The Law of Contract and the Concept of Change: Public and Private Attempts to Regulate Modification, Waiver, and Estoppel
Abstract
This article argues that contractual change is inherently problematic because contract and change are fundamentally antithetical. Because change is inevitable, however, the law of contract attempts to regulate the effect of change. These attempts are divided into two realms: public regulation, including the preexisting duty rule and its substitutes, and private regulation, including contractual "no oral modification" and "no oral waiver" clauses. The article criticizes not only the preexisting duty rule but also the duress and good faith tests that have been suggested as substitutes. Instead, the article proposes a "coercion" test, which is stated in detail and which is compared with duress in a matrix of cases. On the private side, the article would validate clauses that require modifications and waivers to be written, although a limited exception for estoppel (which is distinguished from waiver and modification) is recognized. The article rejects calls for complete validation or invalidation of such clauses. The paper recognizes the benefits of those clauses, especially with respect to "course of performance" and its effects under the Uniform Commercial Code. After examining several decades of case law, however, the article concludes that courts cannot realistically be expected to uphold such clauses in the face of reasonable, material reliance. When a party seeks public (i.e., judicial) enforcement of a private regulation, public concerns must enter any decision to enforce that regulation. While the legislation proposed in this article would generally uphold these private regulations, circumstances are suggested in which such contractual clauses will fail. Provisions to replace UCC sections 1-205, 2-208, and 2-209 are included.