Contracts I, Pages 116–122

Angel v. Murray

Supreme Court of Rhode Island, 1974

Facts:

Defendant Maher was contracted by the city of Newport to collect all trash for $137,000 per year, with a five-year contract from 1964 to 1969. In 1967, he requested of the city council $10,000 extra in the upcoming year because of the unexpected increase in population, which was granted. This increase process was repeated for 1968–9.

Procedural History:

Lower court found payments were in violation of the law because:

  1. They were not recommended in writing to the city manager.
  2. The original contract was for all the city, so the extra units were already included. Therefore the contract had no consideration.

Issue:

Are contract modifications binding without both parties exchanging something new?

Rule:

Modifications are binding if fair and equitable in view of circumstances unanticipated by the parties when the contract was made.

Reasoning:

Although most states follow the preexisting duty rule that a modification of a contract doesn't have consideration, modern cases have trended away from that. The Restatement provides that they are binding if fair and equitable in view of circumstances unanticipated by the parties when the contract was made. Defendant publicly requested and explained his reasoning for the extra money, which the council agreed to. The garbage load increased at an unexpected rate, so the extra payment was fair and equitable under the circumstances.

Holding:

Yes, if fair in view of circumstances unanticipated by the parties when the contract was made. Judgment reversed and remanded to the Superior Court for entry of judgment for the defendants.


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