Schwartzreich v. Bauman-Basch, Inc.

Brief Fact Summary. A clothing designer agreed to work for Company 1 for $90 per week.  The designer received a higher offer from Company 2, and Company 1 countered with another offer, which the designer accepted.

Synopsis of Rule of Law. "It would doubtless be competent for parties to cancel an existing contract and make a new one to complete the same work at a different rate of compensation, but it seems that it would be essential to its validity that there should be a valid cancellation of the original contract."

Facts. On August 31, 1917, the Plaintiff, Schwartzreich (the "Plaintiff"), entered into an agreement with the Defendant, Bauman-Basch, Inc. (the "Defendant"), to design clothes.  The Plaintiff was to receive a salary of $90.00 per week.  In October 1917 the Plaintiff was offered by another company $11o or $115 per week.  The testimony as to the offered amount was inconsistent.  Upon learning that the Plaintiff was going to leave, Mr. Bauman an officer of the Defendant company, had a conversation with the Plaintiff and offered him $100 per week to stay.  A new contract dated October 17, 1917, reflected the $100 per week salary.  The Plaintiff testified that Mr. Bauman told him he did not need to keep the old contract because the new one took its place.  The Plaintiff was discharged by the Defendant in December of 1918.  Subsequently, the Plaintiff brought this action under the October 17, 1917 contract.  The Defendant, before the trial court, alleged there was no consideration supporting the October 17, 1917 contract, because the Plaintiff was already bound under the August 31, 1917 agreement.  The trial judge in-structed the jury that if the Plaintiff and the Defendant mutually consented to revoke the original contract, the Plaintiff could recover dam¬ages for the Defendant's breach of the second con¬tract.  The trial judge set aside the juries verdict for the Plaintiff.  The Appellate term reversed the trial court's ruling and reinstated the verdict in favor of the Plaintiff. 

Issue. Can a contract of employment be set aside or terminated by the parties to it and a new one made or substituted in its place?
•    If so, is it competent to end the one and make the other at the same time?

Held. The court first observed "[i]t has been repeatedly held that a promise made to induce a party to do that which he is already bound by contract to perform is without consideration."  However, this rule can co-exist with the rule that parties can cancel a contract by mutual consent and make a new one.  The court quoted [Vanderbilt v. Schreyer (91 N.Y. 392, 402)], which stated:  "It would doubtless be competent for parties to cancel an existing contract and make a new one to complete the same work at a different rate of compensation, but it seems that it would be essential to its validity that there should be a valid cancellation of the original contract."  
•    No consideration exists where parties enter into a new contract, but do not agree to abrogate the old agreement.  Or in other words "The almost universal rule is that without any express rescission of the old contract, the promise is made simply for additional compensation, making the new promise a mere nudum pactum."  However, "[w]here [  ] an existing contract is terminated by consent of both parties and a new one executed in its place and stead, we have a different situation and the mutual promises are again a consideration."

Discussion. It is interesting to read this case alongside [Angel v. Murray] and see how courts from different states construe the pre-existing duty rule.