This section is from the book "The Law Of Contracts", by William Herbert Page. Also available from Amazon: Commercial Contracts: A Practical Guide to Deals, Contracts, Agreements and Promises.
If the new contract does not provide either for abrogating the original contract or for retaining it in force, the question of the effect of the second contract upon the first turns on the question whether the second contract is consistent with the first contract in whole or in part.
If the second contract is consistent with the first, the original contract remains in full force and effect. A contract providing for making certain changes in the construction of a furnace does not abrogate an earlier contract between the same parties, whereby one agrees to sell such furnace to the other.1 A agreed to make a machine for B, according to certain plans and specifications. There was no guaranty that the machine would do the work for which it was intended. Subsequently the parties found that some of the plans and specifications were imperfect, and A agreed to examine the drawings and specifications and correct them if there was anything imperfect or defective therein. It was held that the new agreement did not amount to a warranty that the machine would do the work for which it was made.2 Conversely, if there is an express guaranty in the original contract, a modification of the plans and specifications does not operate as a discharge of the covenant of guaranty.3 B bought A's poultry and grocery business, and A agreed not to engage in the poultry business while B remained therein. Subsequently A bought some real estate and B's poultry business, and B agreed not to engage in the poultry business in a certain territory for a specified time. It was held that the latter contract did not merge the earlier one.4 An author and publisher made a contract fixing the quality of the books to be published and the price therefor. A subsequent oral modification as to the first edition will not abrogate the written contract as to subsequent editions.5 Two contracts of different dates, which are not inconsistent each with the other, and one of which appears to be in part performance of the other, are to be enforced together. The second does not abrogate the first.6
5 People v. Metz, 193 X. Y. 148. So N. E. 1070 [order affirmed on rehearing, 86 N. E. 986].
6Bellaire Stove Co. v. Midland Steel Co., 66 O. S. 1, 63 N. E. 587.
1 Green v. Ry., 92 Fed. 873, 35 C. C. A. 68; Sheats v. Scott, 133 Ala. 642, 32 So. 573; Arnold v. Pawcucket, 21 R. I. 15, 41 Atl. 576.
2De Baumont v. Webster, 71 Fed. 226; Union, etc., Co. v. Johnson, 72 Fed. 147, 18 C. C. A. 490; Youngberg v.
South End Warehouse Co., 177 Gal. 504, 171 Pac. 97; Swarts v. Narragansett Electric Lighting Co., 26 R. I. 388, 59 Atl. 77 [rehearing denied, 26 R I. 436, 59 Atl. 1111; Hutchinson v. Holmes Sanitarium, 93 Wis. 23, 66 N. W. 700.
3AIferitz v. Ingalls, 83 Fed. 964; Landvoigt v. Paul, 27 D. C. App. 423; Gray v. Jones, 47 Or. 40, 81 Pac. 813.
4 Landvoigt v. Paul, 27 D. C. App. 423; Lowell v. Washington County R. R., 90 Me. 80, 37 Atl. 860.
Conduct of the parties in continuing to act under the old contract after they have entered into the new contract, tends to show that both the contracts are to be in effect, as far as they are not inconsistent with each other.7 If the two contracts are consistent, the second does not operate as a rescission or modification of the first.8 The new contract consists, in such cases, of the terms of the new agreement, together with the terms of the original contract which are not inconsistent with such new terms.9 If the original contract consists of a letter which refers to a formal agreement, and such formal agreement, a modification of the terms of the formal agreement by a new contract, does not alter the terms of the original agreement any further than such express modification, the letter remains a part of the contract as modified.10 If the original contract provides for the payment of a certain price and for the application of royalties thereon, a subsequent agreement reducing the price does not modify the remaining provisions of the original contract with reference to the application of such royalties.11 To operate as a discharge in the absence of an express agreement to that effect, the new contract must be clearly inconsistent with the continued existence of the original contract. A sold a blacksmith shop to B, and agreed, as a part of the consideration, not to engage in that business in that town. The fact that A and B subsequently formed a partnership in such business, did not as a matter of law discharge such contract absolutely. Accordingly, if, after the termination of such partnership, A continues such business, he is liable upon his covenant.12 A subsequent agreement between a contractor and a subcontractor, whereby the contractor finishes the work for the subcontractor, and agrees to pay him any balance over and above the cost of completing such work, does not operate as a complete discharge by abandonment of the original contract.13 A contract by a railway to furnish cars is consistent with a subsequent formal contract for the transportation of live stock,14 and such formal contract for transportation does not merge the original contract to furnish cars.15 Modifications of a building contract do not abrogate it entirely, as long as the alterations and changes leave it possible to follow the original contract.16 A contract for erecting a mill, provided that the foundations should be laid in cement and mortar, except the foundations for machinery, which should be laid in Portland cement. The walls were to be laid in lime mortar, except certain cappings, which were to be in Portland cement. A subsequent modification of the contract substituted Louisville cement for Portland cement in all the brick-work, except the machinery foundations and the cappings. It was held that this change referred only to the kind of cement to be used, and did not affect the contract as to the amount of brick which was to be laid in cement.17 An agreement between the owner and the contractor, which provides for the use of less expensive material, is said not 'to imply an agreement to make a corresponding reduction in the contract price.18 If A has sold stock to B, under a contract by which A agrees to repurchase such stock in a year, upon the happening of a certain event, and by which it was agreed that as between A and B such stock should be regarded as the property of A, such contract is not terminated as a matter of law by the fact that B gives to A an option upon such stock,19 or that B gives to A authority to sell such stock.20
1 Uhlig v. Barnum, 43 Neb. 584, 61 N. W. 749.
2 Johnson v. Freemann. 160 Pa. St. 317,28 Atl. 780; Swarts v. Narragansett Electric Lighting Co., 26 R. I. 388, 60 Atl. 77 [rehearing denied, 26 R. T. 436, 39 Atl. 111].
