Here’s the scenario: A woman was a member of the Church of Scientology, and wanted to get out, which is apparently no small feat. After enduring various forms of torture and solitary confinement, she was finally allowed to leave…so long as she signed a non-disclosure agreement, agreeing never to speak ill of the church. In sworn court testimony, she stated that “[i]f I had refused to sign the agreement, then I wouldn’t have been able to leave.” So she essentially had two choices: sign the agreement and be set free, or refuse to sign the agreement and be held captive and subjected to torture. Which would you choose? Of course, she signed the non-disclosure agreement and was set free. Subsequently, however, she sent an email to Scientology members criticizing the church, and is now being sued for breach of contract to the tune of $300,000.
Although the Church seems to think that they have a rock-solid case of breach of contract, I would argue differently. There are two good defenses to a breach of contract claim: (1) the party did not breach the contract, and (2) there was no contract to breach. In this situation, I suspect that this woman’s defense will be the latter—that there was no contract. Here’s why:
Among the excuses to contract formation are impossibility, impracticability, and coercion or duress (which is most likely to happen when there is a power imbalance). This last condition is clearly present in this scenario (“sign the agreement or we will torture you”), so it is my contention that even though the woman signed the agreement, no contract was formed. If a contract is signed under real duress, it cannot be enforced.
Here, the woman being sued is being sued for breaching an agreement signed under duress. Since that duress rose to such an extreme level, I argue that she could not have willingly entered into the non-disclosure agreement, and it is therefore not binding.
(photo: http://www.flickr.com/photos/seier/3122721913/)
About Graham Martin
Graham Martin is a solo practitioner focusing on Contract law (including drafting, review, and litigation). He operates Martin Legal Services, LLC in the Minneapolis-St. Paul area.
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Recently my house flooded. I called a water mitigation company. In the middle of this disater I signed a contract to have the company start work. Only recently did I receive a copy of hte signed contract. It says I must sign over all the insurance money to this company eventhough they clearly (I have all the estimates from the adjuster) have not performed all the work they are charging for AND padding the bill. I feel that under the circumstances this is duress (and possibly fruad). I paid them for the water mitigation as soon as they sent a bill.
They have sent me an additional bill for $10,000 with the trumped up charges which exactly adds up tot he checks the insurance company sent.
What do I do?
BB
We were recently victims of a mortgage fraud. In order to get any portion of our “earnest” fees refunded, we must sign a non disclosure agreement. What this person does is absolutely wrong, by posing as an investor looking to hold private mortgages, he collects fees upfront – then does not give the promised loan. He keeps 40% of up to a 10,000 upfront required fee – this is how he makes his money. If we sign to get our money back – are we really legally kept from warning anyone else about doing business with this man?
I would need to know more about the specific circumstances of the earnest money payment and the purported fraud, but I could see arguing against the validity of the non-disclosure agreement (NDA) based either on (1) duress, or (2) illegality. If a contract (in this case, the NDA) is signed by a party against his/her/its will, that contract is not really valid, because it doesn’t really represent the intent of the parties. Contracts signed when under threat of violence, or perhaps involving blackmail would likely fall under this category, and duress would be a potential defense to a breach of contract action in that case. Alternatively, I could see arguing that the NDA is part of a fraudulent (i.e., illegal) activity, making the contract illegal and unenforceable. There would need to be research into your state’s case law to determine the scope of applicability of these principles to your situation, but either of these seem like valid arguments.
From a more practical standpoint, though, it’s not likely that a person who is knowingly engaging in illegal activity would ever bring a breach of contract action in court against someone for breaking a contract that s/he knows is part of illegal activity. The only effect of such a situation would be to have the court investigate the situation and discover the nature of the fraud.
So although I would have a hard time imagining a situation where a an illegal actor would invite court scrutiny upon his activities, I also can’t see a court enforcing a contract signed under the circumstances you describe. I suggest you contact an attorney in your area to determine a prudent course of action to attempt to recover your money. I’m only licensed in Minnesota, so I would not be able to assist you further unless you or the other party is based in Minnesota.
Best of luck.
I am a contract lawyer. This can be complicated and requires detailed examination, but on the surface good defenses appear to be in order of strength:
1. No consideration, thus no contract.
2. Duress.
3. Unreasonable liquidated damages, not properly calculated ( assuming contract valid, the $10K equates to a fine and not calculated to rectify contract performance, terms void against public policy of private party not exercising power to issue a punitive fine).
4. Fraud in the inducement.
5. Contract for unlawful purpose, violates public policy to report illegal actives.
6. Contract void for being part of criminal enterprise or involving illegal activities. While this ground is absolutely right on, there is a lot of stuff to prove and it does not win you any money, it is just a defense and you would win on one of the easier defense first, though this one should be pled in order to plead the facts and put into the public record – have a hay day.
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