar there are strong grounds for arguing that the plaintiff was not led to make the assignment by the duress alleged. They are to be found in the fact that the plaintiff sought the defendant; in her testimony that when she made the assignment she wanted the defendant to have full security for all her son owed him; and in the plaintiff's later conduct; but we are considering whether there was a case of duress for the jury.

    18

    [50 N.E. 557]

    19

    The assignment was on October 10, 1894. Before March 12, 1895, the plaintiff had joined with her sisters in employing a lawyer to secure her share in her father's estate, intending it to be paid over to the defendant. On March 12, 1895, to the same end, she signed a petition for distribution, setting forth the assignment, and afterwards took some further steps, and never made any claim that the assignment was not valid until December 19, 1895, before which time it had come to the knowledge of her husband. Apart from the weight which these facts may give to the argument that the plaintiff did not act under duress, they found an independent one,-that, if she did act under duress, she has ratified her act. The assignment was formally valid. The only objection to it, if any, was the motive for it. [171 Mass. 382]Fairbanks v. Snow, 145 Mass. 153, 154, 13 N.E. 596. Therefore it might be ratified by the plaintiff when she was free. But the acts relied on were done in connection with a member of the bar, who had been the defendant's lawyer before he undertook to act for the plaintiff, and who plainly appeared to be acting for the plaintiff only in the defendant's interest. We cannot say that the jury might not find that the later acts of the plaintiff, if not done under the active influence of her supposed original fear, at least were done before the plaintiff had gained an independent foothold, or realized her independence or her rights. We are of opinion that the case should have been left to the jury. Adams v. Bank, 116 N.Y. 606, 614, 615, 23 N.E. 7.

    20

    Verdict set aside. Case to stand for trial.

    21
    KNOWLTON, J. (dissenting).
    22

    The report shows no evidence which seems to me to warrant a finding for the plaintiff. It is not contended that she can prevail in this action on the ground that the parties agreed to compound a felony. The defendant had detected his trusted clerk in embezzling from him. He could not certainly know how long the embezzlement had been going on, or how much money had been taken; but very likely he thought that it had been for a long time, and that the amount was large. The clerk had been in his employment for six years, as chief salesman. It was proper that the defendant should obtain reimbursement if he could. On account of what her son said, the plaintiff visited the defendant at his home. She testified that she wanted him to have full security for all her son owed him, and for anything he had stolen, and that her son had agreed to give security for the $1,500 which he admitted that he had stolen. In all the defendant's dealings with the plaintiff there is not a suggestion that he made a threat, unless it be called a threat to say, when she proposed to give him a chamber set as security, “I do not think that will do. I will have to tell his father;” and to say again, once or twice before the interview ended, that he would tell her husband about the matter. Ordinarily, it would be right and proper for the defendant, if not his duty, to tell the young man's father what had happened.

    23

    [171 Mass. 383]In 2 Greenl.Ev. § 301, is this clause: “By duress, in its more extended sense, is meant that degree of severity, either threatened and impending or actually inflicted, which is sufficient to overcome the mind and will of a person of ordinary firmness. *** Duress per minas is restricted to fear of loss of life or mayhem or loss of limb; or, in other words, to remediless harm to the person. If, therefore, duress per minas is pleaded in bar to an action upon a debt, the plea must state a threat of death or mayhem or loss of limb. *** A fear of mere battery or of destruction of property is not technically duress, and, therefore, is not pleadable in bar.” Bishop, in his work on Contracts, at section 715, defines “duress” as “any physical force, applied or threatened to the person of the party, or of the party's husband, wife, parent, or child, through constraint of which he, in form, consents to what he otherwise would not.” While the law in regard to duress per minas in some of the late cases is less strict than that stated by Greenleaf, in none of them, so far as I am aware, is this ground of avoiding a contract changed in its general character, or in the principles on which it is founded. The distinction still remains between threats of grievous injury and legitimate arguments founded on disclosed intentions of the party using the argument as to his lawful conduct affecting the other party. The word “threat” implies intentional detriment. The fundamental reason for depriving one of the benefits of his contract in such cases is that he was guilty of a wrong in obtaining it, and that his wrong was injurious to the other party in inducing the making of it. No contract can be set aside on the ground of duress per minas without the concurrence of these conditions. It is not enough to set aside a contract that the maker of it yielded to motives founded on legitimate arguments, even though the inducements rested in part upon statements by the other party of what would be done if the contract should not be made. It must be shown that the will is overcome by an improper and wrongful influence, producing fear which he has not sufficient strength to withstand. If the other party to the contract is innocent, his defense cannot prevail. Fairbanks v. Snow, 145 Mass. 153, 13 N.E. 596. The cases in which it is held, in this jurisdiction and elsewhere, that one [171 Mass. 384]whose will is overcome, and who is induced to execute a contract by threats of prosecution and imprisonment for a crime, made by one who reasonably believes him to be guilty of the crime, may avoid the contract on the ground of duress, rest upon the principle that it is an abuse of process, and a misuse of the machinery of the law, which the law

    24

    [50 N.E. 558]

    25

    will not permit, to extort the collection of a private debt, or to procure any other private benefit by proceedings intended only to impose punishment in the interest of the public. It is equally a wrong and an injury to accomplish the same result through threats of such an abuse of process. Morse v. Woodworth, 155 Mass. 233-250,27 N.E. 1010, and 29 N.E. 525.

