Takeaway
In short, this case holds that parties may mutually end an existing contract and immediately substitute a new one on different terms; once the old contract is truly rescinded, the new mutual promises are supported by consideration.
Louis Schwartzreich signed an August 31, 1917 employment contract to work as a coat-and-wrap designer for Bauman-Basch for twelve months beginning November 22, at $90 per week. Before the employment term began, Schwartzreich received a higher offer from another firm. Bauman-Basch offered to pay him $100 per week if he stayed.
On October 17, the parties signed a second written contract for the same work and term, but at $100 per week. Schwartzreich testified that, when he surrendered his copy of the first contract, Bauman told him it was no longer needed because the new contract took its place. Bauman testified that the old document's signatures were torn off. Schwartzreich was later discharged in December and sued for damages under the October contract.
The defendant argued that the October agreement lacked consideration because Schwartzreich had already promised to perform the same services under the August contract. The jury found for Schwartzreich after being instructed that the new contract was supported by consideration if the parties mutually canceled the old contract before or at the time they signed the new one. The trial judge set aside the verdict and dismissed the complaint for insufficient evidence of cancellation. The Appellate Term reversed and reinstated the verdict, and the Appellate Division affirmed. The Court of Appeals affirmed as well.