Contract coercion occurs when a contract agreement is entered into under conditions involving harm or threats of harm. State and federal laws require contracts to be entered into “knowingly” and “willingly” by all parties. Thus, if a party signs a contract due to coercion, the contract generally will not be considered legally enforceable.
The rule regarding coercion applies both to the entire contract as well as individual terms in the contract. That is, the parties must willingly agree to the contract as a whole, as well as the various terms, definitions, and requirements laid out individually in the agreement.
For a contract to be legally enforceable, both parties must have willingly entered into the contract. On the other hand, if one party was coerced into the contract, meaning threats were used to obtain their acceptance, the contract is not valid. This rule related to coercion applies both to specific terms in a contract and the contract as a whole. Basically, this means that contracted parties must agree to the entire contract and must also agree to all the individual terms.
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.
Effects of Coercion:
It is quite obvious that the contract entered into due to the effect of coercion do not have free consent. In this way, the following instances are possible:
- The contract brought about due to coercion becomes voidable, at the option of the aggrieved party.
- With respect to the result of recission i.e. revocation of a voidable contract, the party who revokes a void contract, have to restore any benefit received from the other party.
- If due to coercion money has been paid or certain stuff is provided, it must be repaid or returned.
It must be noted that mere threat by one party to other to prosecute does not result in coercion. The aggrieved party must have entered into a contract out of that threat, which can be avoided on account of coercion.