Centre City Properties, Inc, owns and manages a warehouse. DIY Home Improvement Stores agrees to lease the warehouse for six years. Under the lease, DIY is obligated to pay all of the utility costs. Two years into the term, DIY asks Centre City to
modify the lease to provide that the utility costs will be split equally between them. The landlord agrees, but later decides it does not want to share the costs and refuses to pay. Is Centre City bound to its agreement to share the utility costs? Why or why not?
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Centre City Properties, Inc., the landlord, is not bound to its agreement to share utility costs with DIY Home Improvement Stores, its tenant. Under the preexisting duty rule, a promise to do what one already has a legal duty to do does not constitute legally sufficient consideration. The preexisting legal duty may arise out of a previous contract. And if a party is already bound by contract to perform a certain duty, that duty cannot serve as consideration for a second contract. Thus, a modification of a contract requires consideration to be binding.
In this question, the agreement to split the utility costs was a modification of the original terms of the parties' lease. Centre City is not bound because the landlord did not receive any consideration in exchange for the agreement to split the utility costs.
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