Extortionate demand

Definition

An extortionate demand refers to an unreasonable or excessive request made by one party that creates pressure on another party, often involving threats or coercion. This type of demand typically exploits the vulnerabilities of the other party, which can lead to agreements that lack genuine consent and may be deemed unenforceable due to the coercive circumstances under which they were made.

5 Must Know Facts For Your Next Test

1. Extortionate demands can lead to contracts being voided because they lack mutual consent, as one party was under undue pressure.
2. These demands often arise in situations where one party has significantly more power or leverage over the other, exploiting that imbalance.
3. The law recognizes extortionate demands as a form of misconduct, and contracts formed under such conditions are typically unenforceable.
4. Extortionate demands can include threats of physical harm, reputational damage, or significant financial loss if the other party does not comply.
5. Proving an extortionate demand in court usually requires evidence showing that the victim had no reasonable alternative but to acquiesce to the demands.

Review Questions

• What are some examples of situations where extortionate demands might arise, and how do they affect the validity of contracts?
  • Extortionate demands can arise in various scenarios such as business negotiations, debt collections, or family disputes where one party threatens negative consequences if the other does not comply. These situations can severely affect the validity of contracts because if a party entered into an agreement solely due to threats or coercion, the contract may be considered void. The law aims to protect individuals from exploitation and ensures that agreements are made with free will.
• Discuss how economic duress relates to extortionate demands and the legal implications for contracts formed under such conditions.
  • Economic duress is closely linked to extortionate demands, as it specifically involves financial pressure that compels a party to agree to unfavorable terms. For instance, if a creditor threatens severe financial repercussions unless a debtor agrees to an extortionate repayment plan, this constitutes economic duress. Legally, contracts formed under economic duress can be voided because they lack genuine consent; the pressured party did not have a true opportunity to negotiate freely.
• Evaluate the potential long-term effects on business relationships when one party resorts to making extortionate demands during negotiations.
  • Resorting to extortionate demands can severely damage long-term business relationships, as trust and integrity are fundamental components of successful partnerships. When one party uses coercion or excessive demands, it creates an environment of fear and resentment, leading to future conflicts and potential legal disputes. Moreover, once a reputation for making such demands is established, it can deter other parties from engaging in future dealings, harming both current and potential business opportunities.

Related terms

Duress:

A situation in which a person is forced to act against their will or better judgment due to threats or harm.

Economic Duress:

A form of duress where a party uses financial pressure to coerce another party into entering a contract or agreement.

Coercion:

The practice of persuading someone to do something by using force or threats, compromising their ability to make free choices.