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3. Contract Modification under Article 2 Generally A modification to a contract falling within Article 2 requires no consideration to be binding, provided the modification was made in good faith . Indeed, the good-faith requirement seems to be the only significant limitation that Article 2 places on the parties’ ability to modify a contract. A modification is, in every relevant sense, a separate contract between the parties, as to which the UCC dispenses with the consideration requirement. To that end, one party alone cannot modify a contract; both parties must agree to it. [U.C.C. § 2-209(1) (1951); Roth Steel Prods. v. Sharon Steel Corp. , 705 F.2d 134 (6th Cir. 1983); 2A Anderson U.C.C. §§ 2- 209:22, 2-209:34 (3d. ed.), Westlaw (database updated Dec. 2020).] a. Good-Faith Requirement for Contract Modification Though a contract modification under Article 2 requires no consideration to be binding, the modification must be made in good faith. Many courts follow a two-part test to determine whether a given modification is in good faith, asking whether: (1) the modification is consistent with reasonable commercial standards of fair dealing in the relevant trade or industry and (2) the parties sought the modification out of a sincere and honest desire to compensate for evolving commercial realities or commercial exigencies. Bad faith generally involves extortion, overreaching, exploiting a counterparty’s necessity, or modification without a legitimate commercial reason. One common example of bad faith is threatening to breach the contract if the counterparty refuses to agree to a modification. On the other hand, one party’s mere insistence on availing itself of its contractual rights is not bad faith. Of course, the general definition of good faith, discussed above, remains relevant here. [ See U.C.C. § 2-209(1), cmt. 1 (1951); Eighth North-Val, Inc. v. William L. Parkinson, D.D.S., P.C. Pension Tr. , 773 A.2d 1248 (Pa. Super. Ct. 2001); 2A Anderson U.C.C. §§ 2-209:63, 2- 209:67 (3d. ed.), Westlaw (database updated Dec. 2020); Good Faith, supra .] Note : If a party obtains a contract modification by threatening to breach the contract or employing similar coercive conduct, some courts apply a presumption of bad faith. Here, the court will find bad faith unless the party seeking to enforce the modification comes forward with sufficient evidence to show that it in fact sought the modification in good faith. [ See, e.g., Roth Steel Prods. v. Sharon Steel Corp. , 705 F.2d 134 (6th Cir. 1983).] Example : A developer contracted with a lumberjack to purchase trees from the lumberjack’s surplus stock. The contract provided that the developer would purchase at least 44 percent of the lumberjack’s stock at a price of $12,000. Purchase of any of the lumberjack’s remaining stock was at the developer’s option. The developer indeed bought 44 percent of the lumberjack’s surplus stock at the agreed price. Having done so, the developer threatened not to purchase more of the stock, unless the lumberjack agreed to sell that stock for a
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