A party may feel pressured to enter into an unfavorable contract due to the need to continue business, a cash flow shortage, or unequal bargaining power. That party may later want to try to void the contract due to duress. However, the Michigan courts have ruled that fear of financial damage or ruin alone is not enough and the party must also show that the conduct of the other party was illegal or unlawful.
In the Michigan Court of Appeals’ April 23, 2020 unpublished opinion, Weber Automotive Corporation v. Metaldyne LLC, (No. 168872), the Court reaffirmed that in a dispute over a contract where one party alleges economic duress, Michigan law requires that Plaintiff allege that the plaintiff was “illegally compelled or coerced to act by fear of serious injury to their persons, reputations, or fortunes.”
Plaintiff and Defendant entered into a requirements contract in 2010 under which Defendant was to manufacture and sell, and Plaintiff to purchase, castings for inclusion in the transmission systems of certain Ford Motor Company vehicles. The companies performed under the contract until 2015 when a disagreement began over when the original contract expired.
On October 2, 2018, Plaintiff filed a complaint alleging that the original contract was still effective and that a new contract signed in 2016 was void due to economic duress. However, Plaintiff did not allege that Defendant engaged in illegal or unlawful conduct when renegotiating the original contract. Therefore, Plaintiff’s claim to void a contract based on economic duress failed.
Plaintiff then asked the Court of Appeals to overrule its prior cases and create new law in order to “modernize” Michigan’s jurisprudence with respect to economic duress. The Court declined and once again reiterated that illegality is an element of duress. Should the law regarding duress change, it must come from either the Supreme Court of Michigan or the Legislature.
The primary takeaway from this case is that, in Michigan, the law requires illegal or unlawful conduct when bringing forth a claim to void a contract due to duress. Be sure to keep this in mind before you sign a contract.
A link to the opinion can be found here: https://law.justia.com/cases/michigan/court-of-appeals-unpublished/2020/347157.html
