Consideration Without Economic Duress: Reframing the Analysis of Contractual Modifications

Prevailing approaches to the contractual enforceability of modifications revise or dispense with the requirement of consideration and invoke economic duress to rule out unfair, inequitable, or bad faith modifications. Enforceability turns effectively on the absence of economic duress. But economic duress is a doctrine of avoidance. It does not answer the contractually prior step of whether a modification satisfies the general requirements for contract formation. This article develops an alternative approach which satisfies the requirements for contract formation, most importantly consideration, while ensuring that only fair and reasonable modifications in ongoing transactions are thereby validated. It has been overlooked by current approaches starting from incorrect assumptions about the scope of the pre‐existing duty rule and failing to integrate decisions that provide definite grounds for enforcing even one‐sided modifications on a basis that does not conflict with the duty rule. There is no need to revise or dispense with consideration for modifications. Further, this analysis of contract formation addresses the concerns that have motivated courts to resort to economic duress. Being fully consonant with general principles of contract law and applicable to all modifications, the proposed approach provides a sounder and more complete framework for assessing their contractual enforceability.