## Facts

- Fred and Ginger Chouinard sought cancellation of two promissory notes totaling $190,000 payable to Fred’s father (Al) and twin brother (Ed) arising from a dispute over ownership interests in ARC Security, Inc.
- ARC Security supplied security guards in the Atlanta area and employed hundreds; it was formed with capital contributions from Fred, Al, and Ed, and the parties had an understanding that Al and Ed would hold stock interests.
- Over time, a contentious dispute developed about the extent and character of Al and Ed’s ownership interests and the terms on which they would release their claims.
- ARC later experienced severe cash-flow problems due to business setbacks and nonpayment by customers, and Fred sought refinancing to meet payroll and keep the business operating.
- A prospective lender conditioned refinancing on settlement of Al and Ed’s ownership claims.
- Fred offered to pay Al and Ed $30,000 each for releases; after consulting counsel and reviewing company records, Al and Ed demanded $90,000 each.
- Facing urgent need for refinancing, Fred and Ginger executed the notes as part of a broader settlement in which Al and Ed released their claims; plaintiffs made installment payments for about a year before suing.
- Plaintiffs alleged economic duress, claiming Al and Ed exploited ARC’s financial distress to extract an excessive price for the releases.

## Issues

1. Whether the promissory notes were voidable for economic duress based on Al and Ed’s bargaining demands in light of ARC’s financial distress and the lender’s settlement condition.
2. Whether plaintiffs waived any duress claim by making voluntary payments on the notes after execution.

## Decision

- The Fifth Circuit affirmed judgment for defendants.
- The court held the evidence did not establish economic duress as a matter of law because plaintiffs did not show a wrongful or unlawful act by Al or Ed.
- Because it found no duress, the court did not need to overturn the jury’s finding that plaintiffs waived any duress claim by making voluntary payments.

## Legal Principles

- Economic duress requires a wrongful or unlawful act by the opposing party that overcomes the victim’s free will; financial pressure alone is insufficient.
- Insisting on asserted legal rights in good faith, even when the other side faces severe economic pressure, does not constitute duress.
- Hard bargaining and taking advantage of another party’s difficult financial position are not duress absent wrongful conduct.
- Pressure that results from a party’s own business circumstances, including self-created financial distress, does not establish duress attributable to the counterparty.
- The existence of legal alternatives (even unattractive ones) weighs against a finding that an agreement was compelled by duress.

## Conclusion

The Fifth Circuit refused to void the settlement notes for economic duress because the defendants’ demands were tied to plausible ownership claims and involved no wrongful conduct; the plaintiffs’ urgent need for refinancing reflected business necessity rather than legally cognizable compulsion.


Chouinard v. Chouinard, 568 F.2d 430 (5th Cir. 1978)