The Michigan Court of Appeals recently decided in Dunkel v. Signal Medical Corp., whether extensions for the repayment of promissory notes that were agreed upon by the parties were modifications to the original contracts. Because the Court concluded that the extensions were modifications of the promissory notes, it held that the extensions must either be in writing or supported by consideration in order to be binding. Mary Clare Dunkel v. Signal Medical Corporation, Docket No. 339357 (June 19, 2018).
https://law.justia.com/cases/michigan/court-of-appeals-unpublished/2018/339357.html
The Appeals Court agreed with the trial court that the language in the promissory notes stating that payments “may be extended from time to time without in any way affecting the liability of the makers and endorses hereof,” merely anticipates future modifications by the parties. The language does not state that extensions are anything other than modifications. Since the extensions were deemed to be modifications, they are subject to MCL 566.1, which requires modifications to either be in writing or to be supported by consideration.
There was no dispute that the modifications were not in writing, leaving the question to be whether the modifications were supported by consideration. The Appeals Court found that the extensions were supported by consideration. As a result of the extensions, plaintiff received the benefit of collecting further interest on her loan and took the burden of waiting additional time before she would be repaid. Defendant received the benefit of using the loan for a longer amount of time, but assumed the duty of paying more interest. These duties were not preexisting under the original notes, thus qualifying as consideration and making the extensions enforceable. Because the trial court had erroneously held that the modifications were not enforceable, the Appeals Court reversed the trial court’s decision.
This article was written by Ryan Hansen, Law Clerk
