Chapter 18 MODIFICATION OF AGREEMENTS

JurisdictionNew York

Chapter Eighteen

Modification of Agreements

I. Generally

In Beatty v. Guggenheim Exploration Co.,3078 Justice Benjamin N. Cardozo stated: "Those who make a contract, may unmake it. The clause which forbids a change, may be changed like any other. . . . Whenever two men contract, no limitation self-imposed can destroy their power to contract again."3079 Parties have the right to modify a separation agreement "by altering, excising or adding provisions regardless of self-imposed limitations, as the power to modify or alter cannot be controlled or fettered by any stipulation to the contrary in the original contract."3080 The modification of a contract results in the establishment of a new agreement between the parties, which pro tanto supplants the affected provisions of the original agreement while leaving the balance of it intact. 3081 A modification agreement leaves intact those provisions of the original agreement which were not expressly or impliedly supplanted.3082 Indulgence or leniency in enforcing a debt when due is not an alteration of the contract. 3083

II. Oral Modification of Written Separation or Settlement Agreements; Partial Performance

A recurring issue is the validity of an oral modification to a written agreement, which contains specific language that all modifications must be in writing. Oral modification may be found under limited circumstances. As a general rule, where a contract has a provision that explicitly prohibits oral modification, such clause is afforded great deference.3084

A strict merger clause3085 and no-oral-modification clause3086 establish an integrated writing and, as a matter of law, bar any claims not expressed in the agreement itself or in a signed written amendment.3087

GOL § 15-301(1) states:

A written agreement or other written instrument which contains a provision to the effect that it cannot be changed orally, cannot be changed by an executory agreement unless such executory agreement is in writing and signed by the party against whom enforcement of the change is sought or by his agent.

The parol evidence rule is not violated if a purported oral modification of a written agreement is executed rather than executory and is supported by consideration.3088 An oral modification may constitute a defense to specific performance of a separation agreement.3089

A. When a "No Oral Modification Clause" Conflicts With Another Clause in a Contract, Such as a Guaranty

Guaranties are not uncommon in matrimonial litigation where a parent or other family member promises to make good the obligations of the payor spouse in the event of a default. A guaranty is a promise to fulfill the obligations of another party, and is subject to ordinary principles of contract construction. Guarantees that contain language obligating the guarantor to payment without recourse to any defenses or counterclaims, i.e., guarantees that are "absolute and unconditional," have been consistently upheld by New York courts.3090 Guarantors are required to satisfy the underlying obligations despite modifications to those obligations.3091

In Israel v. Chabra,3092 the following question was certified to the New York Court of Appeals by the Court of Appeals, Second Circuit:

"Does New York General Obligations Law § 15-301(1) abrogate, in the case of a contract where the second of two irreconcilable provisions requires that any modifications to the agreement be made in writing, the common law rule that where two contractual provisions are irreconcilable, the one appearing first in the contract is to be given effect rather than the one appearing subsequent?"

The Court of Appeals paraphrased the question:3093

The statute indicates that where a contract contains a "no oral modification" clause, that clause will be enforceable. The Second Circuit has inquired whether the statute does more than merely allow for the enforcement of a clause banning oral modifications, questioning whether, in the event of a conflict, the statute might require that a "no oral modification" provision take precedence over other contract terms.

The reason for the rewording of the certified question was because the Court refused to endorse the "first clause governs" view of contract interpretation. Following an historical review of the statute, the Court of Appeals held that the statutory language does not support that interpretation, nor does the legislative history indicate any such legislative intent:3094

Th[e] legislative history reveals that, in drafting General Obligations Law § 15-301(1), the Legislature did not intend to interfere with the ability of parties to craft specific contract terms governing their rights; if parties decide to include a "no oral modification" clause in their agreement, the statute is intended to facilitate its enforcement. Section 15-301(1) places this type of clause on the same footing as any other term in a contract.
"[N]othing in the history of the statute suggests that the Legislature sought to abrogate other common-law rules related to the interpretation of contracts, other than to extinguish the Beatty 3095 rule."

