Modification of contracts - Next Generation Bar Exam

1. An excavator hits a buried rock ledge neither party anticipated, and the owner agrees to pay more to finish. On what basis is the promise enforceable?

   It is a fair and equitable modification prompted by unanticipated circumstances. The Restatement (Second) exception enforces such modifications without new consideration.

2. Under the Restatement (Second), when else is a modification enforceable without consideration?

   To the extent justice requires because of a material change of position in reliance on the modification. Reliance can make a promise to modify binding even if the unanticipated-circumstances exception does not apply.

3. Under the traditional common-law rule, what must support a modification?

   New consideration. Under the preexisting duty rule, a promise of more for the same performance is unenforceable.

4. Under the Restatement (Second), how is performance of a duty owed to a third person treated when another promises to pay for it?

   As consideration for the new promise. Because the promisor gains a performance it had no right to demand, the preexisting duty rule does not apply.

5. When must a common-law modification be in writing?

   When the contract as modified falls within the statute of frauds. The writing requirement applies to the contract as it stands after the change.

6. What effect does a no-oral-modification clause generally have at common law?

   Little; the parties may orally modify the contract, including the clause itself. The UCC treats such clauses differently for sales of goods.

7. Under the Restatement (Second), when is a modification enforceable without new consideration?

   When it is fair and equitable in view of circumstances not anticipated when the contract was made, before full performance. This exception, in section 89, applies to unexecuted contracts.

8. A contractor halfway through a job refuses to finish unless paid $10,000 more, and the owner agrees. On what ground is the owner's promise unenforceable at common law?

   The contractor gave no new consideration, since it was already bound to finish. The promise of additional pay for the same work fails under the preexisting duty rule.

9. What makes a modification enforceable under the preexisting duty rule?

   Any new or different performance by the party benefiting from the modification. Even a slight added duty, if bargained for, supplies consideration.

10. How do some courts avoid the preexisting duty rule when parties agree to change their contract?

    By treating the parties as having rescinded the old contract and formed a new one. Mutual rescission is supported by each party's release, so the new contract needs no additional consideration.

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