Additional Thoughts on Pre-Existing Duty Rule and Third Parties

Our last post, concerning PDI Group, Inc. v. The Desco Group, Inc., involved the application of the pre-existing duty rule to a circumstance where the pre-existing duty was under a contract with a third party. In that post it was noted that additional detail of the context would be helpful. Let us expand by illustration.

As previously noted, the function performed by the pre-existing duty rule is to make unenforceable a promise made in circumstances indicating the promise was not voluntary, without the need for separately proving the generally applicable elements of duress. When the pre-existing duty is owed to a third party, the circumstance may not suggest the same level of lack of volition. We can, however, provide an illustration of a context where a lack of volition may be present:

With three parties, the language can be confusing. So let’s say:

Current Contract: Promisor P promises to render performance to O, with putative consideration being performance C. It is alleged that O was already obligated under an old contract (“Old Contract”) between O and TP to render performance C.

An argument that P’s promise to render performance to O was not really voluntary (and was not supported by consideration) is supported by a conclusion P was an intended beneficiary of O’s duties under the Old Contract. So, one may want to consider that issue.