    26

    The burden of proof is on the plaintiff to show that the defendant obtained the contract by threatening to inflict injury upon her husband. A fair interpretation of the evidence indicates that the defendant's reference to her husband was in no sense a threat, but merely a natural statement, when the plaintiff offered inadequate security, that he should see whether the young man's father, who was an owner of houses and lands, was willing to furnish the security which his son had promised. If it was more than that, and was also a legitimate appeal to a motive which the plaintiff might have had to save her husband from the grief and sorrow that knowledge of the facts would be likely to bring to him, or to save herself from additional pain by sharing her husband's trouble, it would hardly be contended that the contracts would thereby be rendered voidable. A party endeavoring to obtain a contract from another may legitimately appeal to all proper motives which will induce the other to agree to his terms.

    27

    The only element in this case, as it seems to me, on which a doubt in regard to the proper decision of it can arise, is the testimony as to the condition of the plaintiff's husband. The plaintiff's testimony on this point was as follows: “He was suffering with a mental trouble, which made him very irritable. He suffered pain continually in the head, was melancholy, and unable to sleep. *** He was attending to his business at the time of the trouble with Webber. He had various estates about town, and was collecting rents and looking after his business every day.” There was testimony from other members of the plaintiff's family in regard to the husband's condition, but none more [171 Mass. 385]favorable to her than this. They all agreed that he was collecting his rents, taking charge of repairs, and attending to his business generally, at the time when the contracts were made. She testified that she believed that knowledge of the charges against her son would make her husband insane; but there is not a word of testimony to show that the defendant knew of this belief if she entertained it. She testified that she had previously talked with the defendant about her husband's condition; but this must mean that she spoke about his condition as it was, and not about her belief that this information would make him insane, which, so far as appears, was never disclosed until the trial. In connection with the making of the contracts, there was no conversation about her husband's condition except a reference to it when the plaintiff said, in answer to the defendant's statement that he should have to tell him: “Don't do that; you know what his condition is.”

    28

    It is a familiar rule of law that fraud or wrong of any kind is never to be presumed. It cannot be inferred from evidence which is as consistent with right as with wrong. I can see nothing in the evidence that tends to show that the defendant was guilty of any wrong towards the plaintiff. What he proposed could do no direct harm to the person or property of the plaintiff or of her husband. At most, there was merely a possibility or a probability of suffering and harm from reflection upon facts for whose existence the defendant was not responsible, and which the husband would be likely to learn at some time from others if the defendant did not tell him. But this probability, viewed from the defendant's knowledge and information, was no greater than would be expected in the case of any man who was irritable, melancholy, and unable to sleep from trouble in his head, yet whose ailments were not so severe as to prevent him from managing a somewhat extensive and important business. Reading the testimony without favor or prejudice, I do not see how an implication against the defendant of an improper purpose in saying to the plaintiff that he should have to tell her husband can be founded on anything more than conjecture. The presumptions are in favor of honesty and fair dealing, and the testimony is to be interpreted accordingly. Moreover, there is nothing to show a belief on the part of the [171 Mass. 386]defendant that the statement that he should tell her husband would overcome the plaintiff's will. Upon his understanding of the facts, such a suggestion would not be expected to overcome the will of a person of ordinary firmness; and there is no evidence that she was supposed by him to be, or that she was in fact, less firm than other women. Whether the rule so often stated in the books-that, to avoid a contract on the ground of duress by threats, a threat must be such as would overcome the will of a person of ordinary firmness-be of universal application or not, it undoubtedly furnishes a correct guide in cases in which there is nothing to show that the party who seeks to avoid the contract was not of ordinary courage and firmness. Upon an extended examination of the authorities, I have found no case in which a contract has been set aside on the ground of duress on such evidence as appears in this case. I think that the ruling of the superior court was correct.

    29
    FIELD, C.J., and LATHROP, J., concur in this dissent.
  • 2 Austin Instrument v. Loral Corp.

    1
    29 N.Y.2d 124 (1971)
    2
    Austin Instrument, Inc., Respondent,
    v.
    Loral Corporation, Appellant.
    3

    Court of Appeals of the State of New York.

    4
    Argued May 12, 1971.
    5
    Decided July 6, 1971.
    6

    Alvin A. Simon and Joseph Sachter for appellant.

    7

    Herbert L. Ortner and Joel Salon for respondent.

