Pre-Existing Duty Rule

A rule of contract law providing that a party that does or promises to do only what that party was already legally or contractually obligated to do cannot constitute consideration to form a new enforceable contract or a modification to an existing contract.  Similarly, a party that refrains or promises to refrain from doing what that party is already legally or contractually obligated to refrain from doing does not constitute sufficient consideration to support a new contract or a modification to an existing contract.

Example:  A owes $100 to B that will become due by January 15, 2015.  A agrees to pay B 4 monthly payments of $25 starting on January 15, 2015 and B agrees to not charge interest.  Under the pre-existing duty rule, A will not be able to enforce B’s promise regarding wavier of interest because that promise was not supported by any new consideration.

Compare with:

The same scenario as above, but A offers to pay $75 to B by January 5, 2015 if B agrees to consider that as full satisfaction of the $100 debt.  The foregoing very likely enforceable contract if B accepts because A gave something more to B than what he was legally obligated — i.e., payment 10 days before the due date of any money from A to B.

Restatement (Second) of Contracts:  Recognizes the modern trend where the courts will enforce a modification to a contract where said modification is “fair and equitable in view of circumstances not anticipated by the parties when the contract was made.”

Uniform Commercial Code: The UCC abolished the pre-existing duty rule for contracts for the sale of goods. Section 2-209(1) provides that “an agreement modifying a contract . . . needs no consideration to be binding.” But there must be good faith, and any no-oral-modification clause must be complied with.

Reference Desk:

McCallum Highlands, Ltd. v. Washington Capital Dus, Inc., 66 F.3d 89 (5th Cir. 1995).

In general, under the “pre-existing duty rule,” an agreement to do what one is already bound to do cannot serve as “sufficient consideration to support a supplemental contract or modification.”  This rule usually comes in to play when one party becomes unhappy with the contract as agreed upon and wants to change it. He has to offer some new consideration to the other party to induce that other party to agree to the change.  Thus, merely offering the preexisting duty he had already contracted to perform cannot serve as consideration for the change.

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