A general contractor enters into a contract with a landowner to build a commercial building for $1,000,000. The contract contains a clause that states: 'This Agreement may not be amended, modified, or otherwise changed except by a writing signed by both parties.' After construction begins, the landowner orally requests a minor change to the building's interior layout, which would add $5,000 to the cost. The contractor orally agrees to the change and completes the work. The landowner then refuses to pay the additional $5,000, citing the 'no oral modification' clause. Under common law, what is the most likely outcome?
- AThe contractor cannot recover the $5,000 due to the 'no oral modification' clause.
- BThe contractor can recover the $5,000 because the oral modification was executed.
- CThe contractor can recover the $5,000 under promissory estoppel.
- DThe contractor cannot recover the $5,000 because the modification requires new consideration.
Show answer & explanationAnswer & explanation
Correct answer: B. The contractor can recover the $5,000 because the oral modification was executed.
Under common law, a 'no oral modification' clause is generally not effective if the parties subsequently agree to an oral modification and perform based on that modification. The oral modification effectively waives the 'no oral modification' clause. Since the contractor completed the work based on the oral agreement, the modification is executed and enforceable.
Why the other options are wrong
- A. This is true under the UCC for sales of goods, but not generally for common law contracts where performance occurs.
- C. While promissory estoppel is an alternative, the more direct route here is that the oral modification itself becomes enforceable through performance.
- D. The oral modification here includes an additional $5,000 for additional work, which constitutes new consideration for the modification.
No Oral Modification Clause (Common Law)
A contractual provision stating that the agreement can only be modified in writing. Under common law, these clauses are generally not effective if the parties subsequently agree to and execute an oral modification.
- Common law often allows oral modifications despite such clauses.
- Performance of the oral modification often makes it enforceable.
- UCC (for goods) takes a stricter view, generally enforcing these clauses.
Memory trick: Common Law Lets Oral Changes Override Written 'No Oral Mods' Clauses If Performed.