Written by attorneys · grounded in primary & secondary sources — see below
A factual disagreement between contracting parties over the existence or scope of a preexisting legal duty that each party asserts in good faith. The disagreement supplies consideration for a contract modification when the parties compromise their positions rather than one party simply performing an undisputed duty.
Sources & Authorities
How it applies
Common Examples
2
Charter Party Route Dispute
Midnight Maritime and Liberty Coastal entered a charter party requiring transport of cargo on a fixed schedule for a set fee. Rough seas arose during the voyage. Midnight demanded an extra payment to take a longer safer route and Liberty agreed orally. Midnight completed the voyage by the alternate route. Because the parties genuinely disputed whether the original duty required the safer route, the oral modification was supported by consideration and Liberty must pay the additional sum.
Employment Bonus Modification
Riverside General Hospital employed Dr. Mei Lin under a contract requiring her to participate in the on-call rotation and provide emergency care when on call. During a staffing shortage the administrator promised a $40,000 bonus if she would take all emergency cases that month. Dr. Lin handled every case. Because her preexisting duty was clear and not subject to honest dispute, the promise of a bonus lacked consideration and the hospital need not pay.
Put it into practice
Test Yourself
10
Practice Questions5
· 3 primary sources
Select any source to read its text and confirm it supports the definition.
Statutes
Uniform Acts
Restatements
Course Outlines
Dyer v. National By-Products, Inc.380 N.W.2d 732 (1986)
Common questions
Frequently Asked
4
When does an honest dispute about a preexisting duty supply consideration for a contract modification?+
An honest dispute supplies consideration when the parties genuinely disagree in good faith about the scope or existence of the duty and each compromises its position. The Restatement rule treats the compromise itself as the bargained-for exchange. A mere assertion of dispute without factual basis does not qualify.
Supporting sources
Does a party's later realization that its position was weak destroy the honest-dispute exception?+
No. The bargain is judged by the circumstances at the time of the modification. Even if the claim later proves invalid, an honest dispute at the time of settlement supplies consideration. Courts do not require a showing that the disputed claim would have succeeded.
Supporting sources
What distinguishes an honest dispute from a mere pretext to extract more money?+
An honest dispute requires a factual disagreement asserted in good faith. A unilateral demand for extra payment accompanied by only cosmetic changes to performance that do not differ meaningfully from the original duty is treated as a pretense of bargain and supplies no consideration.
Supporting sources
Can an honest dispute arise after contract formation because of changed circumstances?+
Yes. When unforeseen conditions create a genuine disagreement about what the original duty requires, the parties may modify the contract and the modification will be supported by consideration. The key is whether the dispute is bona fide rather than manufactured to renegotiate price.
Supporting sources
Professional ResponsibilitySafekeeping funds and other property · Disputed claimsMPREFoundational