1. What was the basis for the plaintiffs’ suit?

2. How would the Angel case have been decided under the common law rule as to consideration?

3. Can an adversely affected contractor compell a modification of an unprofitable contract under the Angel v. Murray decision?

John Murray was director of finance of the city of Newport. A contract was made with Alfred Maher to remove trash. Later, Maher requested that the city council increase his compensation. Maher’s costs were greater than had been anticipated because 400 new dwelling units had been put into operation. The city council voted to pay Maher an additional $10,000 a year. After two such annual payments had been made, Angel and other citizens of the city sued Murray and Maher for a return of the $20,000. They said that Maher was already obligated by his contract to perform the work for the contract sum, and there was, accordingly, no consideration for the payment of the increased compensation. From a decision in favor of the plaintiffs, the city and Maher appealed.

JUDICIAL OPINION

ROBERTS, C. J.… It is generally held that a modification of a contract is itself a contract, which is unenforceable unless supported by consideration.… The preexisting duty rule is followed by most jurisdictions.…

The primary purpose of the preexisting duty rule is to prevent what has been referred to as the “hold-up game.” … A classic example of the “hold-up game” is found in Alaska Packers’ Ass’n v Domenico, 117 F 99 (9th Cir 1902). There 21 seamen entered into a written contract with Domenico to sail from San Francisco to Pyramid Harbor, Alaska. They were to work as sailors and fishermen out of Pyramid Harbor during the fishing season of 1900. The contract specified that each man would be paid $50 plus two cents for each red salmon he caught. Subsequent to their arrival at Pyramid Harbor, the men stopped work and demanded an additional $50. They threatened to return to San Francisco if Domenico did not agree to their demand. Since it was impossible for Domenico to find other men, he agreed to pay the men an additional $50. After they returned to San Francisco, Domenico refused to pay the men an additional $50. The court found that the subsequent agreement to pay the men an additional $50 was not supported by consideration because the men had a preexisting duty to work on the ship under the original contract, and thus the subsequent agreement was unenforceable.

Another example of the “hold-up game” is found in the area of construction contracts. Frequently, a contractor will refuse to complete work under an unprofitable contract unless he is awarded additional compensation. The courts have generally held that a subsequent agreement to award additional compensation is unenforceable if the contractor is only performing work which would have been required of him under the original contract.…

These examples clearly illustrate that the courts will not enforce an agreement that has been procured by coercion or duress and will hold the parties to their original contract regardless of whether it is profitable or unprofitable. However, the courts have been reluctant to apply the preexisting duty rule when a party to a contract encounters unanticipated difficulties and the other party, not influenced by coercion or duress, voluntarily agrees to pay additional compensation for work already required to be performed under the contract. For example, the courts have found that the original contract was rescinded, … abandoned, … …………………………