Also known as: unhandsome dealings · unfair dealing
Written by attorneys · grounded in primary & secondary sources — see below
Prior unfair conduct by one party that heightens the coercive force of a later threat and renders the resulting exchange improper under the rules governing economic duress. The conduct need not itself be independently unlawful. It must simply create or exploit a vulnerability that makes the threatened party more likely to assent to unfair terms.
Select any source to read its text and confirm it supports the definition.
Valley Health had intentionally underpaid Rural Care Physicians invoices for months, leaving the practice cash-strapped. Valley then threatened to withhold all remaining payments unless the physicians signed an exclusive agreement at steeply reduced rates. The prior underpayments made the threat far more coercive than ordinary bargaining, allowing the physicians to avoid the agreement.
Riley Construction withheld progress payments from Lopez Steel on a pretext later rejected by inspectors. Riley then threatened to blacklist Lopez from future work unless Lopez signed a change order slashing prices. Lopez, facing imminent cash collapse, signed and later avoided the modification.
A controlling shareholder withheld material information from minority investors while negotiating a cash-out merger. The shareholder then threatened to block alternative financing unless the minority accepted below-market terms. The prior nondisclosure rendered the threat improper and allowed rescission of the merger agreement.
A dominant platform had previously delayed revenue shares owed to a small developer. It then threatened to cut off API access unless the developer accepted a steep buyout. The earlier delays made the threat especially coercive, permitting the developer to avoid the agreement.
A promoter extracted secret profits from preincorporation licensing deals while concealing conflicts from later investors. The promoter then threatened rapid foreclosure on related property unless the corporation accepted unfavorable terms. The prior nondisclosure made the threat improper and allowed avoidance of the resulting agreement.
A threat becomes improper when the resulting exchange is not on fair terms and the effectiveness of the threat is significantly increased by the threatening party's earlier unfair conduct. The prior conduct need not be criminal or tortious. It is enough that it creates or exploits a vulnerability that leaves the recipient with no reasonable alternative.
Supporting sources
…Cinerama countered by moving the Court for alternative relief: (1) to amend its appraisal complaint to include its fraud and unfair dealing claims asserted in its fraud action; or (2) to consolidate for discovery and trial its appraisal and its fraud actions. Technicolor opposed both motions, and all defendants moved to dismiss…
…Concurring opinions Concurring — Kennedy, Circuit Judge The case involves specific pricing practices, not an allegation of unfair dealing
…contend, that the merger does not meet the entire fairness standard required by Weinberger . They aver specific acts of unfair dealing
…law fraud claims have been disallowed in appraisal actions under both Rabkin v. Phillip A. Hunt Chemical Corp. , id. (unfair dealing
…of Chancery dismissed the complaint, reasoning that, under Weinberger , plaintiffs could obtain full relief for the alleged unfair dealing
Yes. When a party intentionally withholds payments it owes in order to manufacture financial distress and then uses that distress to extract a one-sided modification, the earlier withholding qualifies as prior unfair dealing that renders the later threat improper.
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Yes. A threat may be improper when the exchange is unfair and the threat's coercive force is increased by prior unfair dealing, even if the act threatened would be lawful standing alone.
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Ordinary hard bargaining does not involve prior conduct that deliberately weakens the other party. Prior unfair dealing occurs when one party first creates or exploits a vulnerability through intentional misconduct and then leverages that vulnerability to obtain assent to unfair terms.
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The contract is voidable at the option of the party whose assent was induced by the improper threat. That party may rescind the agreement and seek restitution, subject to any equitable adjustments required by partial performance.
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