    8

    Judges BURKE, SCILEPPI and GIBSON concur with Chief Judge FULD; Judge BERGAN dissents and votes to affirm in a separate opinion in which Judges BREITEL and JASEN concur.

    9
    [128] Chief Judge FULD.
    10

    The defendant, Loral Corporation, seeks to recover payment for goods delivered under a contract which it had with plaintiff Austin Instrument, Inc., on the ground that the evidence establishes, as a matter of law, that it was forced to agree to an increase in price on the items in question under circumstances amounting to economic duress.

    11

    In July of 1965, Loral was awarded a $6,000,000 contract by the Navy for the production of radar sets. The contract contained a schedule of deliveries, a liquidated damages clause applying to late deliveries and a cancellation clause in case of default by Loral. The latter thereupon solicited bids for some [129] 40 precision gear components needed to produce the radar sets, and awarded Austin a subcontract to supply 23 such parts. That party commenced delivery in early 1966.

    12

    In May, 1966, Loral was awarded a second Navy contract for the production of more radar sets and again went about soliciting bids. Austin bid on all 40 gear components but, on July 15, a representative from Loral informed Austin's president, Mr. Krauss, that his company would be awarded the subcontract only for those items on which it was low bidder. The Austin officer refused to accept an order for less than all 40 of the gear parts and on the next day he told Loral that Austin would cease deliveries of the parts due under the existing subcontract unless Loral consented to substantial increases in the prices provided for by that agreement — both retroactively for parts already delivered and prospectively on those not yet shipped — and placed with Austin the order for all 40 parts needed under Loral's second Navy contract. Shortly thereafter, Austin did, indeed, stop delivery. After contacting 10 manufacturers of precision gears and finding none who could produce the parts in time to meet its commitments to the Navy,[1] Loral acceded to Austin's demands; in a letter dated July 22, Loral wrote to Austin that "We have feverishly surveyed other sources of supply and find that because of the prevailing military exigencies, were they to start from scratch as would have to be the case, they could not even remotely begin to deliver on time to meet the delivery requirements established by the Government. * * * Accordingly, we are left with no choice or alternative but to meet your conditions."

    13

    Loral thereupon consented to the price increases insisted upon by Austin under the first subcontract and the latter was awarded a second subcontract making it the supplier of all 40 gear parts for Loral's second contract with the Navy.[2] Although Austin was granted until September to resume deliveries, Loral did, in fact, receive parts in August and was able to produce the radar sets in time to meet its commitments to the Navy on both contracts. After Austin's last delivery under the second subcontract [130] in July, 1967, Loral notified it of its intention to seek recovery of the price increases.

    14

    On September 15, 1967, Austin instituted this action against Loral to recover an amount in excess of $17,750 which was still due on the second subcontract. On the same day, Loral commenced an action against Austin claiming damages of some $22,250 — the aggregate of the price increases under the first subcontract — on the ground of economic duress. The two actions were consolidated and, following a trial, Austin was awarded the sum it requested and Loral's complaint against Austin was dismissed on the ground that it was not shown that "it could not have obtained the items in question from other sources in time to meet its commitment to the Navy under the first contract." A closely divided Appellate Division affirmed (35 A D 2d 387). There was no material disagreement concerning the facts; as Justice STEUER stated in the course of his dissent below, "[t]he facts are virtually undisputed, nor is there any serious question of law. The difficulty lies in the application of the law to these facts." (35 A D 2d 392.)

    15

    The applicable law is clear and, indeed, is not disputed by the parties. A contract is voidable on the ground of duress when it is established that the party making the claim was forced to agree to it by means of a wrongful threat precluding the exercise of his free will. (See Allstate Med. Labs. v. Blaivas, 20 N Y 2d 654; Kazaras v. Manufacturers Trust Co., 4 N Y 2d 930; Adams v. Irving Nat. Bank, 116 N.Y. 606, 611; see, also, 13 Williston, Contracts [3d ed., 1970], § 1603, p. 658.) The existence of economic duress or business compulsion is demonstrated by proof that "immediate possession of needful goods is threatened" (Mercury Mach. Importing Corp. v. City of New York, 3 N Y 2d 418, 425) or, more particularly, in cases such as the one before us, by proof that one party to a contract has threatened to breach the agreement by withholding goods unless the other party agrees to some further demand. (See, e.g., du Pont de Nemours & Co. v. Hass Co., 303 N.Y. 785; Gallagher Switchboard Corp. v. Heckler Elec. Co., 36 Misc 2d 225; see, also, 13 Williston, Contracts [3d ed., 1970], § 1617, p. 705.) However, a mere threat by one party to breach the contract by not delivering the required items, though wrongful, does not in itself constitute economic duress. It must also appear that [131] the threatened party could not obtain the goods from another source of supply[3] and that the ordinary remedy of an action for breach of contract would not be adequate.[4]

    16

    We find without any support in the record the conclusion reached by the courts below that Loral failed to establish that it was the victim of economic duress. On the contrary, the evidence makes out a classic case, as a matter of law, of such duress.[5]

