Preexisting Legal Duty Rule

Question 1

What is the Preexisting Legal Duty Rule?

Answer 1

Performance of a legal duty owed to a promisor which is neither doubtful nor the subject of honest dispute IS NOT CONSIDERATION; but a similar performance is consideration if it differs form what was required by the duty in a way which reflects more than a pretense of a bargain.

“If the purported consideration for a promise consists of something that the promisee is already legally obligated to perform, then there is no bargain. In such cases, the promisee has not incurred a detriment because he has not waived a legal right.”

Question 2

What are the three types of preexisting legal duties?

Answer 2

1. Preexisting Public Duties of Public Officials
2. Preexisting Public Duties of Private Parties
3. Preexisting Contractual Duties

Question 3

How does the Preexisting Legal Duty Rule relate to contract modification?

Answer 3

The preexisting legal duty rule prevents one-sided contract modifications where only one party modifies its contractual duties while the other does not.

When parties attempt to modify a contract, they each must take on new legal duties, otherwise there is no consideration for the modification. When a party attempts to use a preexisting legal duty as consideration for a promise, it might indicate that the promise was intentionally gratuitous. When a pre-existing legal duty is claimed as consideration, you should consider whether any of the defenses to formation are implicated.

Question 4

What are the exceptions to the Preexisting Legal Duty Rule?

Answer 4

1. A fair and equitable modification in view of changed circumstances (Sometimes parties make a one-sided modification because circumstances changed after contract formation in a way that was unanticipated. For example, perhaps there has been a labor strike, making it difficult for one party to meet its obligations)
2. Promissory Estoppel (Promissory estoppel, sometimes referred to as detrimental reliance, is one of the alternatives to consideration. A modification without consideration might be enforceable by applying the equitable principle of promissory estoppel.)
3. Good faith Modification under the UCC