Warning
Info
- - tl;dr
- - ICRA
- - Facts & Holding
- - DeepDive
0 0
New York Court of Appeals - 29 N.Y.2d 124
Tags: Economic Duress
tl;dr:
Threatening your partner's business by withholding goods until they agree to your demands may render your contract voidable.Video Summary
Case Summary
In the case of Austin Instrument, Inc. v. Loral Corp. (1971), Austin Instrument sued Loral Corp. for payment after supplying gear components for the US Navy under two contracts. Loral counterclaimed for damages, claiming economic duress. After the initial contract began, Austin demanded a significant price increase for all parts already received and scheduled for shipment. If Loral refused, Austin threatened to stop their deliveries. As no alternative suppliers were available, Loral agreed to pay the higher rate under protest. Loral only paid the original price, however, and Austin sued for the remaining balance.
Initially, Austin won at trial and Loral's counterclaim was dismissed. However, the Court of Appeals reversed this and called for a new trial, stating that Loral had valid grounds for claiming economic duress. The court applied the test of economic duress, asking whether one party was forced into agreement due to a wrongful threat that doesn't allow free will.
The court found that Austin had wrongfully threatened Loral by demanding higher prices after the contract had been agreed upon. Without alternatives, Loral faced penalties if they couldn't meet their Navy contract. Therefore, the court decided that Austin took advantage of Loral's urgent need, and coercively made them agree to new prices.
This case demonstrates the legal principle of economic duress, a valid reason to avoid a contract if one party acts oppressively or unfairly towards another, thereby undermining the voluntary consent needed to form a contract.
DeepDiveHighlight a legal term to see the definition
Loral Corporation is seeking payment for goods delivered under a contract with Austin Instrument, Inc. Loral claims that it was forced to agree to an increase in price due to economic duress. Austin refused to accept an order for less than all 40 gear parts and threatened to cease deliveries of the parts unless Loral consented to substantial price increases and placed an order for all 40 parts needed under Loral’s second Navy contract. Loral eventually acceded to Austin’s demands due to military exigencies. The court held that Loral failed to prove that it could not have obtained the items from other sources in time to meet its commitment to the Navy under the first contract. However, the higher court found that Loral was a victim of economic duress, which is when someone is forced into a bad deal because of threats or pressure. The lower courts made a mistake by saying that Loral did not prove they were forced into an unfair economic situation. The law applicable to the case is clear and undisputed by the parties. A contract can be voided on the grounds of duress if it is proven that one party was forced to agree to it due to a wrongful threat that prevented them from exercising their free will. Economic duress or business compulsion can be established if immediate possession of necessary goods is threatened or if one party threatens to breach the contract by withholding goods unless the other party agrees to further demands.
Judge Bergan dissents from the majority opinion and argues that the issue of whether Loral's acts caused damage or not was already resolved against them by the lower courts and should not be reconsidered. However, there are conflicting testimonies from witnesses regarding the renegotiation request made by Austin. The Appellate Division concluded that Loral acted voluntarily and deliberately without immediate pressure, which precludes a recovery on the theory of economic duress. The majority of judges agree with this decision, while Judge Bergan and Judges Breitel and Jasen disagree. The order will be made accordingly.
LSD+ Case Briefs
Features
- DeepDive for detailed case analysis
- Over 50,000 existing case briefs
- Instant briefs for another 6,000,000 cases
- Highlight dictionary for legal term definitions
- Social learning with chat and high points
Over 50,000 Cases Briefed
LSD+ gives you access to over 50,000 case briefs, more than anyone else. Be the first to email us the website of a case brief product that offers you more case briefs and we'll give you a free year of LSD+.
14-Day Free Trial
Unlimited access. Read as much content as you want during your trial with no device limitations. Cancel any time during your trial and keep access for the full 14 days.
Integrated Legal Dictionary
Lawyers and judges love to use big words. And Latin, for some reason.
Highlight a legal term in LSD Briefs and get an instant, plain English definition. Try highlighting contract or specific performance. No need to search or read through a list of definitions, simply highlight the words you don’t know and our LSDefine integration will instantly give you a definition to any of over 30,000 legal terms.
DeepDive
DeepDive allows you to explore legal cases like never before. DeepDive offers multiple levels of case summaries, which empowers you to quickly and easily find the information you need to stay on top of readings. Easily navigate through summary levels and click on any text to get more detail, all the way down to the original legal case text.
Brief anything. Instantly.
Our proprietary state-of-the-art system can instantly brief over 6,000,000 US cases. That means we can probably brief that case that your professor assigned last night when she sent you a poorly scanned pdf and told you to read every third paragraph. Or maybe she uploaded it to Canvas and didn’t really tell you to read it, but you know you probably should. Tenure does wild things to good people.
Social Learning with Chat and High Points
Study groups are a great way to learn and explore a case. LSD has chat rooms for each case to let you ask questions across the community and hear what other students struggled with and how they put it all together. Learn the key points of every case from other LSD+ users and share your knowledge with LSD High Points.
Real-Time Brief Feedback
Don’t settle for mistakes in briefs that have been there for 10 years and never fixed. Find an issue or something missing from a brief? Down vote and we will make improvements. All of our case brief editors graduated from from T14 law schools.