    17

    It is manifest that Austin's threat — to stop deliveries unless the prices were increased — deprived Loral of its free will. As bearing on this, Loral's relationship with the Government is most significant. As mentioned above, its contract called for staggered monthly deliveries of the radar sets, with clauses calling for liquidated damages and possible cancellation on default. Because of its production schedule, Loral was, in July, 1966, concerned with meeting its delivery requirements in September, October and November, and it was for the sets to be delivered in those months that the withheld gears were needed. Loral had to plan ahead, and the substantial liquidated damages for which it would be liable, plus the threat of default, were genuine possibilities. Moreover, Loral did a substantial portion of its business with the Government, and it feared that a failure to deliver as agreed upon would jeopardize its chances for future contracts. These genuine concerns do not merit the label "`self-imposed, undisclosed and subjective'" which the Appellate Division majority placed upon them. It was perfectly reasonable for Loral, or any other party similarly placed, to consider itself in an emergency, duress situation.

    18

    [132] Austin, however, claims that the fact that Loral extended its time to resume deliveries until September negates its alleged dire need for the parts. A Loral official testified on this point that Austin's president told him he could deliver some parts in August and that the extension of deliveries was a formality. In any event, the parts necessary for production of the radar sets to be delivered in September were delivered to Loral on September 1, and the parts needed for the October schedule were delivered in late August and early September. Even so, Loral had to "work * * * around the clock" to meet its commitments. Considering that the best offer Loral received from the other vendors it contacted was commencement of delivery sometime in October, which, as the record shows, would have made it late in its deliveries to the Navy in both September and October, Loral's claim that it had no choice but to accede to Austin's demands is conclusively demonstrated.

    19

    We find unconvincing Austin's contention that Loral, in order to meet its burden, should have contacted the Government and asked for an extension of its delivery dates so as to enable it to purchase the parts from another vendor. Aside from the consideration that Loral was anxious to perform well in the Government's eyes, it could not be sure when it would obtain enough parts from a substitute vendor to meet its commitments. The only promise which it received from the companies it contacted was for commencement of deliveries, not full supply, and, with vendor delay common in this field, it would have been nearly impossible to know the length of the extension it should request. It must be remembered that Loral was producing a needed item of military hardware. Moreover, there is authority for Loral's position that nonperformance by a subcontractor is not an excuse for default in the main contract. (See, e.g., McBride & Wachtel, Government Contracts, § 35.10, [11].) In light of all this, Loral's claim should not be held insufficiently supported because it did not request an extension from the Government.

    20

    Loral, as indicated above, also had the burden of demonstrating that it could not obtain the parts elsewhere within a reasonable time, and there can be no doubt that it met this burden. The 10 manufacturers whom Loral contacted comprised its entire list of "approved vendors" for precision gears, and none was [133] able to commence delivery soon enough.[6] As Loral was producing a highly sophisticated item of military machinery requiring parts made to the strictest engineering standards, it would be unreasonable to hold that Loral should have gone to other vendors, with whom it was either unfamiliar or dissatisfied, to procure the needed parts. As Justice STEUER noted in his dissent, Loral "contacted all the manufacturers whom it believed capable of making these parts" (35 A D 2d, at p. 393), and this was all the law requires.

    21

    It is hardly necessary to add that Loral's normal legal remedy of accepting Austin's breach of the contract and then suing for damages would have been inadequate under the circumstances, as Loral would still have had to obtain the gears elsewhere with all the concomitant consequences mentioned above. In other words, Loral actually had no choice, when the prices were raised by Austin, except to take the gears at the "coerced" prices and then sue to get the excess back.

    22

    Austin's final argument is that Loral, even if it did enter into the contract under duress, lost any rights it had to a refund of money by waiting until July, 1967, long after the termination date of the contract, to disaffirm it. It is true that one who would recover moneys allegedly paid under duress must act promptly to make his claim known. (See Oregon Pacific R. R. Co. v. Forrest, 128 N.Y. 83, 93; Port Chester Elec. Constr. Corp. v. Hastings Terraces, 284 App. Div. 966, 967.) In this case, Loral delayed making its demand for a refund until three days after Austin's last delivery on the second subcontract. Loral's reason — for waiting until that time — is that it feared another stoppage of deliveries which would again put it in an untenable situation. Considering Austin's conduct in the past, this was perfectly reasonable, as the possibility of an application by Austin of further business compulsion still existed until all of the parts were delivered.

    23

    In sum, the record before us demonstrates that Loral agreed to the price increases in consequence of the economic duress [134] employed by Austin. Accordingly, the matter should be remanded to the trial court for a computation of its damages.

    24

    The order appealed from should be modified, with costs, by reversing so much thereof as affirms the dismissal of defendant Loral Corporation's claim and, except as so modified, affirmed.

