United States v. Progressive Enterprises
418 F.Supp. 662 (1976)
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Rule of Law:
Under Uniform Commercial Code § 2-209, a contract modification sought in good faith for a legitimate commercial reason is binding if the other party objectively assents. To later claim the modification is unenforceable due to economic duress, the assenting party must have protested the change at the time of the modification.
Facts:
- On May 3, 1974, Crane Company offered to sell a deaerator to Progressive Enterprises, Inc. for $5,238, with the price firm for 15 days.
- After the 15-day period expired, Progressive used the price in its bid for a U.S. government contract and was awarded the contract on June 14, 1974.
- On July 1, 1974, after getting Crane to extend the offer, Progressive submitted a purchase order for $5,217, which Crane accepted, forming an initial contract.
- Shortly thereafter, Crane informed Progressive that due to 'rapidly escalating material costs,' the price would be increased to $7,350 at the time of shipment.
- On August 7, 1974, Progressive submitted a new purchase order for the deaerator at the higher price of $7,350 without any protest.
- After the machine was delivered, Progressive paid only $5,550.88, refusing to pay the remaining balance and arguing the price increase was an invalid modification.
Procedural Posture:
- Crane Company sued Progressive Enterprises, Inc. and its surety, The Fidelity and Deposit Company of Maryland, in the United States District Court.
- The action was brought under the Miller Act to recover the unpaid balance for goods supplied for a government contract.
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Issue:
Does a buyer's objective assent to a seller's good-faith request for a price increase constitute a binding contract modification under UCC § 2-209, even if the buyer later claims economic duress, when the buyer failed to protest the increase at the time of the modification?
Opinions:
Majority - Clarke, District Judge
Yes. A buyer's objective assent to a seller's good-faith request for a price increase constitutes a binding contract modification under UCC § 2-209, and a subsequent claim of economic duress fails if the buyer did not protest the increase at the time it was made. Under UCC § 2-209, contract modifications need no new consideration to be binding, but they must meet the good faith requirement. Crane's request for a higher price was justified by 'rapidly escalating material costs,' which is a legitimate commercial reason. Progressive gave objective assent to this modification by submitting a second purchase order at the higher price. Progressive's claim of economic duress fails because, unlike in precedent cases, it never protested the increase or notified Crane of its difficult position. To preserve a claim of duress, a party must protest at the time of the modification to put the other party on notice that the assent is not freely given. The buyer's secret intention not to pay the higher price violates the UCC's good faith requirement of 'honesty in fact.'
Analysis:
This decision clarifies the practical application of UCC § 2-209 regarding contract modifications and the defense of economic duress. It establishes that a party's objective assent to a modification is paramount and will generally be enforced if the modification was sought in good faith. The court effectively places an affirmative duty on the party claiming duress to voice its objection at the time of the modification. This ruling provides greater certainty for businesses, allowing them to rely on agreed-upon modifications unless a contemporaneous protest signals that the agreement was coerced, thus discouraging parties from silently acquiescing and later challenging the deal in court.
