Outline: Contracts - III - Modifications and Mutuality of Obligation

Contracts (Spring 2006, Hull)

III. MODIFICATIONS AND MUTUALITY OF OBLIGATION

1. Modification – An agreement to amend a prior agreement must be supported by consideration. [Jole v. Bredbenner – An adjustment in grace period does not modify a rental agreement because there was no consideration.]
   1. R.2d 73 – Prior Promise – Promising to perform a prior promise is not consideration. [Gilbert Steel Ltd. v. University Construction Ltd. – Oral agreement to modify contract not enforceable because promise to “give a good price” is not consideration.]
   2. R.2d 89 - Modifications Without Consideration – A promise modifying a duty under a contract not fully performed on either side is binding
      1. Fair and equitable (good faith)
      2. Statute
      3. Promissory estoppel
   3. NOM Clauses are not enforceable. [Wagner v. Graziano Construction Company – Even where the contract specifically states no oral modification will be recognized, the parties may yet alter their agreement by parol negotiation.]
2. Duress
   1. R.2d 175(1) - Duress; R.2d 176 - Improper Threat
   2. 1-103 - Duress among factors that can be considered.
3. Settlement of Claims - Settlement requires consideration. [Mathis v. St. Alexis Hospital – A promise to forbear pursuit of a legal claim can be sufficient consideration to support a contract when the promisor has a good faith belief in the validity of the claim.]
4. Mutuality
   1. R.2d 79 - If there is no consideration, mutuality of obligation ("promise for promise") will do. [Weiner v. McGraw-Hill – Mutuality is not required where there is valid consideration.]
   2. Requirements Contracts – The seller promises to supply the buyer for a certain period of time at an agreed price, and the buyer promises that he will buy exclusively from the seller.
      1. Requirements contracts require mutuality. [USAA v. Schlang – Where the seller doesn’t promise to supply the buyer during a certain time, and the buyer doesn’t promise to buy only from the seller, there is no valid requirements contract.]
      2. Mutuality may be implied. [Laclede v. Amoco – Required 30-day notice negated buyer’s unilateral right to cancel, and hooking pipes up to seller’s system implicitly bound buyer to buy only from seller.]
5. Modifications under UCC [2-209]
   1. 2-209(1) - "An agreement modifying a contract . . . needs no consideration to be binding."
   2. 2-209(2) - NOM Clauses - Enforceable; but between merchants, the other party must sign.
   3. 2-209(3) - Original Contract in SoF - If original contract is within statute of frauds (UCC 2-201), need writing. [Wixon Jewelers, Inc. v. Di-Star, Ltd. – Where one was in breach of the original contract, the other did not have to honor the contract or oral modifications of it.]
   4. 2-209(3) - If original contract is not within statute of frauds, and quantity increased in sales case, need writing.
   5. 2-209(4) - If modification doesn’t meet (2) or (3), it can operate as a waiver (of own rights). (Oral waivers are allowed.)
   6. 2-209(5) - A waiver under (4) may be retracted by reasonable notification unless the other party has relied on the waiver.
6. Settlement of Claims under UCC
   1. 1-107 - Settlement of Claims - No consideration needed if signed and delivered by aggrieved party.
   2. 2-209(1) - "An agreement modifying a contract . . . needs no consideration to be binding." Implies requirement of good faith (per 1-203).
   3. 3-311 - Payment in Full - Cashing a "payment in full" check is acceptance of settlement. [County Fire Door Corporation v. C.F. Wooding Company – Any sum paid toward dispute is sufficient consideration; creditor may not cross out "payment in full" and cash check as partial payment. "You can’t eat your cake and have it too."]