Angel v. Murray
322 A.2d 630 (1974)
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Rule of Law:
A modification to a contract is binding, even without new consideration, if it is fair and equitable in view of circumstances that were not anticipated by the parties when the contract was made.
Facts:
- Since 1946, James L. Maher provided refuse-collection for the City of Newport under a series of five-year contracts.
- On March 12, 1964, Maher and the City entered into a new five-year contract for $137,000 per year, which was predicated on an average increase of 20-25 new dwelling units per year.
- In 1967, an unanticipated increase of 400 new dwelling units occurred, substantially increasing the cost of collection for Maher.
- In June 1967, Maher requested an additional $10,000 from the city council to cover the increased costs for the upcoming year.
- The city council held a public meeting and voluntarily agreed to pay Maher the additional $10,000 for the year ending June 30, 1968.
- In June 1968, Maher made a similar request for the same reasons for the final year of the contract, and the city council again agreed to pay an additional $10,000.
Procedural Posture:
- Alfred L. Angel and other citizens sued James L. Maher and the City of Newport in the Rhode Island Superior Court.
- The plaintiffs sought an order compelling Maher to repay $20,000 he received from the city as modifications to his refuse-collection contract.
- The Superior Court justice, sitting without a jury, found for the plaintiffs and entered a judgment ordering Maher to repay the $20,000.
- Maher, as appellant, appealed the judgment to the Supreme Court of Rhode Island.
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Issue:
Is a modification to an existing contract, agreed to by both parties, unenforceable for lack of consideration when it is a voluntary response to unanticipated circumstances that arose during performance?
Opinions:
Majority - Roberts, C. J.
No, a modification to an existing contract is enforceable under these circumstances. The traditional pre-existing duty rule, which holds that a promise to do something one is already legally obligated to do is not valid consideration, is outdated when applied to cases involving unanticipated difficulties. Its purpose is to prevent coercion or duress—the 'hold-up game'—not to invalidate voluntary and fair modifications made in response to unforeseen events. The court adopts the modern rule expressed in the Restatement (Second) of Contracts § 89D(a), which enforces a modification if it is made before the contract is fully performed, prompted by unanticipated circumstances, and is fair and equitable. Here, the contract was ongoing, the 400-unit increase in housing was 'beyond any previous expectation,' and the city's voluntary agreement to pay an additional $10,000 was a fair and equitable response to the substantial increase in Maher's duties.
Analysis:
This case marks a significant departure from the rigid, traditional application of the pre-existing duty rule in contract law. By adopting the flexible standard from the Restatement (Second) of Contracts, the court aligns itself with the modern trend that favors enforcing good-faith modifications made in response to unforeseen circumstances. This decision shifts the focus from a formalistic search for new consideration to a substantive analysis of fairness, voluntariness, and unanticipated events. It provides a legal framework for parties to adapt contracts to changing realities without having to resort to legal fictions like rescission, thereby promoting commercial practicality and honoring the parties' intentions.
