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CONTRACT MODIFICATION

Modification

A modification must satisfy the elements of a contract: a meeting of the minds supported by
consideration. Hathaway v. General Mills, Inc., 711 S.W.2d 227, 228-29 (Tex.1986); Rhoads
Drilling Co. v. Allred, 123 Tex. 229, 70 S.W.2d 576, 583 (1934); Walden v. Affiliated Computer
Servs., 97 S.W.3d 303, 314-15 (Tex.App.-Houston [14th Dist.] 2003, pet. denied).

When parties agree to extend payment of a note, a new contract arises between the parties. Ringer v.
Bobby D. Associates Ohio General Partnership, No. 05-01-00004-CV, 2002 WL 15898, at *2-3 (Tex.App.
-Dallas January 8, 2002, pet. denied) (not designated for publication).

CONTRACT MODIFICATION AS AN AFFIRMATIVE DEFENSE

Contract modification is an affirmative defense. Arthur J. Gallagher & Co. v. Dieterich, 270 S.W.
3d 695, 701 (Tex. App.-Dallas 2008, no pet.). Whether a contract is modified depends on the
parties' intentions and is a question of fact, and the burden of proving modification rests on the
party asserting the modification. Id. at 702. A contract modification independently must satisfy
the traditional requirements of a contract—there must be a meeting of the minds supported by
consideration. Id.

CONTRACT MODIFICATION CASE LAW FROM HOUSTON COURTS OF
APPEALS

Boondoggles Corp. v. Yancey  (Tex.App.– Houston [1st Dist.] Aug. 3, 2006)(by Radack)
[
employment law, employment contract, breach of contract, BoC, restaurant manager, modification of
contract,
contract construction, ambiguous contract, bonus pay dispute, calculation of damages,
remittitur, res judicata, no identity of claims, parties, different capacities, attorney fees, disclosure of
witnesses, discovery not filed, CoD)
AFFIRM TC JUDGMENT: Opinion by
Chief Justice Radack
Before Chief Justice Radack, Justices Taft and Nuchia
01-05-00185-CV Boondoggles Corporation v. Johnathan Yancey
Appeal from 234th District Court of Harris County (
Hon. Reece Rondon)
(“Having concluded that the trial court properly found that Boondoggles never paid Yancey the
bonus
required by his contract of employment and that Yancey demanded payment before filing this action, the
trial court correctly ruled, in conclusion of law seven, that Yancey’’s right to collect was due.”)  
Alternative Challenge to Conclusion that Contract Not Ambiguous

In its fifth point of error, Boondoggles raises an alternative challenge to the trial court’s ninth conclusion
of law, which states that Yancey’s employment contract was not ambiguous. Boondoggles argues that
the meaning of the term “net sales” rendered Yancey’s employment contract ambiguous and that we
must, therefore, remand the cause for a new trial to determine the meaning of the term.

We review the trial court’s conclusion of
no ambiguity de novo. Heal, 917 S.W.2d at 9; see MJR Corp. v.
B&B Vending Co., 760 S.W.2d 4, 10 (Tex. App.—Dallas 1988, writ denied). A court may analyze a
contract for ambiguity even when, as here, neither party has raised the issue in its pleadings. See Sage
Street Assocs. v. Northdale Constr. Co., 863 S.W.2d 438, 445 (Tex. 1993); Sun Oil Co. v. Madeley, 626
S.W.2d 726, 731-32 (Tex. 1981); City of Pinehurst, 432 S.W.2d at 518–19.

Whether
a contract is ambiguous is a question that the court decides as a matter of law by examining
the contract as a whole in light of the circumstances present when it was executed. J.M Davidson, Inc. v.
Webster, 128 S.W.3d 223, 229 (Tex. 2003); Lenape Resources Corp. v. Tenn. Gas Pipeline Co., 925 S.
W.2d 565, 574 (Tex. 1996). If, after applying the pertinent rules of construction to the face of the
contract, the court concludes that the contract is subject to two or more reasonable interpretations, the
contract is ambiguous. See Universal C.I.T. Credit Corp. v. Daniel, 243 S.W.2d 154, 157 (Tex. 1951);
see also JM Davidson, Inc., 128 S.W.3d at 229 (concluding that arbitration agreement ambiguous
because court could not determine from face of agreement whether clause affording employer unilateral
right to abolish or modify “personnel policies” applied to arbitration agreement itself so that it, too, was a
“personnel policy”). A contract is not ambiguous, however, simply because the parties offer conflicting
interpretations of its terms. Am. Mfrs. Mut. Ins. Co. v. Schafer, 124 S.W.3d 154, 157 (Tex. 2003); Lopez,
22 S.W.3d at 861; Columbia Gas Transmission Corp. v. New Ulm Gas, Ltd., 940 S.W.2d 587, 589 (Tex.
1996). An ambiguity arises only if both interpretations are reasonable. Columbia Gas Transmission
Corp., 940 S.W.2d at 589 (emphasis in original).