    25
    BERGAN, J. (dissenting).
    26

    Whether acts charged as constituting economic duress produce or do not produce the damaging effect attributed to them is normally a routine type of factual issue.

    27

    Here the fact question was resolved against Loral both by the Special Term and by the affirmance at the Appellate Division. It should not be open for different resolution here.

    28

    In summarizing the Special Term's decision and its own, the Appellate Division decided that "the conclusion that Loral acted deliberately and voluntarily, without being under immediate pressure of incurring severe business reverses, precludes a recovery on the theory of economic duress" (35 A D 2d 387, 391).

    29

    When the testimony of the witnesses who actually took part in the negotiations for the two disputing parties is examined, sharp conflicts of fact emerge. Under Austin's version the request for a renegotiation of the existing contract was based on Austin's contention that Loral had failed to carry out an understanding as to the items to be furnished under that contract and this was the source of dissatisfaction which led both to a revision of the existing agreement and to entering into a new one.

    30

    This is not necessarily and as a matter of law to be held economic duress. On this appeal it is needful to look at the facts resolved in favor of Austin most favorably to that party. Austin's version of events was that a threat was not made but rather a request to accommodate the closing of its plant for a customary vacation period in accordance with the general understanding of the parties.

    31

    Moreover, critical to the issue of economic duress was the availability of alternative suppliers to the purchaser Loral. The demonstration is replete in the direct testimony of Austin's witnesses and on cross-examination of Loral's principal and purchasing agent that the availability of practical alternatives was a highly controverted issue of fact. On that issue of fact the [135] explicit findings made by the Special Referee were affirmed by the Appellate Division. Nor is the issue of fact made the less so by assertion that the facts are undisputed and that only the application of equally undisputed rules of law is involved.

    32

    Austin asserted and Loral admitted on cross-examination that there were many suppliers listed in a trade registry but that Loral chose to rely only on those who had in the past come to them for orders and with whom they were familiar. It was, therefore, at least a fair issue of fact whether under the circumstances such conduct was reasonable and made what might otherwise have been a commercially understandable renegotiation an exercise of duress.

    33

    The order should be affirmed.

    34

    Ordered accordingly.

    35

    [1] The best reply Loral received was from a vendor who stated he could commence deliveries sometime in October.

    36

    [2] Loral makes no claim in this action on the second subcontract.

    37

    [3] See, e.g., du Pont de Nemours & Co. v. Hass Co., 303 N.Y. 785, supra; Gallagher Switchboard Corp. v. Heckler Elec. Co., 36 Misc 2d 225, 226, supra; 30 East End v. World Steel Prods. Corp., 110 N. Y. S. 2d 754, 757.

    38

    [4] See, e.g., Kohn v. Kenton Assoc., 27 A D 2d 709; Colonie Constr. Corp. v. De Lollo, 25 A D 2d 464, 465; Halperin v. Wolosoff, 282 App. Div. 876; J. R. Constr. Corp. v. Berkely Apts., 259 App. Div. 830; Boss v. Hutchinson, 182 App. Div. 88, 92.

    39

    [5] The suggestion advanced that we are precluded from reaching this determination because the trial court's findings of fact have been affirmed by the Appellate Division ignores the question to be decided. That question, undoubtedly one of law (see Cohen and Karger, Powers of the New York Court of Appeals [1952], § 115, p. 492), is, accepting the facts found, did the courts below properly apply the law to them.

    40

    [6] Loral, as do many manufacturers, maintains a list of "approved vendors," that is, vendors whose products, facilities, techniques and performance have been inspected and found satisfactory.

  • 3 Hackley v. Headley

    1

    45 Mich. 569

    2
    CHAS. H. HACKLEY AND JAS. MCGORDON
    v.
    JOHN HEADLEY.
    3

    [569] Logging contract—Scale—Expense of sealing—Usage—Duress.

    4

    Where a lumberman, in contracting with his jobber for getting out logs, agrees to divide the expense of scaling them and the scaler stipulates that the jobber shall board him, the cost of boarding him is an item of the expense to be divided, and the lumberman is liable for half of it and cannot show that it is the custom of jobbers to board their scalers at their own expense. But if the scaler does not stipulate for his board the lumberman is not liable, and the transaction is between the jobber and scaler alone.

    5

    A contract for getting out logs to be scaled "in accordance with the standard rules or scales in general use" on the stream, is governed by the scale in use at the time of scaling.

    6

    Duress exists where one is induced, by another's unlawful act, to make a contract or perform some act under circumstances which prevent his [570] exercising free will. It is either of the person or the goods of the party constrained.

    7

    Duress of the person is by imprisonment, threats or an exhibition of apparently irresistible force.

    8

    Duress of goods may exist when one is compelled to submit to an illegal exaction in order to obtain them from one who has them but refuses to surrender them unless the exaction is endured.

    9

    There is no duress where the act threatened is nothing which the party has not a legal right to perform.

