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Filling Gaps In Incomplete Contracts Outline

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Filling Gaps in Incomplete Contracts: Substantive Interpretation by Implication A. Modification: Substantive Approaches

1. Generally a) Usually becomes an issue where the seller's costs increase due to unexpected or unforeseen events b) Difference between legitimate requests and those opportunistic attempts to use the contract relationship and the inertia it creates to hold up the other party by threatening to breach unless the contract is modified c) Three general doctrinal approaches to the problem: (1) The common law's pre-existing duty rule, which attempts to use consideration to set up a bright line test to distinguish legitimate modifications from extortionate holdups (2) The more contemporary approach taken by UCC 2-209 and Restatement SS 89, which says that modifications will be enforced if they are in good faith and meet certain objective criteria (3) The duress doctrine approach, which says that modifications will not be enforced if they were achieved only via circumstances and pressures that constitute economic duress under the duress doctrine

2. Pre-Existing Duty Rule (Common Law) a. An agreement modifying a contract is not supported by consideration if the party demanding the modification simply does or promises to do something that which he is already contractually obligated to do. A contract modification is not enforceable without new consideration. b. Two ways of avoiding this rule:

1. Promise to do something in addition to existing obligation

2. Rescind previous contract before entering into the revised contract c. Alaska Packers' Ass'n v. Domenico (1902) - Fishermen signed contracts to be shipped from San Francisco to Alaska where they would work throughout the fishing season, but then stopped work as a group and demanded twice the salary from the plant superintendent in Alaska lest they all go home and leave him with no workers. The court refused to enforce the second contracts for lack of consideration because the fishermen were already required by the first contracts to do the work required of them in the second contracts.

3. Modern Approach a) Restatement (Second) of Contracts SS 89: (1) A promise modifying a duty under a contract not fully performed on either side is binding (a) If the modification is fair and equitable in view of circumstances not anticipated by the parties when the contract was made; or (b) To the extent provided by statute; or

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