## Facts

- Louis Schwartzreich, a clothing designer, and Bauman-Basch, Inc., a coat and wrap manufacturer, signed a written employment contract on August 31, 1917.
- The August contract set employment to begin November 22, 1917, for twelve months, at $90 per week.
- In October 1917, Schwartzreich received an outside offer for higher pay and told Bauman-Basch he intended to leave.
- Bauman-Basch offered $100 per week to retain him; Schwartzreich agreed to stay at that wage.
- On October 17, 1917, the parties executed a second written contract in the same form and for the same term as the August contract, but with salary changed to $100 per week.
- At the time of the October contract, Schwartzreich’s copy of the August contract was surrendered to Bauman-Basch, and there was testimony indicating the earlier contract was no longer needed because the new one replaced it.
- In December 1918, Bauman-Basch discharged Schwartzreich before completion of the term.
- Schwartzreich sued for breach of the October contract, seeking damages measured by the $100 per week salary.

## Issues

1. Whether a new employment contract for the same work and term at a higher wage is unenforceable for lack of consideration under the pre-existing duty rule when an earlier contract already obligates performance.
2. Whether mutual rescission of the first contract and substitution of the second may occur contemporaneously so that the second contract is supported by consideration.
3. Whether the trial court could set aside the jury’s plaintiff’s verdict and dismiss the complaint where evidence permitted a finding that the first contract was mutually cancelled.

## Decision

- The New York Court of Appeals affirmed the judgment reinstating the jury verdict for Schwartzreich.
- The court held the evidence permitted a jury finding that the August contract was mutually rescinded and replaced by the October contract.
- The court ruled it was legally permissible for the parties to terminate the first contract and substitute a new one for the same work and period at a different rate of pay, including doing so at the same time.
- The trial court erred in setting aside the verdict and dismissing the complaint because a factual question on rescission was presented and supported by evidence.

## Legal Principles

- A promise to pay more for performance already required by an existing contract is generally unsupported by consideration (pre-existing duty rule) if the original contract remains in force.
- Parties may, by mutual consent, rescind an existing contract and enter a new contract covering the same subject matter on different terms; the new contract is enforceable if the original contract is validly cancelled.
- Mutual rescission and substitution may be contemporaneous; the controlling inquiry is whether, by words or conduct, the parties mutually agreed the prior contract became null at or before execution of the new one.
- Whether rescission occurred is ordinarily a question of fact for the jury when the evidence supports competing inferences, and a verdict should not be set aside where a reasonable jury could find mutual cancellation.

## Conclusion

The court enforced the higher-wage October agreement because the jury could reasonably find that the parties mutually cancelled the August contract and substituted the October contract, avoiding the pre-existing duty objection and making the discharge a breach of the enforceable new agreement.


Schwartzreich v. Bauman-Basch, Inc., 231 N.Y. 196, 131 N.E. 887 (N.Y. 1921)