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How to Analyze Contract Modification & The Preexisting Duty Rule on a Contracts Essay
CONTRACT MODIFICATION
A contract modification occurs when the parties to a contract change or add additional terms to an existing enforceable contract.
Under the common law, a contract modification must be supported by consideration. The preexisting duty rule stipulates that a promise to do something of which the party is already legally obligated to do, by contract or otherwise, is not consideration.
Under the UCC, a contract modification need NOT be supported by consideration. The UCC stipulates that a contract modification will be valid if the parties enter into the modification in good faith.
WATCH OUT FOR THIS COMMONLY-TESTED TRICK FACT PATTERN
A rents an apartment from B for one year at a rent of $2,000 per month. Nine months into the lease contract, A (running short on cash) and B both agree to modify the rent to $1,500 per month for the remainder of the lease. Subsequently, B crosses out the $2,000 price term on the original lease and writes in $1,500 as the new price term. Both A and B sign and initial the contract to approve the modification. At the end of the month, A pays B the agreed upon $1,500. B then sues A for $500 for breach of contract. Will B recover the $500?
Yes. Under the common law, B can successfully sue A at the end of the month for $500, because the modification was NOT supported by consideration. A had a preexisting legal duty to pay B the full $2,000. Thus, the $1,500 A paid B does NOT constitute consideration for the modification. Therefore, the original contract controls and A is in breach of contract having only paid $1,500 of the $2,000 owed to B.
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