Black-letter propositions
- 01
An agreement modifying a contract within Article 2 needs no consideration to be binding; the modification must still meet the good faith obligation that every contract within the Code imposes on its performance and enforcement.
- 02
A signed agreement that excludes modification or rescission except by a signed writing cannot be otherwise modified or rescinded, but except as between merchants such a requirement on a form supplied by a merchant must be separately signed by the other party.
- 03
The statute of frauds must be satisfied if the contract as modified is within its provisions, so a modification that brings a contract to $500 or more of goods needs a signed writing unless an exception applies.
- 04
Although an attempt at modification or rescission does not satisfy the signed-writing requirements, it can operate as a waiver.
- 05
A party who has made a waiver affecting an executory portion of the contract may retract the waiver by reasonable notification that strict performance will be required, unless retraction would be unjust in view of a material change of position in reliance on the waiver.
- 06
A contract for the sale of goods for the price of $500 or more is not enforceable unless there is a writing sufficient to indicate that a contract has been made, signed by the party against whom enforcement is sought; a writing is not insufficient because it omits or incorrectly states a term, but the contract is not enforceable beyond the quantity shown in the writing.
- 07
Between merchants, a written confirmation sufficient against the sender and received within a reasonable time satisfies the statute of frauds against the receiver unless written notice of objection is given within 10 days after it is received.
- 08
A claim is discharged by accord and satisfaction through an instrument if the debtor proves that it tendered the instrument in good faith as full satisfaction, the claim was unliquidated or subject to a bona fide dispute, and the claimant obtained payment of the instrument.
- 09
In that case the claim is discharged if the instrument or an accompanying written communication contained a conspicuous statement that the instrument was tendered as full satisfaction of the claim.
- 10
A claim is not discharged if the claimant proves it tendered repayment of the amount of the instrument within 90 days after payment, or, if the claimant is an organization, proves it had sent a conspicuous statement designating a person or place for communications about disputed debts and the instrument was not received there.
- 11
A claim is nevertheless discharged if the debtor proves that within a reasonable time before collection of the instrument was initiated the claimant, or an agent with direct responsibility for the obligation, knew the instrument was tendered in full satisfaction.
Use this attack sequence under time
Frame the issue
Confirm the contract is a sale of goods, so section 2-209 rather than common-law consideration governs modification.
Resolve the next checkpoint
Check for a signed no-oral-modification clause and whether a merchant's form clause was separately signed.
Resolve the next checkpoint
Ask whether the modified contract needs a writing under the statute of frauds, and whether a waiver can be retracted.
Finish the conclusion
For a check marked full payment, test good faith, a bona fide dispute, a conspicuous statement, and repayment within 90 days.
Common wrong turns
- A sales modification needs no new consideration, so a common-law preexisting-duty argument does not defeat it.
- A merchant's form clause against oral modification must be separately signed by a non-merchant party.
- Cashing a check marked full satisfaction discharges only a disputed or unliquidated claim, and a claimant may undo it by repaying within 90 days.
Worked example
A seller and buyer of goods agree in a signed contract that changes must be in a signed writing. Later the buyer orally agrees to accept delivery two weeks late and the seller relies on it, then the buyer demands strict on-time delivery.
The oral change may not be an effective modification, but it operates as a waiver, and the buyer may retract only on reasonable notice and only if that would not be unjust in view of the seller's reliance.
Practice this topic
Modification and waiver under section 2-209
UCC section 2-209(1) provides that an agreement modifying a contract within Article 2 needs no consideration to be binding. Section 2-209(2) provides that a signed agreement excluding modification or rescission except by a signed writing cannot be otherwise modified or rescinded, but except as between merchants, a requirement on a form supplied by a merchant must be separately signed by the other party, and section 2-209(3) requires the statute of frauds to be satisfied if the contract as modified is within its provisions.
Section 2-209(4) provides that an attempt at modification or rescission that fails subsections (2) or (3) can operate as a waiver, and section 2-209(5) permits a party who has waived a term affecting an executory portion of the contract to retract the waiver by reasonable notification that strict performance will be required, unless retraction would be unjust in view of a material change of position in reliance on the waiver. Section 1-304 provides that every contract or duty within the Code imposes an obligation of good faith in its performance and enforcement.
Statute of frauds for goods
Section 2-201(1) provides that a contract for the sale of goods for the price of $500 or more is not enforceable unless there is a writing sufficient to indicate that a contract for sale has been made, signed by the party against whom enforcement is sought, and that a writing is not insufficient because it omits or incorrectly states a term, though the contract is not enforceable beyond the quantity shown. Section 2-201(2) provides that between merchants a written confirmation sufficient against the sender satisfies the requirement against the recipient unless written notice of objection is given within 10 days after receipt.
Section 2-201(3) provides that a contract that does not meet subsection (1) is enforceable if the goods are to be specially manufactured and the seller has made a substantial beginning, if the party against whom enforcement is sought admits in court that a contract was made, but only to the quantity admitted, or as to goods for which payment has been made and accepted or that have been received and accepted.
Accord and satisfaction by instrument
Section 3-311(a) provides that accord and satisfaction by use of an instrument applies when the debtor proves that it tendered an instrument in good faith as full satisfaction of the claim, the claim was unliquidated or subject to a bona fide dispute, and the claimant obtained payment of the instrument. Under section 3-311(b), the claim is discharged if the instrument or an accompanying written communication contained a conspicuous statement that the instrument was tendered as full satisfaction.
Under section 3-311(c), a claim is not discharged if the claimant, whether or not an organization, tendered repayment of the amount of the instrument within 90 days after payment, or, if the claimant is an organization, it had sent a conspicuous statement designating a person, office or place for communications about disputed debts and the instrument was not received there. Under section 3-311(d), the claim is discharged if within a reasonable time before collection was initiated the claimant, or an agent with direct responsibility for the obligation, knew the instrument was tendered in full satisfaction.
Frequently asked questions
What is the controlling rule for modification, waiver, no-oral-modification clauses, and accord and satisfaction by check?+
State that a sales modification needs no consideration, apply the signed-writing and statute-of-frauds limits, treat a failed modification as a possible waiver, and handle accord and satisfaction under section 3-311.
Does a modification of a sales contract need consideration?+
No. UCC section 2-209(1) says an agreement modifying a contract within Article 2 needs no consideration to be binding.
Can an oral modification defeat a no-oral-modification clause?+
Not as a modification if the clause is signed, but the attempt can operate as a waiver under section 2-209(4).
Can a waiver be taken back?+
Yes, by reasonable notification that strict performance will be required, unless unjust because of the other party's reliance, under section 2-209(5).
When does a check marked paid in full discharge a debt?+
When it was tendered in good faith, the claim was disputed or unliquidated, the statement was conspicuous, and the claimant obtained payment, under section 3-311.
How can a claimant undo an accord and satisfaction by check?+
By repaying the amount of the instrument within 90 days after payment, under section 3-311(c)(2).