Also known as: fair & equitable · FET
Written by attorneys — see sources below.
A standard of justice applied to contract modifications. The standard requires that changes treat affected parties justly when unanticipated circumstances arise.
Fusion Power agreed to supply turbines to Fairfield Bank at a fixed price. Steel costs then rose sharply after an embargo that neither party foresaw. The parties modified the price upward. The modification satisfies the fair and equitable standard because it responds directly to the unanticipated cost increase.
The SEC first obtained a judgment against Franklin Foundry for securities violations. Farah Fox then sued the same company for damages arising from identical conduct. Fox invoked issue preclusion to establish the violation. The court permitted the use because applying preclusion was fair to the defendant under all the circumstances.
No. The Restatement treats a modification as binding when it is fair and equitable in view of unanticipated circumstances even without new consideration. The modification need only respond to circumstances the parties did not anticipate at formation.