    10

    Refusal, on demand, to pay a debt that is due, thereby forcing the creditor to receipt in full for only a partial payment, does not constitute duress if the debtor has done nothing unlawful to cause the financial embarassment which compelled him to submit to the extortion.

    11

    A receipt obtained by improper means and assuming to discharge any indebtedness not honestly in dispute between the parties and known by the debtor to be owing, is to that extent without consideration and ineffectual.

    12

    Error to Kent. Submitted Jan. 26. Decided April 13.

    13

    ASSUMPSIT. Defendant brings error. Reversed.

    14

    Smith, Nims, Hoyt & Erwin for plaintiffs in error.

    15

    Duress is that degree of constraint that is sufficient to overcome the mind and will of a person of ordinary firmness: Brown v. Pierce 7 Wal. 214; as a defense it must be made in good faith and seasonably: Lyon v. Waldo 36 Mich. 356, DeArmand v. Phillips Wal. Ch. 199; a payment is not compulsory unless made to emancipate the person or property from an actual and existing duress imposed upon it by the party to whom it is made: Radich v. Hutchins 95 U. S. 213; it is not ordinarily duress to refuse to pay without litigation: Mayhew v. Phoenix Ins. Co. 23 Mich. 105.

    16

    John C. FitzGerald for defendant in error. Procuring a settlement of a debt by taking advantage of the creditor's financial embarassments is duress of goods; Moses v. Macferlan 2 Burr. 1005; Irving v. Wilson 4 D. & E. 485; there is no consideration for a receipt obtained by taking such advantage, to the extent to which it releases the debt: Ryan [571] v. Ward 48 N. Y. 206; Harrison v. Close 2 Johns. 448; Seymour v. Minturn 17 Johns. 170; Mech. Bank v. Hazard 9 Johns. 393; Hendrickson v. Beers 6 Bosw. 639; contracts must be carried into effect according to the intention of the parties at the time of making them: Heald v. Cooper 8 Me. 32; a logging contract providing for scaling by the rule in general use means in use at the time: Williams v. Gilman 3 Me. 276; Homer v. Dorr 10 Mass. 26; Robinson v. Fiske 25 Me. 405; Dawson v. Kittle 4 Hill 108; Thomas v. Wiggers 41 Ill. 470; Karmuller v. Krotz 18 Ia. 352; Rindskoff v. Barrett 14 Ia. 101; 1 Chitty Cont. 135, n 3.

    17

    COOLEY, J. Headley sued Hackley & McGordon to recover compensation for cutting, hauling and delivering in the Muskegon river a quantity of logs. The performance of the labor was not disputed, but the parties were not agreed as to the construction of the contract in some important particulars, and the amount to which Headley was entitled depended largely upon the determination of these differences. The defendants also claimed to have had a full and complete settlement with Headley, and produced his receipt in evidence thereof. Headley admitted the receipt, but insisted that it was given by him under duress, and the verdict which he obtained in the circuit court was in accordance with this claim.

    18
    I.
    19

    The questions in dispute respecting the construction of the contract concerned the scaling of the logs. The contract was in writing, and bore date August 20, 1874. Headley agreed thereby to cut on specified lands and deliver in the main Muskegon river the next spring 8,000,000 feet of logs. The logs were to be measured or scaled by a competent person to be selected by Headley & McGordon, "and in accordance with the standard rules or scales in general use on Muskegon lake and river," and the expense of scaling was to be mutually borne by the parties.

    20

    The dispute respecting the expense of scaling related only to the board of the scaler. Headley boarded him and claimed to recover one-half what it was worth. Defendants offered [572] evidence that it was customary on the Muskegon river for jobbers to board the scalers, at their own expense, but we are of opinion that this was inadmissible. If under the contract with the scaler he was to be furnished his board, then the cost of the board was a part of the expense of scaling, and by the express terms of the contract was to be shared by the parties. If that was not the agreement with him, Headley could only look to the scaler himself for his pay.

    21

    This is a small matter; but the question what scale was to be the standard is one of considerable importance. The evidence tended to show that at the time the contract was entered into, scaling upon the river and lake was in accordance with the "Scribner rule," so-called; but that the "Doyle rule" was in general use when the logs were cut and delivered, and Hackley & McGordon had the logs scaled by that. By the new rule the quantity would be so much less than by the one in prior use that the amount Headley would be entitled to receive would be less by some $2000; and it was earnestly contended on behalf of Headley that the scale intended, as the one in general use, was the one in general use when the contract was entered into.