Settled law recognizes the trial court’s authority to hear and consider extrinsic evidence of the
circumstances surrounding the formation and execution of the contract and to apply the rules of contract
construction when the parties to a contract offer competing interpretations. See Columbia Gas
Transmission Corp., 940 S.W.2d at 591; Sun Oil Co., 626 S.W.2d at 731-32; City of Pinehurst, 432 S.W.
2d at 518-19. The extrinsic evidence offered to the court does not necessarily create a triable issue of
fact concerning the parties’ intent in forming the contract. See Columbia Gas Transmission Corp., 940 S.
W.2d at 592 (holding that extrinsic evidence of circumstances surrounding execution of contract did not
give rise to triable issue of fact regarding parties’ intent). Extrinsic evidence is admissible to clarify,
explain, or give meaning to terms of a contract that are facially incomplete, provided the evidence does
not attempt to provide essential terms or vary or contradict other terms of the contract that are
unambiguous, complete, and final. See Tex. Builders v. Keller, 928 S.W.2d 479, 481 (Tex. 1996);
Warren Bros. v. A.A.A. Pipe Cleaning Co., 601 S.W.2d 436, 438-39 (Tex. Civ. App.—Houston [1st Dist.]
1980, writ ref’d n.r.e.).

Boondoggles’ answer to Yancey’s petition shows that the meaning of the term “net sales” was a crucial
determination in this case. In its answer, Boondoggles disputed Yancey’s method of calculating his
bonus by maintaining that the bonus was a function of net profit and not gross profit. Having disputed
Yancey’s method, Boondoggles had the burden to substantiate its proffered method, not only legally,
but also factually. See, e.g., Lone Star Gas Co. v. McCarthy, 605 S.W.2d 653, 656-57 (Tex. Civ. App.—
Houston [1st Dist.] 1980, writ ref’d n.r.e.) (construing meaning of term propounded by appealing party’s
interpretation under both the substantive law and realities of oil and gas business). The trial court’s
questions to Boondoggles during closing argument clarify that Boondoggles did not meet that burden
and even conceded that it offered “no testimony whatsoever” to support its interpretation. Instead,
Boondoggles relied on its legal contentions that net sales were necessarily a function of net, rather than
gross, profit; and that Yancey had agreed to a condition precedent to performance of the contract that
was consistent with that theory. As addressed above, the latter contention has no merit.

Yancey, on the other hand, relied on three types of extrinsic evidence to clarify, explain, and
demonstrate that the term “net sales” meant sales after taxes, as follows: common usage of the term
with that meaning by the corporation, State of Texas records used to establish sales taxes that
Boondoggles was obligated to pay, and financial statements prepared for Boondoggles by an
independent accounting firm. See Tex. Builders, 928 S.W.2d at 481; Warren Bros., 601 S.W.2d at 438-
39. The trial court agreed with Yancey, and, as we held above, the evidence was both legally and
factually sufficient to support the trial court’s finding. Because Yancey thus met his burden by clarifying,
explaining, and giving meaning to the disputed term and did not attempt to vary or contradict the
otherwise unambiguous terms of his contract, the trial court did not err by stating, in its ninth conclusion
of law, that the employment contract was unambiguous. See Tex. Builders, 928 S.W.2d at 481; Warren
Bros., 601 S.W.2d at 438-39. We overrule Boondoggles’ fifth point of error.


Perkins v. Ulrich (Tex.App.- Houston [14th Dist.] Apr. 24, 2007)(Yates)
(
employment at will, employee accepted change in compensation policy by continuing to work)
AFFIRMED: Opinion by
Justice Brock Yates
Before Justices Brock Yates, Anderson and Hudson
14-05-00992-CV        Anthony Perkins v. William Ulrich d/b/a Morrison Homes and George Wimpey of
Texas Corp.--Appeal from
215th District Court of Harris County (name of judge not shown on docket)


A modification to a contract need not restate all the essential terms of the original 146 agreement. A
modification alters only those terms of the original agreement to which it refers, leaving intact those
unmentioned portions of the original agreement that are not inconsistent with the modification. See
Boudreaux Civic Ass'n v. Cox, 882 S.W.2d 543, 547-48 (Tex.App.-Houston [1st Dist.] 1994, no writ) ("A
modification to a contract creates a new contract that includes the new, modified provisions and the
unchanged old provisions.") (emphasis added). Thus, if we construe the Repayment Agreement as a
modification, terms not addressed in the Repayment Agreement are supplied by the original Loan
Documents.[5] Because the original Loan Documents supply essential terms missing from the
Repayment Agreement, this construction arguably supports the argument that the
agreement satisfies
the Statute of Frauds.
BACM-2001 San Felipe Road  LP v. Trafalgar Holdings I Ltd 218 S.W.3d 137 (Tex.App.- Houston [14th
Dist.] Jan. 11, 2007)(Opinion by Justice Guzman) (commercial loans, repayment agreement, loan
contract modification agreements,
breach of contract, statute of frauds)
REVERSED AND RENDERED: Opinion by
Justice Guzman
(Before Justices Anderson, Hudson and Guzman)
14-05-00476-CV  BACM-2001 San Felipe Road Limited Partnership Et Al v. Trafalgar Holdings I Ltd Et Al
Appeal from 133rd District Court of Harris County (
Judge Lamar McCorkle)    


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