3Duggleby v. Lewis Rooting Co., 139 Ia. 432, 116 N. W. 711.
4 Adams v. Adams, 160 Ind. 61, 66 N. E. 153.
5 Keely v. Hartranft, 178 Pa. St. 384, 3.", Atl. 984.
6 Rhoades v. Ry., 49 W. Va. 494, 65 L. R. A. 170, 39 S. E. 209.
7 Robert Grace Contracting Co. v. Norfolk & W. Ry. Co., 259 Pa. St. 241, 102 Atl. 956.
8 Trumbull v. Harris, 102 Ark. 669, 145 S. W. 547; Cutler v. Spens, 191 Mich. 603, 158 N. W. 224.
9 McDowell v. Hemming Mfg. Co., - N J. - , 102 Atl. 080.
10Canadian Imp]. Co. v. Lea. 74 N. J. Eq. 234, 69 Atl. 433.
11 Hoffman v. Murphy, 44 Colo. 107, 96 Pac. 780.
12 Drown v. Forrest, 63 Vt. 557, 14 L. R. A. 80, 22 Atl. 612.
13 Pease v. McQuillin, 180 Mas 136, 61 N. E. 819.
14 Clark v. Ulster and Delaware Rail-road Co., 189 X. Y. 93. 121 Am. St. Rep. 848. 13 L. R. A. (N.S.) 184, 81 N. E. 766
15 Clark v. Ulster and Delaware Railroad Co., 189 N. Y. 93, 121 Am. St. Rep 848, 13 L. R. A, (N.S.) 164, 81 N. E. 766.
16 Hood v. Smiley, 5 Wyom. 70, 36 Pac. 856.
A building contract is not abrogated by a subsequent agreement changing the plans and specifications and providing for omitting certain provisions of the contract.21 A building contract is not abrogated by the owner's making payments direct to the laborers and materialmen, with the consent of the contractor.22
A modification which merely extends the time for performance leaves the remaining provisions in full force.23 A provision in a new agreement, accelerating the time for performance, does not discharge the original contract except as far as it is inconsistent therewith.24 A modification of the terms of payment does not operate as a discharge of the entire contract.25 A renewal of a certificate of indebtedness does not operate as a modification of the rights of the parties under the original obligation.26 If A and B have entered into a contract by which A has executed a note to B under a contract by which A is to be entitled to vote stock enough to elect two directors in a given corporation, the renewal of such note without an express reference to the remaining provisions of such contract does not operate as a discharge thereof.27 A written memorandum to the effect that delay in performance of a prior contract shall not affect the rights of the adversary party, is not regarded as a new contract which terminates the original contract,28 but it is rather an admission of the original contract and an evidence of the intention that it shall remain in effect except as to the legal consequences of such delay.29
17 Perkins Oil Co. v. Eberhart, 107 Tenn. 409, 64 S. W. 760.
18 Thomas W. Finucane Co. v. Board of Education, 190 N. Y. 76, 82 N. E. 737.
19 Corey v. Woodin, 195 Mass. 464, 81 N. E. 260.
20 Corey v. Woodin, 195 Mass. 464, 81 N. E. 260.
21 Gray v. Jones, 47 Or. 40, 81 Pac 813.
22 Lane v. Hardware Co., 121 Ala. 296, 25 So. 809.
23 Underwood v. Wolf. 131 111. 425, 19 Am. St. Rep. 40, 23 N. E. 608.
24 Security Trust & Life Ins. Co. v. Ellsworth, 129 Wis. 349, 109 N. W. 125.
25.Cohen v. P. E. Harding Construction Co., 41 R. I. 242, 103 Atl. 702.
26Dunn v. Bank, 74 W. Va. 504, L. R. A. 1915B, 168, 82 S. E. 758.
As far as the new contract is inconsistent with the earlier contract, however, it thereby abrogates and supersedes it.30 A employed B for a term of years for a compensation, which was to be a certain per cent. of the profits. B was not to draw out his profits unless with A's consent. Subsequently B assigned to X the amount of the profits belonging to B for the first year, and A assented thereto, and promised to pay such amount to X. Such new contract was held to abrogate that part of the original contract, giving A the option to retain such profits in the business until the end of the contract and the right to set off against such profits any damage for B's subsequent violation of the contract. 31 A sold B land for a certain sum down and the balance due in three installments. B was to have the option of avoiding the contract before the first installment became due and forfeiting the amount paid down. Subsequently A extended the time for paying the first installment. This was held to extend the time within which B could avoid the sale.32 However, a subsequent contract modifying only the grade of work to be done has been held to leave in full force such a provision as to the power of the engineer.33