Osgoode Hall Law Journal

Document Type



The law of contract modifications poses an analytical paradox: Modifications should be presumptively invalid because they may encourage extortionary, coercive, opportunistic or monopolistic behaviour. Modifications should be presumptively valid because they represent the parties' assessment of their own best interests. A summary of the case-law reveals theoretical difficulties in the tests of enforceability. The authors use an economic framework of analysis in which they argue that the law of contract modification may be used to minimize the costs of contracting. Dynamic efficiency considerations argue against enforcement of all modifications although static efficiency considerations point in the opposite direction. The potential for opportunistic behaviour and "moral hazard" problems suggest some variables that are relevant to formulating legal rules which will aid in reducing the long-run costs of contracting.