Bobco needs 250000 to pay its suppliers otherwise they will

Bobco needs $250,000 to pay its suppliers otherwise they will stop shipping and Bobco will fail. He calls Ambank. Bob, the president of Bobco explains his situation and they offer him a loan at 19% interest and he has to pledge his house as collateral. Bobco fails to repay the loan on time and Ambank sues to foreclose on Bob\'s house. The court will void the contract because it was signed under duress.

True or False?

Solution

Contract Meaning:-

A contract is a promise or set of promises that are legally enforceable and, if violated, allow the injured party access to legal remedies

To understand this we need to look at a basic question. When is a contract considered void because it was signed under duress ??

Explanation:-

What is Duress:-

When a person is forced to do something against his or her will, that person is said to have been the victim of duress—compulsion. There are two types of duress: physical duress and duress by improper threat.

Physical Duress

If a person is forced into entering a contract on threat of physical bodily harm, he or she is the victim of physical duress.

This rule is not applicable since from the example it doesnot seem that BOB was physically harmed to make a contract with the bank

Duress by Threat

The second kind of duress is duress by threat; it is more common than physical duress. Here the perpetrator threatens the victim, who feels there is no reasonable alternative but to assent to the contract. It renders the contract voidable. This rule contains a number of elements.

The bank did not threat BOB it is reasonable to say that they did not approach Bob and hence this is not applicable in the case

Undue Influence

It is a milder form of duress than physical harm or threats. The unfairness does not lie in any misrepresentation; rather, it occurs when the victim is under the domination of the persuader or is one who, in view of the relationship between them, is warranted in believing that the persuader will act in a manner detrimental to the victim’s welfare if the victim fails to assent.

There is no influence in this case.

Hence it is valid to say that if BOB files such a case it will be rejected and hence the contract will not be declared void. So the ultimate answer to the question is FALSE