    22

    We are of opinion, however, that this is not the proper construction. The contract was for the performance of labor in the future, and as the scaling was to be done by third persons, and presumptively by those who were trained to the business, it would be expected they would perform their duties under such rules and according to such standards as were generally accepted at the time their services were called for. Indeed such contracts might contemplate performance at times when it would scarcely be expected that scalers would be familiar with scales in use when they were made. It is true the time that was to elapse between the making of this contract and its performance would be but short, but if it had been many years the question of construction would have been the same; and if we could not suppose under such circumstances that the parties contemplated the scalers should govern their measurements by obsolete and perhaps now unknown rules, neither can we here. It is fair to infer that [573] the existing scale was well known to the parties, and that if they intended to be governed by it at a time when it might have ceased to be used, they would have said so in explicit terms. In the absence of an agreement to that effect, we must suppose they intended their logs to be scaled as the logs of others would be at the place and time of scaling.

    23
    II.
    24

    The question of duress on the part of Hackley & McGordon, in obtaining the discharge, remains. The paper reads as follows:

    25

                                                                                                                     "MUSKEGON, MICH., August 3, 1875.

    Received from Hackley & McGordon their note for four thousand dollars, payable in thirty days, at First National Bank, Grand Rapids, which is in full for all claims of every kind and nature which I have against said Hackley & McGordon.

    Witness: THOMAS HUME.                                                                                 JOHN HEADLEY."

    26

    Headley's account of the circumstances under which this receipt was given is in substance as follows: On August 3, 1875, he went to Muskegon, the place of business of Hackley & McGordon, from his home in Kent county, for the purpose of collecting the balance which he claimed was due him under the contract. The amount he claimed was upwards of $6200, estimating the logs by the Scribner scale. He had an interview with Hackley in the morning, who insisted that the estimate should be according to the Doyle scale, and who also claimed that he had made payments to others amounting to some $1400 which Headley should allow. Headley did not admit these payments, and denied his liability for them if they had been made. Hackley told Headley to come in again in the afternoon, and when he did so Hackley said to him: "My figures show there is 4260 and odd dollars in round numbers your due, and I will just give you $4000. I will give you our note for $4000." To this Headley replied: "I cannot take that; it is not right, and you know it. There is over $2000 besides that belongs to me, and you know it." Hackley replied: "That is the best I will do with you." Headley said: "I cannot take that, Mr. Hackley," and Hackley replied, "You do the next best thing you are a mind to. [574] You can sue me if you please." Headley then said: "I cannot afford to sue you, because I have got to have the money, and I cannot wait for it. If I fail to get the money to-day, I shall probably be ruined financially, because I have made no other arrangement to get the money only on this particular matter." Finally he took the note and gave the receipt, because at the time he could do nothing better, and in the belief that he would be financially ruined unless he had immediately the money that was offered him, or paper by means of which the money might be obtained.

    27

    If this statement is correct, the defendants not only took a most unjust advantage of Headley, but they obtained a receipt which, to the extent that it assumed to discharge anything not honestly in dispute between the parties, and known by them to be owing to Headley beyond the sum received, was without consideration and ineffectual. But was it a receipt obtained by duress? That is the question which the record presents. The circuit judge was of opinion that if the jury believed the statement of Headley they would be justified in finding that duress existed; basing his opinion largely upon the opinion of this Court in Vyne v. Glenn 41 Mich. 112.

    28

    Duress exists when one by the unlawful act of another is induced to make a contract or perform some act under circumstances which deprive him of the exercise of free will. It is commonly said to be of either the person or the goods of the party. Duress of the person is either by imprisonment, or by threats, or by an exhibition of force which apparently cannot be resisted. It is not pretended that duress of the person existed in this case; it is if anything duress of goods, or at least of that nature, and properly enough classed with duress of goods. Duress of goods may exist when one is compelled to submit to an illegal exaction in order to obtain them from one who has them in possession but refuses to surrender them unless the exaction is submitted to.

    29

    The leading case involving duress of goods is Astley v. Reynolds 2 Strange, 915. The plaintiff had pledged goods for £20, and when he offered to redeem them, the pawnbroker [575] refused to surrender them unless he was paid £10 for interest. The plaintiff submitted to the exaction, but was held entitled to recover back all that had been unlawfully demanded and taken. This, say the court,

    30

    "is a payment by compulsion: the plaintiff might have such an immediate want of his goods that an action of trover would not do his business: where the rule volenti non fit injuria is applied, it must be when the party had his freedom of exercising his will, which this man had not: we must take it he paid the money relying on his legal remedy to get it back again."

