Quick Summary
Totem Marine Tug & Barge, Inc., Pacific, Inc., and Richard Stair (plaintiffs) filed a complaint against Alyeska Pipeline Service Company and others (defendants) after Alyeska terminated a contract with Totem. Totem was responsible for transporting pipeline construction materials from Houston, Texas, to a designated port in southern Alaska.
The plaintiff alleged economic duress and sought to rescind the settlement and release agreement they entered into with Alyeska. The trial court granted summary judgment in favor of Alyeska, and this appeal followed.
Facts of the Case
Totem Marine Tug & Barge, Inc. (plaintiff), a newly established corporation, entered into a contract with Alyeska Pipeline Service Company (defendant). The contract involved transporting pipeline construction materials from Houston, Texas, to a designated port in southern Alaska.
Totem faced numerous difficulties in performing the contract due to misrepresentations by Alyeska, loading issues in Houston, adverse weather conditions, and actions of Alyeska’s agents upon reaching San Pedro, California.
Following Alyeska’s termination of the contract, Totem submitted termination invoices and pressed for payment. Alyeska offered a settlement of $97,500, which Totem accepted due to its urgent need for cash to avoid bankruptcy.
Totem released all claims against Alyeska in exchange for the settlement amount.
Procedural History
- Totem filed a complaint against Alyeska, Pacific, Inc., and Richard Stair.
- Plaintiffs alleged economic duress and sought rescission of the settlement and release agreement.
- Defendants moved for summary judgment.
- The trial court granted summary judgment in favor of the defendants.
- Plaintiffs appealed.
I.R.A.C. Format
Issue
Whether the release and settlement agreement entered into by Totem is voidable on the grounds of economic duress.
Rule of Law
Economic duress occurs when wrongful acts or threats force a party into a transaction, eliminating their free will. The affected party must demonstrate having no reasonable alternative but to accept the terms imposed by the other party.
Reasoning and Analysis
Totem alleged that Alyeska wrongfully terminated the contract, withheld funds, and knew about its financial distress. It claimed these actions created economic duress, forcing it to accept the settlement offer under unfavorable terms.
Economic duress occurs when one party’s wrongful acts or threats leave the other party with no reasonable alternative but to agree to their demands. In this instance, if it can be proven that the release was executed under such circumstances of economic duress, it would render the release and settlement agreement voidable.
Therefore, genuine issues of material fact exist surrounding Totem’s allegations of economic duress, warranting further examination and a trial to determine the validity of their claims.
Conclusion
The summary judgment in favor of Alyeska is overturned. Material fact disputes exist on the release agreement’s execution under economic duress. The case is returned to the trial court to assess Totem’s claims’ validity and consider setting aside the release.
Key Takeaways
- Economic duress can render a release and settlement agreement voidable.
- A party must show wrongful acts or threats without reasonable alternatives to prove economic duress.
- Payment delays and financial distress can contribute to economic duress.
Relevant FAQs of this case
How does economic duress impact contract settlements?
Economic duress can make contract settlements voidable if one party is forced into accepting unfavorable terms due to wrongful acts or threats.
How does the court evaluate claims of economic duress?
The court examines whether one party’s wrongful actions or threats eliminated the other’s free will, leaving them with no reasonable alternatives.
- For example: If a giant corporation pressures a small business facing financial distress to accept unfavorable contract changes under the threat of terminating the deal, it might claim economic duress.
References
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