Extortion: Definition, Example and Related Terms
What is Extortion ?
This can manifest in various ways, such as threatening physical harm, damaging someone's reputation, or withholding crucial services or goods unless the victim complies with the demands.
Extortion is illegal and renders any contract entered into under such conditions voidable, as it compromises the free will of the victim party. It is a crucial consideration in contract negotiations and legality assessments to ensure that agreements are made voluntarily and without undue pressure.
Understanding extortion and identifying its presence is vital for anyone involved in contract creation, negotiation, and enforcement. It ensures that the agreements are lawful and that any transactions or contracts are based on mutual consent and free from coercion.
Example(s)
Scenario Description A construction company is contracted for a project but later threatens to stop work halfway unless the client pays an additional amount beyond the agreed contract. This scenario could be considered extortion if the client feels forced to pay the additional amount under the threat of incomplete work. The contract could be deemed voidable due to the coercive circumstances. A supplier threatens a retailer that they will supply a competitor with exclusive products unless the retailer agrees to unfavorable terms in a new goods supply contract. Here, the supplier's threats may amount to extortion if they induce the retailer to agree to the new terms out of fear of losing business. This undermines the fairness and voluntary nature of the contract.