Contracts I, Pages 492–500

Totem Marine Tug & Barge, Inc. v. Alyeska Pipeline Service Co.

Supreme Court of Alaska, 1978

Facts:

Plaintiff Totem entered into a contract with defendant to transport pipeline construction materials from Houston to a port in southern Alaska, with the possibility of one or two cargo stops along the way. Plaintiff chartered a barge and a to carry out this contract, using a loan from Totem's vice-president Richard Stair, also a plaintiff.

Totem was supposed to complete performance by August 15, 1975, but numerous problems impeded this. Defendant had more and different materials to load than they initially said and they were not arranged properly, causing 3 days of loading to become 30 days. The extra load slowed the ships down. With defendant's verbal consent, plaintiff chartered a second tug, but told it not to help for a week until defendant executed the amended complaint. The boats then encountered a hurricane for over a week.

When nearing San Pedro, California, where plaintiff planned to change crews and refuel, defendant instead had the vessels pull into port at Long Beach and commenced off-loading. Defendant did not get plaintiff's consent or the proper surveys, thereby voiding plaintiff's insurance. Defendant then terminated the contract without giving a reason, which was affirmed a few days later. Plaintiff then submitted termination invoices totaling between $260,000 and $300,000. Defendant said they would pay in six to eight months, but plaintiff needed payment sooner to avoid bankruptcy and so had a lawyer meet with defendant, therethrough acquiring a settlement offer for $97,500.

Plaintiff then filed a complaint against defendant to rescind the settlement and release it on the ground of economic duress, also alleging that defendant had wrongfully terminated the contract.

Procedural History:

The superior court granted the defendant's motion for summary judgment.

Issue:

Whether plaintiff could rescind the contract due to economic duress.

Rules:

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    1. The party alleging economic duress must show that he has been the victim of a wrongful or unlawful act or threat, and
    2. Such act or threat must be one which deprives the victim of his unfettered will.
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    1. One party involuntarily accepted the terms of another,
    2. Circumstances permitted no other alternative, and
    3. Such circumstances were the result of coercive acts of the other party.

Reasoning:

Even a few weeks wait on collecting can by fatal for a company.

Holding:

Plaintiff's facts make a sufficient factual showing as to the elements of economic duress. Remanded for trial.