REG · Business Law · 6 practice questions
UCC Contract Modifications: Good Faith and Signed Writings
For goods, a signed price increase still fails if the seller acts in bad faith. Below, the same desk sale produces different results when only the seller's reason for demanding more money changes.
Try one first
Hint
Identify which body of law governs each contract before deciding whether consideration or a signed writing is required.
Answer A. The remodel contract is governed by common-law contract rules, so the preexisting-duty rule applies: Contractor promised only to do what it was already obligated to do, and no unforeseen circumstances are present to support a binding extra-payment promise, so the $10,000 promise is unenforceable. The printer sale is governed by the UCC: a good-faith modification of a goods contract does not require new consideration, and the signed confirmation from one merchant binds the recipient merchant if received and not objected to within 10 days, satisfying the statute-of-frauds requirement for the increased quantity.
Why not B: Tempting because both parties manifested assent, but assent alone is not enough under common law when one party only promises to perform a preexisting duty; the remodel modification fails for lack of new consideration (and no stated exception applies).
Why not C: This misapplies rules: a mere writing does not cure the lack of consideration in a common-law service contract, and the merchant-confirmation exception under the UCC can bind the recipient merchant without that merchant's separate signature if the confirmation is signed by the sender and not objected to within 10 days.
Why not D: This overgeneralizes the common-law rule: while many service-contract modifications require new consideration, the UCC allows good-faith modifications of contracts for the sale of goods without new consideration, so the printer-order modification can be enforceable.
Side by side
| Version A: Supplier surcharge | Version B: Profit-only demand | |
|---|---|---|
| Shared facts | Office Co. agrees to buy desks for $40,000. Before delivery, the seller says it will not deliver unless Office Co. accepts a $6,000 increase for the same desks. Office Co. signs the increase. | Office Co. agrees to buy desks for $40,000. Before delivery, the seller says it will not deliver unless Office Co. accepts a $6,000 increase for the same desks. Office Co. signs the increase. |
| Reason for the demand: the only changed fact | An unexpected supplier surcharge motivates the demand, which is honest and commercially reasonable. | The seller seeks only to extract more profit, without a legitimate commercial reason. |
| Governing law | UCC Article 2: desks are goods. | UCC Article 2: desks are goods. |
| New consideration | Not required, even though the desks remain unchanged. | Not required, even though the desks remain unchanged. |
| Writing requirement | Satisfied here: Office Co. signs the price increase. | Satisfied here: Office Co. signs the price increase. |
| Good faith | Met: the demand has an honest, commercially reasonable basis. | Not met: the seller uses threatened nonperformance solely to extract more profit. |
| Is the increase enforceable? | Yes. Good faith and the writing requirement are satisfied. | No. The signature does not cure bad faith. |
| Enforceable contract price | $46,000: $40,000 plus the enforceable $6,000 increase. | $40,000: the original price controls. |
Key points
- Remember: A signature cannot turn a bad-faith price demand into an enforceable UCC modification.
- A refusal to deliver is not decisive by itself; examine the commercial reason behind it.
- If the $6,000 increase fails, the seller must still perform under the original $40,000 contract.
How the exam traps you
- Rejecting both increases because the seller promises no additional desks. Desks are goods. UCC modifications do not require new consideration.
- Treating Office Co.'s signature as conclusive. The signature satisfies the writing requirement here, but good faith remains a separate test.
- Treating the shared refusal to deliver as automatic proof of bad faith. Compare the reasons: an honest supplier surcharge differs from a demand solely to extract more profit.
Question 2
Hint
Ask whether Ace promised anything new in exchange for the additional $1,500.
Answer D. Under common law, a modification to a services contract generally requires new consideration from the party seeking additional payment unless an exception applies. Here Ace only promised to finish the job it was already contractually obligated to perform, and the facts state there were no unanticipated circumstances to justify a fair-and-equitable exception; therefore Holt's additional promise lacks consideration and is unenforceable.
Why not A: Tempting because mutual assent is required for modifications, but under common law assent alone is usually insufficient, new consideration is also required unless an exception applies.
Why not B: Completing performance is not new consideration when it is performance of a preexisting contractual duty; Ace was already obligated to finish the painting for $8,000.
Why not C: This overgeneralizes writing requirements. There is no blanket rule that all modifications must be written; the controlling issue here is lack of new consideration under common law.
Question 3
Hint
Focus on the rule for modifying a common-law contract when one party promises only what that party already had to do.
