What is Duress in Contract Law?

21 October, 2021 | Nathan Tetzlaff

Normally, when you place your signature on a contract you agree to be bound by the terms in that contract. However, the law says you cannot be bound by a contract you were induced to sign under duress. Compelling someone to commit to a contract they would not otherwise commit to renders that contract null and void.

What is Duress?

Duress, in a contractual context, refers to a situation where a person is pressured into signing a document they would not have signed without that pressure. The most common form of duress is coercion. That is, when another person threatens you if you don’t sign the contract.  A common indication of duress is when understands the decision they are making but are nonetheless acting against their own interests.

For pressure to make a contract null and void, the Court must find that this was “illegitimate pressure”.

A negotiation for a contract may be robust, vigorous, even potentially aggressive. A contract may not result in a good outcome for everyone, nor does the law expect that. Therefore, while negative outcomes for a party in a contract are a red flag, this is not automatically evidence of illegitimate pressure. The Court needs to consider the particular circumstances, and the parties’ behaviour at and before the contract was signed.

What is Illegitimate Pressure?

Where pressure results from a threat, the nature and circumstances of the threat will determine whether the pressure was legitimate or illegitimate. If the threat is unlawful, that will be an example of illegitimate pressure. However, some threats that don’t break the law could nonetheless amount to illegitimate pressure.

Unlawful consequences are those that directly violate the law, such as a threat of violence against you or a threat to break a previous contract. A threat of an unlawful consequence would be considered an illegitimate pressure that could amount to duress.

Lawful consequences are those that do not go against the law, but which may still involve unfavourable outcomes. Therefore, lawful consequences can still be illegitimate pressures if they are made in a threatening way intended to coerce you to sign a contract. For example, if someone threatens to inflict bodily harm upon themselves if you do not agree to the terms of a contract then this may be a lawful consequence that could amount to an illegitimate pressure, and therefore, duress.

How to Prove you Were Under Duress?

To prove you were under duress you must establish that you agreed to a contract because of a threat of illegitimate pressure and would not have signed the contract if the threat did not exist.

Evidence of duress often includes:

• The actions you take to avoid your contractual obligations since signing the contract;
• That the contract was against your interests;
• Identifying the type of pressure or coercion with evidence such as a threatening email or witness statement;
• Showing that but for the pressure, you would not have signed the contract.

What Happens if you are Found to have Signed a Contract Under Duress?

If the Court determines that a contract was signed under duress, that contract is rendered null and void as if it was never signed.

To schedule an appointment with Nathan for assistance with a contract dispute, please contact litigation executive, Mikayla Sagar by email on mikayla.sagar@smithpartners.co.nz or by phoning 09 837 6890