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."
Any change in an existing contract, such as a modification of the rate of compensation, or a supplemental agreement, must have a new consideration to support it.View Full Point of Law
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.