Legality of Amending an Agreement: Requires Mutual Consent as Well as Bilateral Consideration Although This May Be Softening

Question: Are contract amendments enforceable in Ontario without fresh consideration?

Answer: In Ontario, a contract amendment is generally enforceable when all parties clearly consent to the change, but disputes can arise if there’s no new benefit (fresh consideration) or if the change was pressured by economic duress; Empowered Legal Services is a Professional Legal Advocacy Team offering contract and dispute-resolution legal services for clients across Ontario.  For enforceability analysis tied to duress and post-agreement price increases, courts have addressed these issues in Gilbert Steel Ltd. v. University Construction Ltd., 1976 CanLII 672.

Understanding the Legal Requirements for Amending Agreements

The enforceability of an amended contractual agreement requires the presence of several contractual elements.  One primary concern involves ensuring whether all parties consented to the changes.  Additionally, as an historic requirement, a new flow of consideration, meaning a benefit whether in money or another thing, wherein each party receives some new benefit from the amended agreement, played a crucial role in validating amendments within a previously established contract.  Recent cases do appear as softening the requirement of what is commonly referred to as fresh consideration.

Key general issues often encountered as arguments involving the enforceability of changes to a contract include:

• The Historic Requirement for Fresh Consideration:
  Adjustments to an existing contract historically required new consideration.  If absent, an amendment might lack enforceability, leaving parties without legal recourse.
• The More Recent Developments Regarding Consideration:
  Decisions such as Rosas v. Toca, 2018 BCCA 191, and NAV Canada v. Greater Fredericton Airport Authority Inc., 2008 NBCA 28, propose alternative views to the historical requirement of fresh consideration and thereby suggest that the law is evolving such that mutual consent alone might suffice to validate contractual amendments.
• The Implications of Contractual Unicity:
  Amendments introduce complexities concerning the integrity of the original contract.  Effective amendments must integrate seamlessly within the contract framework.

In some circumstances, such as where a party seeks to increase a previously agreed upon price due to a change in price from a supplier, the customer party may appear to agree to the price increase; however, such is generally unenforceable due to concern for what is known as economic duress.  The case of Gilbert Steel Ltd. v. University Construction Ltd., 1976 CanLII 672, addressed the enforceability of a price change where a party sought to increase a price after the price was contractually agreed to.  In the Gilbert case, the Court of Appeal deemed that the economic duress created by threatening, expressly or impliedly, that an unwillingness to accept a price increase may result in project delays, was a form of economic duress and that despite an expression of acceptance of the imposed higher pricing, such was unenforceable.

Conclusion

An amended contract is generally enforceable so long as all parties to the contract provided consent to the changes.  In addition to consenting to the changes, historically, all parties must also receive a fresh benefit, meaning some additional legal consideration beyond the initial consideration granted within the original contract, in exchange for agreeing to the changes.  With this said, it appears that the law is currently softening on the requirement of a fresh benefit.