ContractsProf Blog

Editor: Myanna Dellinger
University of South Dakota School of Law

Thursday, August 31, 2017

Reminder: To materially modify terms, the other party has to agree

I just taught modification of terms earlier today so this recent case out of Missouri, Andes v. Dickey, Docket Number WD80135 (behind paywall), caught my eye. It involves an agreement regarding a jointly-owned residence between a woman and her daughter, which to me tinges the entire litigation with an extra layer of tragedy over the fact that they ended up in litigation against each other. 

Andes and Dickey bought a house together and reached an agreement with each other (unsurprisingly not involving legal counsel) regarding use of the house, payment for the house, etc. One of the terms of this agreement between Andes and Dickey was that Andes would buy Dickey out through payment of monthly installments of $2,000 until the amount of $66,875.50 was reached (roughly thirty-three months of payments). The parties reduced this agreement to writing and signed it. They then also obtained a line of credit together to make the extensive renovations and repairs that the house turned out to need. 

Andes and Dickey began clashing over the terms of their joint ownership of the house. Andes threatened to terminate Dickey's access to the line of credit and then suggested that Dickey take the remaining balance in the line of credit (around $70,000) as satisfaction of the buy-out provision, giving Andes the house. Dickey rejected Andes's proposal that she accept the line of credit as buy-out. Instead, worried that Andes would cut off her access to the line of credit, she withdrew the remaining balance of the line of credit and deposited it in a different account that she claimed she intended should still be used for renovations. Andes, finding out that Dickey had withdrawn the balance, asserted several times that Dickey should accept the line of credit balance as buy-out under their agreement. Every time, Dickey continued to state that she would not so accept it and that the money should continue to be used to renovate the house. 

This led Andes to sue, claiming that she had bought out Dickey and seeking specific performance that Dickey's interest in the house be transferred to Andes. The trial court found that the buy-out provision had been satisfied and gave Andes the title to the house. Dickey appealed. 

The appeal centers on whether or not the original buy-out provision was effectively modified so that the line-of-credit balance would satisfy it. This was not a situation where Andes simply tried to accelerate payment. Both Andes and Dickey were obligors under the line of credit. So, in giving Dickey the line-of-credit balance, Andes was not paying funds from herself to Dickey, as the parties had agreed. Instead, Andes was promising to assume sole liability for the line of credit. This, the court found, was materially different from the terms the parties had reached and so Dickey needed to accept the new terms. Both parties agreed that Dickey had consistently rejected Andes's proposals regarding the line of credit, so there was no acceptance, so there was no effective modification. No buy-out happened and the original buy-out terms remained in effect.  

At any rate, the new supposed deal regarding the line of credit concerned real estate and so should have been in writing, which it was not. 

http://lawprofessors.typepad.com/contractsprof_blog/2017/08/reminder-to-materially-modify-terms-the-other-party-has-to-agree.html

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