What Does ‘Duress’ Mean In Commercial Real Estate?

What Does ‘Duress’ Mean In Commercial Real Estate?

What Does ‘Duress’ Mean In Commercial Real Estate?

Duress in commercial real estate refers to the act of using force, coercion, threats, or psychological pressure to compel someone to act against their wishes or interests. It is a legal term that can have significant implications on contracts and property deals.

In the context of real estate, duress can arise when a seller is forced to sell a property due to financial difficulties, which may lead to negotiations under less favorable terms. Understanding the definition of duress is crucial for those involved in commercial real estate transactions to ensure that all parties are acting willingly and without undue pressure.

Key Takeaways:

  • Duress in commercial real estate involves using force or pressure to compel someone to act against their interests.
  • It can have significant implications on contracts and property deals.
  • Sellers under duress may be forced to negotiate under less favorable terms.
  • Understanding the definition of duress is important to ensure voluntary and fair transactions.
  • Legal advice and provisions in contracts can help protect against duress-related disputes.

Forms of Duress in Commercial Real Estate

Duress can take various forms in commercial real estate transactions, each with its own implications and consequences. Understanding these forms is crucial for all parties involved to ensure fair and voluntary transactions. The two main forms of duress commonly seen in commercial real estate are physical duress and financial duress.

Physical Duress

Physical duress occurs when someone is compelled to act against their will due to threats, violence, or physical constraints. In the context of commercial real estate, this can manifest in situations where a party is coerced or restrained to sign an agreement or execute a transaction. It is important to note that physical duress is prohibited and considered illegal. Any transaction entered into under physical duress may be deemed voidable, potentially leading to legal disputes and the nullification of contracts.

Financial Duress

Financial duress, on the other hand, pertains to the pressure imposed by financial difficulties. In commercial real estate, this can arise when a party is forced to make decisions or take actions due to financial constraints. For example, a business facing financial duress may be compelled to sell assets or make risky financial choices in order to alleviate its financial burden. Transactions made under financial duress may be subject to scrutiny, and the party facing financial duress may have grounds to challenge the validity of the agreement.

It is important for all parties involved in commercial real estate transactions to be aware of the forms of duress and take steps to ensure that transactions are fair, voluntary, and free from any undue pressure. Seeking legal advice and including provisions in contracts to address and prevent duress can help mitigate the risk of disputes and protect the interests of all parties involved.

Duress Forms Characteristics
Physical Duress Coercion, threats, or physical restraint
Financial Duress Pressure caused by financial difficulties

In conclusion, forms of duress in commercial real estate encompass physical duress and financial duress. Recognizing these forms is essential for all parties to ensure that transactions are conducted in a fair and voluntary manner. By understanding the implications and consequences of duress, parties can take proactive measures to protect themselves and mitigate potential risks in commercial real estate transactions.

 

Defenses Against Duress in Commercial Real Estate

In the realm of commercial real estate, economic duress is a common form of duress. Economic duress occurs when one party uses unlawful economic pressure to coerce another party into a contract that they would otherwise not agree to. It can also occur when one party threatens to cancel an existing contract unless the other party agrees to enter into another contract.

To successfully claim a defense of duress, the aggrieved party must demonstrate that the other party threatened to breach the agreement by withholding performance unless the aggrieved party agreed to some further demand. However, a mere threat to breach a contract does not constitute economic duress if the party who has been threatened can obtain performance of the contract from another source and pursue normal legal remedies for a breach of contract.

In the context of commercial real estate, the standard of justifiability used by the courts in economic duress cases should be a standard of commercial reasonableness. This means that the conduct of the party accused of duress should meet the commercial standards of fair dealing in the trade.

It’s important to note that a party cannot be guilty of economic duress for refusing to do that which it is not legally required to do or for threatening to do that which it is legally authorized to do. For instance, if a party has no legal obligation to execute paperwork for the sale of a property, there can be no economic duress arising from that party’s threat not to consummate the transaction.

Defenses against duress in commercial real estate involve demonstrating that the contract was entered into under coercion, and that the aggrieved party had no reasonable alternative but to assent to the contract. It’s advisable to seek legal counsel when faced with such situations to ensure that your rights are adequately protected.

FAQ

What does ‘duress’ mean in commercial real estate?

Duress in commercial real estate refers to the act of using force, coercion, threats, or psychological pressure to compel someone to act against their wishes or interests.

What are the forms of duress in commercial real estate?

There are two main forms of duress in commercial real estate. Physical duress occurs when someone is forced to act against their will due to threats, violence, or constraint. Financial duress, on the other hand, refers to the pressure caused by financial difficulties.

Can duress be used as a defense in commercial real estate transactions?

Yes, duress can be used as a defense against certain types of contracts or agreements that have been made under duress. If a party can demonstrate that they were forced or coerced to enter into a transaction against their will, the validity of the contract may be called into question.

How can parties protect themselves against duress in commercial real estate transactions?

Seeking legal advice and including provisions in contracts to address duress can help protect against potential disputes and challenges in the future. It is important for all parties involved to ensure that they are entering into agreements voluntarily and without undue pressure.

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