A general contractor enters into a contract with a landowner to build a commercial building for $1,000,000. The contract contains a clause stating that 'any modifications to this agreement must be in writing and signed by both parties.' During construction, the landowner orally requests an additional feature, a custom facade, which the contractor agrees to build for an extra $50,000. After completion, the landowner refuses to pay the extra $50,000, citing the 'no oral modification' clause. Is the contractor likely to recover the additional $50,000?
- AYes, because the parties orally agreed to the modification, and it was performed.
- BNo, because the 'no oral modification' clause prevents any oral changes to the contract.
- CNo, because the modification was not supported by new consideration.
- DYes, if the custom facade was a material improvement to the building.
Show answer & explanationAnswer & explanation
Correct answer: A. Yes, because the parties orally agreed to the modification, and it was performed.
Under common law, a 'no oral modification' clause is generally not effective. Parties are free to orally modify a contract, even one with such a clause, unless the modification itself falls within the Statute of Frauds. Since the contractor performed the work, the oral modification is likely enforceable.
Why the other options are wrong
- B. Under common law, 'no oral modification' clauses are generally not strictly enforced; parties can waive them by subsequent oral agreement.
- C. The agreement for an 'extra $50,000' for an 'additional feature' implies new consideration for the modification.
- D. While it may be an improvement, the materiality of the improvement is not the primary factor for enforcing an oral modification against a 'no oral modification' clause; the key is the common law's treatment of such clauses.
No Oral Modification Clause (Common Law)
A contractual provision stating that any changes to the agreement must be in writing and signed. Under common law, these clauses are generally not strictly enforced, meaning parties can still orally modify the contract if they mutually intend to, unless the modification itself falls under the Statute of Frauds.
- Common law view: parties are free to modify by mutual agreement.
- NOM clauses can be waived orally.
- UCC has a different rule (NOM clauses are enforceable).
- Modification must be supported by new consideration (or satisfy promissory estoppel).
Memory trick: Modifications change the contract's path, but you need a new map (agreement) to do it.