King v. Duluth, Missabe & Northern Railway Co.

Majority - Chief Justice Start

Yes, a promise for extra compensation for completing a pre-existing contract can be supported by valid consideration if the refusal to perform stems from unforeseen and substantial difficulties not contemplated by the parties when the contract was made, and the modified agreement is a voluntary and mutual waiver of the original terms. The general rule holds that a promise to do what one is already legally obligated to do is not valid consideration for a new promise of additional compensation. The court rejects the view that a refusal to perform automatically creates a 'rescission and new contract' because it would encourage parties to repudiate obligations to gain advantage. Such a transaction, where extra pay is coerced, does not create a legal presumption of voluntary rescission. However, an exception applies: where a party refuses to complete a contract due to unforeseen and substantial difficulties, not known or anticipated at the time of contracting, which cast an additional burden not contemplated, and the other party promises extra pay to complete the contract, this promise is supported by valid consideration. This exception is based on the presumption that such circumstances indicate a voluntary and mutual waiver of the original contract rights and obligations, substituting new ones. These difficulties need not legally justify abandonment but must render the demand for extra pay 'manifestly fair' to rebut any inference of seeking to escape a bad bargain or exploit the other party's necessities. Inadequacy of contract price due to error of judgment, not excusable mistake of fact, is insufficient. Applying this to the first cause of action, the court finds the allegations insufficient. The claim of an 'extraordinary season' requiring blasting of frozen earth on the Missabe Range in February is not an unforeseen or extraordinary difficulty, as frozen ground in that region during that month is naturally anticipated. Therefore, the first cause of action alleges only a contractor seeking more money for a losing bargain, which falls under the general rule of no consideration. For the second cause of action, the court finds valid consideration. The Railway Company's own actions (changing its line and other defaults) delayed the work and made timely completion more expensive, legally excusing the contractors. The contractors' waiver of these defaults and promise to complete the work in time for the defendant to secure bonds constituted new, legal consideration for the promise of extra compensation.