Note: This rule does not apply to sales contracts concluded in jurisdictions that have published the Uniform Commercial Code. It also does not apply if a termination of the contract followed by a new contract has taken place. At the end of the lesson, the student will be able to: 1. Explain how the pre-existing customary rule applies to the changes. 2. Determine whether the amendment of a contract is enforceable under the modern common law rule. 3. Determine whether the modification of a treaty is enforceable under the UDC rule. 4. Distinguish between modification and compliance and satisfaction.
5. Distinguish between a performance contract and a superseded contract. 6. Distinguish between liquidated and unliquidated debt. 7. Apply the elements of Article 3-311 of the UCC to a factual situation involving payment by cheque to determine whether agreement and satisfaction have been reached. As early as 1938, a judge called the already existing customs rule “one of the relics of an old law that should have been rejected long ago.”  Despite its shortcomings, the existing customs rule preserves the integrity of the Treaty and can effectively regulate treaty changes and prevent abusive practices during renegotiations. To ensure that it remains useful, the courts will continue to create exceptions and limit their application.  Although amendments to sales contracts do not require new consideration, all amendments must be made in good faith, which means “honesty in the conduct or transaction in question.”  Good faith does not exist, for example, if one party intentionally misled or deceived the other party when seeking to amend the contract of sale.
The first exception occurs when one party acts after relying on another party`s amendment to a contract.  Going back to our plumbing example, imagine that after the owner agreed to pay a higher price, the plumber, relying on this assurance, hired a high-quality subcontractor to work on the piping. This good faith confidence in the change can make the change enforceable. Two parties, a contractor and an owner, enter into a contract for the renovation of a house. A week later, the contractor is not satisfied with the amount he is paid. He tells the owner that he will leave the yard when he is no longer paid for his services. Faced with the prospect of not having completed the desired work, the owner agrees. Under the pre-existing rule, the owner`s promise to pay the new amount is unenforceable because the contractor already had a pre-existing obligation to perform the requested work at the original price. No exchange has been negotiated for this change, so the owner no longer has to pay. A party refuses to perform its part of the contract unless a larger sum of money is paid.
 For example, Christine agreed to sell Julian a series of textbooks for $300. Julian transfers $300 to his friend Jake, who is responsible for picking up the textbooks and delivering the $300. Once the money is transferred and supply agreements are made, Christine calls Julian and explains that she has changed the price to $350 and will not deliver the books to Jake unless Julian promises to pay an additional $50. The rule will apply so that Julian can agree to pay the extra money, but does not do so when the books are delivered. (If Julian actually paid the extra money, he could later sue under “duress” to get the $50 back.) This lesson contains an introduction to the doctrine that fulfilling a pre-existing duty or a promise to fulfill it is not a sufficient consideration to make a promise binding. Using questions based on a series of hypothetical cases, the underlying reasons for teaching and its implications in different contexts are examined. Coverage includes: performance of obligations due to the promise or to third parties in return; amendments to contracts still to be performed; contracts replaced after termination; implementing agreements; Satisfaction; liquidated claims and offers to settle outstanding claims. There are ways to circumvent the legal obligation, such as mutual termination of the existing contract with a clear indication of such termination (literally tearing up the old contract). In some States, the parties may also renegotiate contracts to include additional benefits, for example, if the party fulfils unexpected or additional obligations, if the parties agree in good faith or if a new contract is agreed. Some critics argue that the rule may be too ambitious because it makes contracts rigid and prevents meaningful changes. Suppose a plumber agrees to replace all the plumbing in a house with copper pipes, but before the project begins, the price of copper skyrockets and it is no longer financially possible for the plumber to replace the pipe.
The plumber could reasonably ask the homeowner for an additional payment to cover the cost of the copper price increase. But even if the owner agrees to this change, the change may not be binding under the pre-existing customs rule, as the plumber had an obligation to replace the plumbing with copper before the change. The pre-existing tariff rule was repealed pursuant to section 89 of the Restatement, Second of Contracts, which does not require independent review if the parties mutually and voluntarily agree to the amendment (see Angel v. Murray for the earlier application of the reformulation).  However, rewording is not always followed, as shown by Labriola v. Pollard Group, Inc.  Pre-existing customs rule plays a role in rescue, which is “successful voluntary service to save maritime property threatened at sea.”  The service must be “voluntary”, which in this context means that the salvage must have no existing obligation to the vessel. In general, the crew of a ship is only eligible for rescue if (i) they have been ordered to abandon ship (so that their employment contract is terminated), Le San Demetrio (1941);  or (ii) the crew goes beyond their normal duty to ensure the safety of The Beaver (1800).  In practice, the provision also preserves the integrity of a contract by preventing the parties from forcing the other parties to amend the contract.  Let`s take an example: the Uniform Commercial Code, which applies to contracts for the sale of goods, also significantly modifies the already existing customs rule.
The UCC modifies the rule because it wants to “ensure that Contracting Parties can adapt freely to changing circumstances”. Article 2-209(1) of the UCC states: While the existing customs rule applies today, these and other concerns have resulted in several exceptions to the rule. The pre-existing rule of obligations is an aspect of contractual consideration. The concept of consideration, which originated in England (the global embodiment of the common law), has been adopted by other jurisdictions, including the United States. The rule may be influenced by questions of public policy, as in: Collins v Godefroy (1831) , England v Davidson (1840)  and Williams v Williams   “Preexisting duty rule”. Merriam-Webster.com Legal Dictionary, Merriam-Webster, www.merriam-webster.com/legal/preexisting%20duty%20rule. Retrieved 14 January 2022. That rule states, in essence, that performance of a pre-existing obligation is not good consideration for supporting a valid contract; But there are exceptions to the rule.  Even under the Uniform Commercial Code, amendments may also be exempted from the common law rule of legal obligation without consideration, provided the amendment is made in good faith.