Preexisting Duty Rule

Question 1

Is an oral agreement to modify a written agreement that does not change the duties of the parties to the contract enforceable?

Answer 1

• A preexisting duty is not consideration
• The promise not to breach a contract is not fresh consideration
• The subsequent agreement to impose the obligation of a contract must rest upon a new and independent consideration
• An act of forbearance required by a legal duty owing to the promisor is not sufficient consideration

Question 2

Is obtaining a modification to a contract fresh consideration?

Answer 2

• Obtaining a modification to an agreement under duress is not fresh consideration
• Restatement Second section 73 - performance of a legal duty neither doubtful nor the subject of honest dispute is not consideration

Question 3

What is the exception to the preexisting duty rule?

Answer 3

• The courts have been reluctant to apply the preexisting duty rule when a party to a contract encounters unanticipated difficulties and the other party not influenced by coercion or duress, voluntarily agrees to pay additional compensation for work already required to be performed under the contract
• The modern trend is that courts should enforce agreements modifying contracts when unexpected or unanticipated difficulties arise during the course of performance of a contract, even though there is no consideration as long as the parties agree voluntarily

Question 4

What does Restatement Second 89D(a) say about the exception to the preexisting duty rule?

Answer 4

• Restatement Second 89D(a) enforces a modified contract
  ○ If the parties voluntarily agree
  ○ The promise to modify the contract was made before the contract was fully performed
  ○ The circumstances were unanticipated by the parties
  ○ The modification is fair and equitable

Question 5

What is the rule for modification to a contract under the UCC?

Answer 5

• An agreement modifying a sales contract needs no consideration to be binding
• Modifications must meet the good faith test
  ○ The test of good faith between merchants includes observance of reasonable commercial standards of fair dealing in trade…and may require an objectively demonstrable reason