Explain the preexisting duty rule and how the UCC allows modification without new consideration.

Explain the preexisting duty rule and how the UCC allows modification without new consideration.

• A. Under common law, modification requires no new consideration; under the UCC, new consideration is required.
• B. Under common law, modification generally requires new consideration; under the UCC, modifications may be enforceable without new consideration if made in good faith and properly evidenced in writing if required by the Statute of Frauds.
• C. Under common law, new consideration is required and the UCC always requires new consideration.
• D. Both systems require writing for all modifications.

Answer: (B)

The key idea is how contract modifications are treated differently in common law versus the UCC when the deal involves goods. Under common law, a modification to a contract generally must be supported by new consideration because simply promising to do what you’re already obligated to do isn’t enough to constitute a new bargain—the preexisting duty rule. So, if you already have a duty to perform, promising to perform it again or for more money isn’t typically binding unless something new is given or there’s some other valid consideration. The UCC changes this for contracts for the sale of goods. It allows a modification to be enforceable without new consideration, as long as the modification is made in good faith. The catch is the writing requirement: if the modified contract, as modified, is within the Statute of Frauds (for example, if it’s a goods contract over a certain value), the modification must be in writing. So the UCC permits changes without new consideration, but requires good faith and, when needed, proper written form to satisfy the Statute of Frauds.

The key idea is how contract modifications are treated differently in common law versus the UCC when the deal involves goods. Under common law, a modification to a contract generally must be supported by new consideration because simply promising to do what you’re already obligated to do isn’t enough to constitute a new bargain—the preexisting duty rule. So, if you already have a duty to perform, promising to perform it again or for more money isn’t typically binding unless something new is given or there’s some other valid consideration.

The UCC changes this for contracts for the sale of goods. It allows a modification to be enforceable without new consideration, as long as the modification is made in good faith. The catch is the writing requirement: if the modified contract, as modified, is within the Statute of Frauds (for example, if it’s a goods contract over a certain value), the modification must be in writing. So the UCC permits changes without new consideration, but requires good faith and, when needed, proper written form to satisfy the Statute of Frauds.