    31

    The principle of this case was approved in Smith v. Bromley Doug. 696, and also in Ashmole v. Wainwright 2 Q. B. 837. The latter was a suit to recover back excessive charges paid to common carriers who refused until payment was made to deliver the goods for the carriage of which the charges were made. There has never been any doubt but recovery could be had under such circumstances. Harmony v. Bingham 12 N. Y. 99. The case is like it of one having securities in his hands which he refuses to surrender until illegal commissions are paid. Scholey v. Mumford 60 N. Y. 498. So if illegal tolls are demanded, for passing a raft of lumber, and the owner pays them to liberate his raft, he may recover back what he pays. Chase v. Dwinal 7 Me. 134. Other cases in support of the same principle are Sham v. Woodcock 7 B. & C. 73; Nelson v. Suddarth 1 H. & Munf. 350; White v. Heylman 34 Penn. St. 142; Sasportas v. Jennings 1 Bay, 470; Collins v. Westbury 2 Bay 211; Crawford v. Cato 22 Ga. 594. So one may recover back money which he pays to release his goods from an attachment which is sued out with knowledge on the part of the plaintiff that he has no cause of action. Chandler v. Sanger 114 Mass. 364. See Spaids v. Barrett 57 Ill. 289. Nor is the principle confined to payments made to recover goods: it applies equally well when money is extorted as a condition to the exercise by the party of any other legal right; for example when a corporation refuses to suffer a lawful transfer of stock till the exaction is submitted to: Bates v. Insurance Co. 3 Johns. Cas. 238; or [576] a creditor witholds his certificate from a bankrupt. Smith v. Bromley Doug. 696. And the mere threat to employ colorable legal authority to compel payment of an unfounded claim is such duress as will support an action to recover back what is paid under it. Beckwith v. Frisbie 32 Vt. 559; Adams v. Reeves 68 N. C. 134; Briggs v. Lewiston 29 Me. 472; Grim v. School District 57 Penn. St. 433; First Nat. Bank v. Watkins 21 Mich. 483.

    32

    But where the party threatens nothing which he has not a legal right to perform, there is no duress. Skeate v. Beale 11 Ad. & El. 983; Preston v. Boston 12 Pick. 14. When therefore a judgment creditor threatens to levy his execution on the debtor's goods, and under fear of the levy the debtor executes and delivers a note for the amount, with sureties, the note cannot be avoided for duress. Wilcox v. Howland 23 Pick. 167. Many other cases might be cited, but it is wholly unnecessary. We have examined all to which our attention has been directed, and none are more favorable to the plaintiff's case than those above referred to. Some of them are much less so; notably Atlee v. Backhouse 3 M. & W. 633; Hall v. Schultz 4 Johns. 240; Silliman v. United States 101 U.S. 465.

    33

    In what did the alleged duress consist in the present case? Merely in this: that the debtors refused to pay on demand a debt already due, though the plaintiff was in great need of the money and might be financially ruined in case he failed to obtain it. It is not pretended that Hackley & McGordon had done anything to bring Headley to the condition which made this money so important to him at this very time, or that they were in any manner responsible for his pecuniary embarrassment except as they failed to pay this demand. The duress, then, is to be found exclusively in their failure to meet promptly their pecuniary obligation. But this, according to the plaintiffs claim, would have constituted no duress whatever if he had not happened to be in pecuniary straits; and the validity of negotiations, according to this claim, must be determined, not by the defendants' conduct, [577] but by the plaintiff's necessities. The same contract which would be valid if made with a man easy in his circumstances, becomes invalid when the contracting party is pressed with the necessity of immediately meeting his bank paper. But this would be a most dangerous, as well as a most unequal doctrine; and if accepted, no one could well know when he would be safe in dealing on the ordinary terms of negotiation with a party who professed to be in great need.

    34

    The case of Vyne v. Glenn 41 Mich. 112, differs essentially from this. There was not a simple withholding of moneys in that case. The decision was made upon facts found by referees who reported that the settlement upon which the defendant relied was made at Chicago, which was a long distance from plaintiff's home and place of business; that the defendant forced the plaintiff into the settlement against his will, by taking advantage of his pecuniary necessities, by informing plaintiff that he had taken steps to stop the payment of money due to the plaintiff from other parties, and that he had stopped the payment of a part of such moneys; that defendant knew the necessities and financial embarrassments in which the plaintiff was involved, and knew that if he failed to get the money so due to him he would be ruined financially; that plaintiff consented to such settlement only in order to get the money due to him, as aforesaid, and the payment of which was stopped by defendant, and which he must have to save him from financial ruin. The report, therefore, showed the same financial embarrassment and the same great need of money which is claimed existed in this case, and the same withholding of moneys lawfully due, but it showed over and above all that an unlawful interference by defendant between the plaintiff and other debtors, by means of which he had stopped the payment to plaintiff of sums due to him from such other debtors. It was this keeping of other moneys from the plaintiff's hands, and not the refusal by defendant to pay his own debt, which was the ruling fact in that case, and which was equivalent, in our opinion, to duress of goods.

    35

    [578] These views render a reversal of the judgment necessary, and the case will be remanded for a new trial with costs to the plaintiffs in error.

    36

    The other Justices concurred.

  • 4 Restatement § 174-177

  • 5 Farnsworth and Young, Contracts: Cases and Materials

You've reached the bottom of your content preview.
To view the rest in your browser, click here.
To export the complete content in DOC format, click the blue export button in the upper right corner of this page.

(Note: If you view the entire playlist, any changes you've made to export settings will be lost. Large playlists may temporarily freeze your browser while loading, as well.)