Answer A. Under common law, a modification generally requires new consideration from the party promising additional performance (the 'preexisting duty' rule). Here Builder only promised to do what Builder was already obligated to do under the original contract, so Builder provided no new consideration to support the $6,000 increase. The facts also rule out unforeseen circumstances or writing issues, so the Customer need not pay the extra amount.
Why not B: Mutual assent is necessary for a modification, but under common law assent alone is insufficient; a modification generally requires new consideration. Because Builder did not incur any additional legal detriment beyond the original duty, the oral agreement lacks the consideration needed to enforce the extra payment.
Why not C: This is tempting because the Customer received the finished work, but mere receipt of performance does not supply consideration for a common-law modification when the promisor is doing only what was already promised. The original contract price still controls absent new consideration.
Why not D: This choice overstates the law. The prompt explicitly says no statute requires a writing here, and oral modifications can be enforceable in many circumstances; the primary problem on these facts is the lack of new consideration, not the oral form.
Question 4
Hint
First decide whether this agreement is governed primarily by common law or the UCC. Then ask whether the extra $5,000 was supported by anything new.
Answer A. The contract's dominant purpose is consulting and training services; the printed binders are incidental. Under common-law contract rules for services, a modification ordinarily requires new consideration (the pre-existing duty rule). Because Consulting Co. sought additional payment for performing the same duties and no unforeseen circumstances or new obligations arose, the $5,000 increase is not enforceable, but the original $40,000 remains due.
Why not B: This distractor lures candidates into misapplying the UCC. The binders are incidental to a services contract; the predominant-purpose test points to common law, so the UCC rule on goods modifications (and its no-new-consideration approach) does not apply here.
Why not C: Tempting because of Alpha's oral assent, but under the common-law pre-existing duty rule mere assent to pay more for the same performance is not enforceable absent new consideration or an applicable exception (which the facts disallow).
Why not D: Incorrect because rejection of a proposed, unenforceable modification does not negate the original contract. Consulting Co. performed under the original terms and remains entitled to the original contract price of $40,000.
Question 5
Hint
Focus first on what law governs this contract, then ask whether the party seeking more money promised anything new in exchange.
Answer D. This is a services contract governed by common-law modification rules. Under the common law, a promise to do what one is already legally obligated to do is not valid consideration for an increased price. Because Painter only promised to perform the same work it was already contractually obligated to do and the extra $8,000 arose from Painter's own underestimate, the modification lacks consideration and Client is generally obligated to pay only $40,000.
Why not A: Gives the right dollar amount but for the wrong reason. Modifications do not necessarily require a wholly new signed contract; the controlling issue under common law is whether the modification is supported by new consideration (or falls within a recognized exception).
Why not B: Tempting because students may think a writing makes any modification enforceable or confuse this with the UCC rule for goods. But this is a service contract under common law, and a mere written agreement does not supply the new consideration required for a valid modification.
Why not C: Appealing on policy grounds, but past performance of an existing duty (or performing what one was already obligated to do) is not new consideration. Completion of the original contractual duties does not validate a unilateral price increase.
Question 6
Hint
Classify each contract first, then ask what that body of law requires for a later price increase.
Answer A. BuildCo's renovation contract is governed by common-law modification rules: because BuildCo sought more money for the same performance and assumed no new obligation, the modification lacks new consideration and is not enforceable on these facts. SupplyCo's contract is a sale of goods governed by the UCC (UCC 2-209), under which a good-faith modification is enforceable without new consideration; the facts state the parties acted in good faith and executed a signed writing.
Why not B: This reverses the governing rules. At common law, service-contract modifications generally require new consideration (absent an applicable exception), while under the UCC a good-faith modification of a sales contract does not require new consideration.
Why not C: Tempting because both modifications were signed, but form (a writing) does not cure the absence of consideration under common-law modification rules for services; the BuildCo change lacks consideration and is therefore not enforceable on these facts.
Why not D: Overly broad: the preexisting-duty/consideration rule fits BuildCo's facts, but the UCC permits good-faith modifications of sales contracts without new consideration, so SupplyCo's adjustment can be enforceable here.
Common questions
Is a signed UCC contract modification always enforceable?
No. Office Co.'s signature satisfies the writing requirement here, but it cannot cure the seller's bad faith.
Does a UCC price increase require new consideration?
No. In this desk sale, the seller need not promise extra desks, but the $6,000 increase must be made in good faith.
Does threatening not to deliver make a UCC modification invalid?
Not by itself. The honest, commercially reasonable surcharge demand can be enforceable; the demand solely to extract profit fails the good-faith test.
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