Angel v. Murray

Supreme Court of Rhode Island · 1974 · Contracts

Contractsmodificationunanticipated circumstancesgood faithpre-existing duty rulecontract modificationpreexisting duty ruleconsideration

Facts

Maher had long provided refuse-collection services to the City of Newport under successive five-year contracts, including a 1964 contract requiring him to collect all waste generated within the city for $137,000 per year. In 1967 and again in 1968, Maher requested an additional $10,000 per year because collection costs had risen substantially due to an unexpected increase of 400 new dwelling units, far beyond the prior average annual increase of 20 to 25 units on which the contract had been premised. After public meetings at which Maher explained his request, the city council approved the extra compensation for the final two years of the contract. The trial court held the payments unlawful, but the evidence that the increase was unexpected and substantial was uncontradicted.

Issue

Whether the city's agreement to pay Maher additional compensation for the final years of the contract was invalid because Maher was already under a preexisting duty to collect all refuse under the original contract and the modification lacked consideration. Also, whether the city council lacked authority to amend the contract without a written recommendation from the city manager.

Rule

A promise modifying a duty under a contract not fully performed on either side is binding, even without new consideration, if the parties voluntarily agree to the modification and the modification is fair and equitable in view of circumstances not anticipated by the parties when the contract was made. The court also held that the Newport charter provision requiring a city manager's written recommendation for contract alterations does not limit the city council's authority to amend an existing contract.

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

Cedar Line Snow Services contracted with the City of Duluth to plow all residential streets for four winters at a fixed annual price. In the third winter, a newly annexed neighborhood added miles of streets far beyond the modest growth both sides had assumed when they made the contract, and at a city council meeting the city voluntarily approved a reasonable price increase for the remaining season before either side had fully finished its obligations.

If a taxpayer challenges the added payment on the ground that the contractor was already bound to plow all covered streets, which is the strongest argument that the modification is enforceable?

Explanation. The majority adopted the rule that a promise modifying a duty under a contract not fully performed on either side is binding without new consideration if the parties voluntarily agree and the modification is fair and equitable in view of circumstances not anticipated when the contract was made. Here, the contract remained executory, the expansion was beyond prior expectations, and the city voluntarily approved a reasonable increase.