Question

Why under common law you need consideration for a modification and under the UCC you do not need consideration.  Please discuss your answer and make sure to explain why? 

Answer 1

Under common law, a party to contract needs new consideration, which is something of legal value to modify a contract. That is because, when a party obtains new consideration either by negotiating with the other party, it changes the consideration on both sides of the contract.

There are two exceptions or clauses that are applied to this common law. They are - when the parties experience unforeseen difficulties or when one of the parties changes his position in relative to the modified promise. In either of the circumstances, parties do not need new consideration to legally modify the contract.

UCC is the Uniform Commercial Code. Under UCC, if either of the party tries to modify the contract for the sale of goods, then the parties to the contract must first abide to the Uniform Commercial Code. The main aim of UCC is to govern transactions involving the sale of goods.

The UCC attempts to increase the nature of commerce between the parties, therefore it does not require parties to contract supply new consideration to modify a contract for the sale of goods. The UCC does, however, require that the parties modify the contract in good faith.

Let's take an example of both.

Modification under Common law example - The arts and music department at a music college contracts with a famous dancer to perform a dance show at homecoming for $3,000. The dancer later calls the department and asks for $5,000 instead of $3,000. The members of the arts and music committee cannot modify the contract in this manner, so they negotiate with the dancer. They tell him that they can modify the contract if he agrees to sign autographs for an hour after the show. Both parties agree to the new terms of the contract. This is valid modification, because both side exchanged new consideration: $2,000 on the part of the committee and the signing of autographs by the dancer.

Modification under UCC example - Let's say that a couple enters a written contract with a bakery for their child's first birthday. Couple orders a cake for $1,000 to be delivered to the venue on the birthday. The baker calls the couple an hour before the party and tells her that he cannot deliver the cake for less than $2,000. Couple were obviously in distress, and agrees to pay the $2,000. The baker delivers the cake, and sends them a bill for $2,000. The couple remits $1,000, the original contract price, to the baker. The baker sues for $1,000. The court will not enforce the contract under the modified terms, because the baker attempted to modify the contract in bad faith.