In contract law, economic duress also called business compulsion, refers to one party’s improper or illegal conduct that causes the other party’s fear of economic hardship and the fear prevents the party from engaging in a commercial agreement with free will.
Economic duress is a defense that can be used by a party to argue against the formation of a binding contract between two parties. To prove economic duress, a party must show that:
- A continuous contract exists between the plaintiff and the defendant;
- The defendant threatens to terminate the pre-existing contract; and
- The plaintiff under this duress accepts the defendant’s terms and enters the contract.
[Last updated in September of 2022 by the Wex Definitions Team]