Angel v. Murray

Since 1946, Maher ran garbage hauling service in Newport, Rhode Island. Every 5 years, Maher's contract with Newport was renewed.

For the term 1964 to 1969, Maher was to receive $137,000/year.

Murray ("Murray") is the director of finance of Newport, RI. The city entered into a contract with James Maher. Maher was to collect and remove all refuse from the city for a set amount of money.

During the execution of the contract for 1967-1968 the city grew much more than expected, and Maher asked the city for $10,000 more to cover his costs. The city paid. The next year, the same thing happened and the city paid $10,000 more to Maher.

Alfred Angel ("Angel"), a Newport resident, brought suit alleging that Maher had been illegally paid the $20,000.

Trial court found that each $10,000 payment had been paid illegally. Superior court affirmed.

Are the subsequent contracts enforceable? Do they constitute consideration?

Are the additional payments illegal because they haven't been supported by new consideration?

The contracts are enforceable.

No. Modern rules of contract modification allow the parties to negotiate additional compensation. Consequently, the additional payments to Maher (garbage collector) were legal.

Reversed.

There was no coercion in the formation of the second contract. The city voluntarily agreed to the changes in the agreement. The changes in the conditions that led to the changes in the contract went beyond reasonable expectations at the time of forming the original contract, so it is reasonable that a new contract be created. Because the contract wasn’t fully performed by either party, the contract was changeable.

This case is an exception to the pre-existing duty rule.

Section 89(a) of the American Law Institute’s Restatement, Second, Law of Contracts provides the following test for contract modification of services:

1. Voluntary?
2. Prior to full peformance?
3. Unexpected circumstances?
4. Equitable modification?