When a party is coerced to enter a contract due to business necessity or compulsion, courts may excuse the coerced party from performance, finding the contract involuntary due to economic duress. In New York, economic duress renders a contract voidable, not void, and the party claiming duress must act promptly or may be deemed to have affirmed the agreement.
Generally, a claim of economic duress arises where one party is compelled to contract with another due to a wrongful threat that deprives the coerced party of his free will, or where one party threatens injury to the other by taking advantage of a known economic necessity of the other. Where the coercion is the result of ordinary business pressure not caused by the other contracting party, however, courts usually refuse to allow the complaining party to avoid its obligations. Further, New York courts have uniformly held that a mere threat to breach a contract, even if exerted in the context of unequal bargaining power, does not rise to the level of economic duress. Rather, the ordinary remedies for breach of contract must be inadequate and the non-breaching party must have been unable to remedy the situation in some other way, such as finding replacement goods where the breach was of a contract for the sale of goods.
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