Contracts-Modification, Mistake, Ambiguity

Mid-term Modifications:

Under the common law: pre-existing duty rule, exceptions: 1. unforeseen circumstances, 2. mutual modification of duties (both parties change their obligations).

Under the UCC: no consideration required, exception: 1. bad faith. BUT, watch out: statute of frauds can still apply to modifications if sales contract is for more than $500 and modification is oral.

Mistake:

Unilateral Mistake:
1. Mechanical Miscalculations: these can be a defense to formation IF AND ONLY IF the other party knew or reasonably should have known of the error (i.e. the other party jumped on the deal because it was "too good to be true.") (subjective and objective test)
2. Errors in business judgement: these are never a defense to formation.

Mutual Mistake:
Defense to enforcement if it goes to the heart of the bargain and is discovered while the bargain is still executory.

Mistake of third party:
is treated like mechanical miscalculation--K is not formed if offeree jumped on a bargain that was "too good to be true." (subjective and objective test).

Ambiguity:
Ambiguity must infect essential term and fault must lie with neither party.