When a "no-oral modification" clause appears to conflict with another clause in a contract, every attempt should be made to harmonize the two provisions using common-law tools of contract interpretation. But GOL § 15-301(1) does not compel the enforcement of a "no-oral modifications" clause at the expense of other aspects of the parties' agreement.

B. The Doctrine of "Unequivocal Reference"

The issue of oral modification, a complex issue that often appears to be a shifting target, derives from the Court of Appeals: Rose v. Spa Realty Assocs.,3096 Anostario v. Vicinanzo,3097 and Burns v. McCormick.3098

Rose emphasized, "[A]part from statute, a contract once made can be unmade, and a contractual prohibition against oral modification may itself be waived."3099 The Court of Appeals talked about the different ways to enforce an agreement that on its face does not permit an oral modification:

Parties to a written agreement who include a proscription against oral modification are protected by [GOL § 15-301(1)]. . . . Put otherwise, if the only proof of an alleged agreement to deviate from a written contract is the oral exchanges between the parties, the writing controls. Thus, the authenticity of any amendment is ensured.
[W]hen the oral agreement to modify has in fact been acted upon to completion, the same need to protect the integrity of the written agreement from false claims of modification does not arise. In such case, not only may past oral discussions be relied upon to test the alleged modification, but the actions taken may demonstrate, objectively, the nature and extent of the modification. . . . Thus, [GOL] 15-301 nullifies only "executory" oral modification. Once executed, the oral modification may be proved. 3100

In order to be unequivocally referable, conduct must be inconsistent with any other explanation,3101 below.

C. Rose: Partial Performance

The doctrine of part performance has its origins in the statute of frauds and does not apply to defeat the affirmative defense of the statute of frauds.3102 This exception to the statute of frauds, closely related in origin and nature to equitable estoppel, is meant to prevent fraud.3103

Although application of the part performance doctrine has traditionally been grounded on affirmative acts of the party aggrieved, in concept part performance in the form of inaction might also suffice. To qualify as part performance, inaction, like affirmative acts, would have to be pleaded as a term of the oral agreement, alleged to be 'unequivocally referable' to the oral agreement and coupled with an element of detrimental reliance. There would otherwise be 'nothing to show that the plaintiff changed his position to his prejudice because of the contract so as to give rise to an estoppel.3104

In Anostario v. Vicinanzo,3105 the Third Department observed:

Originally entitled "An Act for the Prevention of Frauds and Perjuries" (29 Car. 2, ch. 3, § 4 (1677)), it has earnestly been debated for almost 300 years whether enforcement of its provisions accomplished more mischief than good by protecting frauds rather than preventing them. In recognition of this difficulty, the doctrine of part performance has been carved out of the present day enactment, as an exception to the ritualistic construction often accorded to it, on the theory that equity will not permit its interposition as a shield for the perpetration of fraud (General Obligations Law, § 5-703, subd. (4); see Canda v. Totten, 157 N.Y. 281, 51 N.E. 989; Ryan v. Dox, 34 N.Y. 307). Even though this doctrine is founded on relatively simple principles of equitable estoppel (see 56 N.Y.Jur., Statute of Frauds, §§ 246, 334), a line of judicial authority has evolved over the years producing somewhat technical rules governing its application.

Rose addressed the principle of partial performance where, unlike an oral modification that has occurred and has been fully completed, the modification in a partial performance situation was commenced but not completed and is unequivocally referable to the oral modification:

Where there is partial performance of the oral modification sought to be enforced, the likelihood that false claims would go undetected is similarly diminished. Here, too, the court may consider not only past oral exchanges, but also the conduct of the parties. But only if the partial performance be unequivocally referable to the oral modification is the requirement of a writing under [GOL §] 15-301 avoided. 3106

Rose examined the commonality between "partial performance" and equitable estoppel:

There is, however, another qualification to the mandates of [GOL §] 15-301. Analytically distinct from the doctrine of partial performance, there is the principle of equitable estoppel. Once a party to a written agreement has induced another's significant and substantial
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