Alaska Packers' Ass'n v. Domenico

United States Court of Appeals for the Ninth Circuit · 1902 · Contracts

Contractsmodificationpre-existing duty ruleduressconsiderationcontract modificationpre-existing duty ruleconsideration

Facts

The libelants signed written agreements in San Francisco to sail to Pyramid Harbor, Alaska, and work the 1900 fishing season for fixed compensation of either $50 or $60 for the season plus two cents per red salmon caught. After arriving, beginning work, and while the employer was in a remote location with no practical ability to replace them during the short season, the libelants stopped work and demanded $100 instead of the agreed sums, threatening to quit unless paid more. The trial court found against the libelants' claim that defective nets justified their refusal to perform, and that finding was not disturbed on appeal. The superintendent then had a new writing prepared reflecting the higher pay, but later the company refused to honor it and paid only under the original agreements.

Issue

Assuming the superintendent had authority to make the May 22 agreement, was the employer's promise to pay increased wages enforceable when the workers promised only to render the same services they were already contractually bound to perform? More specifically, does such a modification have sufficient consideration when the workers refused to continue performance without valid cause?

Rule

A contract modification is not supported by consideration when one party promises only to do what that party is already legally bound to do under an existing contract. Where a party, without valid cause, refuses performance and thereby coerces a promise of increased compensation for the same performance, the new promise is unenforceable as without consideration, and there is no basis for inferring a voluntary rescission or modification.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

Blue Mesa Builders agreed in writing to renovate a hotel in Santa Fe for a fixed price by June 1. In May, with the project half finished and no breach by the hotel owner, Blue Mesa stopped work and said it would continue only if the owner paid an additional $80,000; because tourist season was about to begin and no replacement contractor could be found quickly, the owner signed a written increase and Blue Mesa then completed the same renovation work originally promised.

If Blue Mesa sues for the extra $80,000, what is the strongest argument against enforcement of the modification?

Explanation. Under the majority rule, a promise of additional compensation is unenforceable when extracted after one party refuses, without valid cause, to perform duties already owed under an existing contract. Blue Mesa added nothing new; it merely resumed the same performance it was already obligated to render. The owner's assent under business necessity does not create consideration, nor does the owner's decision not to sue immediately.