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George Mason School of Law

Contracts IP.Contract Modification

F.H. Buckley

fbuckley@gmu.edu

Contract Modification

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As relational contracts are long term, conditions may change and prompt a modification of the agreement Should there be any restrictions on this?

Alaska Packers 381

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Pyramid Harbor AK

Russia

Alaska Packers

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Will a promise to perform that which the promisor was already bound to do under a prior contract satisfy the consideration requirement?

Alaska Packers

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Restatement § 73. 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 from whatwas required by the duty in a way which reflects more than a pretense of bargain. Illustration 4 (Lingenfelder at 383-84)

Alaska Packers

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Restatement § 175(1) If a party's manifestation of assent is induced by an improper threat by the other party that leaves the victim no reasonable alternative, the contract is voidable by the victim.

Alaska Packers

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Restatement § 176(1)(d) A threat is improper if (d) the threat is a breach of the duty of good

faith and fair dealing under a contract with the recipient.

Alaska Packers

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Restatement § 89 MODIFICATION OF EXECUTORY CONTRACT. A promise modifying a duty under a contract not fully performed on either side is binding (a) if the modification is fair and equitable in view of circumstances not anticipated by the parties when the contract was made; or (b) to the extent provided by statute; or (c) to the extent that justice requires enforcement in view of material change of position in reliance on the promise.

Alaska Packers

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How would you decide Alaska Packers

under these standards?

Alaska Packers

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How would you decide Alaska Packers

under these standards? The finding of fact at p. 382

Alaska Packers

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Qu. the changed circumstances under Angel v. Murray p. 385

Alaska Packers

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Qu. the changed circumstances under Angel v. Murray p. 380

Brian v. Brighenti p. 386

Alaska Packers

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No modification clauses: Will they be enforced?

Alaska Packers

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No modification clauses: Will they be enforced? Cf. Restatement 311 comment a: “The

parties to a contract cannot by agreement preclude themselves from varying their duties to each other by subsequent agreement.”

The UCCConsideration out, Good faith in

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UCC § 2-209(1) Modification, Rescission and Waiver. An agreement modifying a contract within this Article needs no consideration to be binding.

UCC § 1-304. Every contract or duty within [the Uniform Commercial Code] imposes an obligation of good faith in its performance and enforcement.

UCC 2-209: No Modification Clause

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A signed agreement which excludes modification or rescission except by a signed writing cannot be otherwise modified or rescinded, but except as between merchants such a requirement on a form supplied by the merchant must be separately signed by the other party.

UCC 2-209(2): No Modification Clause

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(2) A signed agreement which excludes modification or rescission except by a signed writing cannot be otherwise modified or rescinded, but except as between merchants such a requirement on a form supplied by the merchant must be separately signed by the other party.

UCC 2-209(2): No Modification Clause

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(2) A signed agreement which excludes modification or rescission except by a signed writing cannot be otherwise modified or rescinded, but except as between merchants such a requirement on a form supplied by the merchant must be separately signed by the other party.

UCC 2-209(2): No Modification Clause

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(2) A signed agreement which excludes modification or rescission except by a signed writing cannot be otherwise modified or rescinded, but except as between merchants such a requirement on a form supplied by the merchant must be separately signed by the other party.

Would that have helped in Alaska Packers?

UCC 2-209(4): Waiver

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(4) Although an attempt at modification or rescission does not satisfy the requirements of subsection (2) or (3) it can operate as a waiver.

UCC 2-209

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How is a waiver different from an agreement of modification? (We’ll see this again in Wisconsin Knife Works at 639

next term)

Are Termination Agreements different?

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El Paso Natural Gas p. 388

What are the drafting choices where good faith is required throughout?

Relational contracting Vertical integration Termination rights Good Faith policing by the courts?

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Eli Lilly at 391

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Eli Lilly at 391

What if Emisphere hadn’t wanted to terminate?

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Eli Lilly at 391

So how would you draft a provision that imposed good faith duties throughout?

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