Angel v. Murray
322 A.2d 630 · Supreme Court of Rhode Island · 1974
Facts
James L. Maher had a series of five-year contracts with the City of Newport for refuse collection, beginning in 1946. On March 12, 1964, Maher and the city entered into another five-year contract, effective July 1, 1964, for $137,000 per year to collect all waste. In June 1967, Maher requested an additional $10,000 per year from the city council, explaining that collection costs had substantially increased due to an unexpected 400 new dwelling units. The 1964 contract was based on an expected annual increase of only 20 to 25 units. After a public meeting, the city council agreed to pay the additional $10,000 for the year ending June 30, 1968. Maher made a similar request in June 1968 for the same reasons, and the city council again agreed to pay an additional $10,000 for the year ending June 30, 1969.
Procedural history
Alfred L. Angel and others brought a civil action against John E. Murray, Jr., the City of Newport, and James L. Maher, alleging Maher had been illegally paid $20,000 and seeking repayment. The case was heard by a justice of the Superior Court, sitting without a jury, who entered a judgment ordering Maher to repay the $20,000 to the city. Maher then appealed this decision to the current court.
Issue
The legal question is whether the city council's agreement to pay additional compensation to Maher for refuse collection was valid, considering both the city charter's requirements for contract alterations and the doctrine of consideration for contract modifications. Specifically, whether the payments were illegal because they lacked a written recommendation from the city manager or were not supported by new consideration.
Holding
The court reversed the judgment of the Superior Court, holding that the city council had the authority to modify the contract without the city manager's written recommendation and that the additional payments were supported by consideration under the modern rule for contract modifications due to unanticipated circumstances.
Rule
The court adopted and applied the rule from Restatement Second of Contracts §89D(a), which states that a promise modifying a duty under a contract not fully performed on either side is binding if the modification is fair and equitable in view of circumstances not anticipated by the parties when the contract was made. This rule prohibits modifications obtained by coercion, duress, or extortion, but enforces voluntary agreements when unexpected difficulties arise. The elements for this rule are: (1) the promise modifying the original contract was made before the contract was fully performed on either side, (2) the underlying circumstances which prompted the modification were unanticipated by the parties, and (3) the modification is fair and equitable. The court reasoned that this modern approach better reflects society's expectation that voluntary agreements will be enforced, moving away from a rigid application of the preexisting duty rule.
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