Levine v. Blumenthal

Court of Errors and Appeals of New Jersey · 1936 · Contracts

Contractsconsiderationlease modificationaccord and satisfactionpreexisting duty ruleconsiderationrent reductionoral modification

Facts

Plaintiff leased defendants store premises for two years at $2,100 for the first year and $2,400 for the second year, payable monthly in advance. Before the second year began, defendants told plaintiff that adverse business conditions made it impossible to pay the scheduled increase, and defendants claimed plaintiff agreed to let them remain at the old rate until business improved; plaintiff testified he accepted the lower payments only on account. For eleven months of the second year, defendants paid and plaintiff accepted $175 per month instead of the increased rent, and defendants left the final month's rent unpaid when the term ended. Plaintiff sued for the difference between the lease rent and the reduced payments for eleven months, plus the final month's rent.

Issue

Whether an oral agreement to reduce rent under an existing written lease was enforceable when the tenants gave no new consideration beyond continued payment of rent they were already bound to pay. Also, whether the landlord's acceptance of the reduced payments for the months already paid discharged the balance despite the lack of consideration.

Rule

A subsequent agreement modifying an existing contractual obligation must be supported by new and independent consideration. A promise or performance consisting only of what the promisor is already legally bound to do is not sufficient consideration, and payment and acceptance of part of a matured, liquidated debt does not satisfy the whole absent valid consideration, except in situations such as bona fide dispute, unliquidated demand, or where some additional bargained-for undertaking not already owed is given.

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

In Columbus, Ohio, Dana Ortiz leased a storefront to Milo Chen for $3,000 per month for one year. After four months, Milo said winter sales had collapsed and asked Dana to accept $2,400 per month for the rest of the term; Dana orally agreed, and Milo paid that amount for six months while remaining in possession.

If Dana later sues for the unpaid $600 per month, what is the strongest argument for Dana under the governing rule?

Explanation. A later agreement reducing a fixed contractual obligation requires new and independent consideration. Milo's financial difficulty and continued payment of only part of the rent he was already bound to pay do not constitute consideration. Acceptance of reduced payments alone does not discharge the balance of a liquidated rent obligation.