Schwartzreich v. . Bauman-Basch, Inc.
231 NY 196 · 1921
Facts
On August 31, 1917, Louis Schwartzreich entered an employment agreement with Bauman-Basch, Inc. as a designer for 12 months at $90 per week, starting November 22, 1917. In October, Schwartzreich received an offer of $115 per week from another company. Mr. Bauman, an officer of Bauman-Basch, Inc., learned of this and offered Schwartzreich $100 per week to stay, which Schwartzreich accepted. On October 17, 1917, a new contract was executed, identical to the first except for the $100 weekly salary. Simultaneously, Schwartzreich's copy of the original contract was returned to Bauman, and Schwartzreich tore off the signatures from his copy, effectively destroying it. Schwartzreich continued working until he was discharged in December.
Procedural history
The plaintiff brought an action for damages under the new contract after being discharged. The trial justice submitted the question of contract cancellation to the jury, which found for the plaintiff. However, the trial justice then set aside the verdict and dismissed the complaint, finding insufficient evidence of cancellation. The Appellate Term reversed this ruling, reinstated the jury's verdict, and the judgment for the plaintiff, leading to this appeal.
Issue
Can parties to an employment contract mutually agree to terminate the existing contract and simultaneously create a new one for the same work at an increased compensation, such that the new contract is supported by valid consideration?
Holding
Yes, the court held that the new contract was valid and supported by consideration because the parties mutually rescinded the original contract and simultaneously entered into a new one. The judgments of the lower courts affirming the plaintiff's verdict were affirmed.
Rule
While a promise to do what one is already contractually bound to perform is generally without consideration, parties can mutually consent to cancel an existing contract and make a new one. For this to be valid, there must be an express and acted-upon rescission of the original contract. When an existing contract is terminated by mutual consent and a new one is executed in its place, the mutual promises in the new agreement constitute valid consideration. The timing of the rescission, whether a moment before or at the same time as the new contract, is unimportant as long as the intent to rescind is clear. This differs from a mere modification, which requires new consideration as the original contract continues.
Read the full opinion on CourtListener
Case brief last reviewed . Prepared by CaseReader from the published opinion.