Meru Cabs case [Economic Duress in Indian Law](Highlighted sentences are relevant)

1. Economic duress is rationale similar to that which underlies the avoidability of contracts
entered into and the recovery of money exacted under colour of office or undue influence.
Two elements are necessary to constitute economic duress i.e. (a) pressure amounting to
compulsion of the will of the victim and (b) the illegitimacy of the pressure exerted. For all
practical purposes, the victim of duress must have no other choice. (Pao On v Lau Yiu Long
(1980) AC 614 referred in Dai-ichi Karkaria Pvt. Ltd. v. ONGC AIR 1992 Bom 309)
2. The plaintiff in the case of Daiichi Karkaria (at page 320) found itself in a totally helpless
condition in view of the plaintiff having gone far ahead in fulfilment of the contract and
having blocked its major resources relying on the representations made by the defendent.
In the present case, the plaintiffs had already entered into a contract with the defendant to pay Rs.
600/day as rent for the cabs with an assurance of getting Rs. 3000/day as income. They had, as in
the aforementioned case, already gone far ahead in fulfilling the terms of the pre-existing contract
and had incurred an expense of Rs. 2.5 lakhs for the same.
3. In Da-ichi Karkaria, it was also held that when allegations of economic duress and fraud are
made, all the facts and circumstances of the case will have to be considered together in
perspective and the necessary inference will have to be drawn by considering the cumulative
effect of all the facts and circumstances (page 329). Also, the definition of Fraud relied upon
was:
“Fraud, indeed, in the sense of a court of equity properly includes all acts, omissions and
concealments which involve a breach of legal or equitable duty, trust, or confidence, justly reposed,
and are injurious to another, or by which an undue and unconscientious advantage is taken of
another.”

“Fraud is the inducement with the underlying transaction and not with the nature of the contract or
document signed.” (page 330)
4. Prima facie it must be established that the defendant committed fraud on the plaintiff when
it tried to resile from its earlier representation made to the plaintiff of which representation
the plaintiff had acted upon (In this case, with relevance to teh fact that the rent was changed
from Rs. 600 to Rs. 900). And also with regard to the misconduct of the defendant in
resiling from the firm commitment already made and whether the plaintiff victim had any
other choice in practical terms other than submitting to the illegitimate pressure exercised by
the defendant at all stages (In the present case, the issue with regard to the debt-ridden
nature of the plaintiff making it impossible for him to choose anything but submitting to the
pressure exerted by the defendant Cab Company).
5. Also, where a party to a contract was forced by the other party to re-negotiate the terms of
the contract to his disadvantage and had no alternative but to accept the new terms offered,
his apparent consent to the new terms was vitiated by economic duress.