IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

The Law of Duress and the Economics of Credible Threats

  • Bar-Gill, Oren
  • Ben-Shahar, Omri
Registered author(s):

    This paper argues that enforcement of an agreement, reached under a threat to refrain from dealing, should be conditioned solely on the credibility of the threat. When a credible threat exists, enforcement of the agreement promotes both social welfare and the interests of the threatened party. If agreements backed by credible threats were not enforceable, the threatening party would not bother to extract them, and would simply refrain from dealing - to the detriment of the threatened party. The doctrine of duress, which predominantly controls such agreements, only hurts the "coerced" party. By denying enforcement in cases where a credible threat exists, duress doctrine precludes the threatened party from making the commitment that is necessary to reach agreement and reduces incentives to invest. The analysis in this paper suggests that, in dealing with agreements reached under threats to breach, courts should replace the duress methodology with a credibility inquiry. It discusses factors that would be relevant under such inquiry. Finally, it demonstrates some of the applications of this approach in the context of leading contract modification cases.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL: http://www.escholarship.org/uc/item/6pn2360j.pdf;origin=repeccitec
    Download Restriction: no

    Paper provided by Berkeley Olin Program in Law & Economics in its series Berkeley Olin Program in Law & Economics, Working Paper Series with number qt6pn2360j.

    as
    in new window

    Length:
    Date of creation: 01 Jun 2003
    Date of revision:
    Handle: RePEc:cdl:oplwec:qt6pn2360j
    Contact details of provider: Postal: Boalt Hall, Berkeley, CA 94720
    Fax: (510) 642-3767
    Web page: http://www.escholarship.org/repec/blewp/
    Email:


    More information through EDIRC

    No references listed on IDEAS
    You can help add them by filling out this form.

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:cdl:oplwec:qt6pn2360j. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Lisa Schiff)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.