Contract rules policing contractual modification are another response to the heightened risk of extortion in specialized environments. For example, the common-law preexisting duty rule can be usefully contrasted with the more permissive regulation of contractual modification under the Uniform Commercial Code. The preexisting duty rule denies enforcement of a renegotiation or contractual modification where an obligor agrees merely to do that which he is already contractually obligated to do. The rule is primarily designed to reduce the incidence of extortionate modification in construction, employment, and other specialized contractual relationships. …

The preexisting duty rule, however, often fails accurately to mirror the underlying bad faith behavior. First, the rule discourages cost reducing negotiations in addition to threats. Moreover, the obligor satisfies the rule by assuming any additional obligations whether or not the “additional” duties are themselves part of the strategic maneuver. The Code [U.C.C. 2–209(1)] abandoned this ill-fitting rule of thumb and instead applies a general good faith standard. … Because this standard is substantially more difficult to enforce, however, the Code may not deter extortionate renegotiation as effectively as did the common law. Nonetheless, if parties generally execute contracts for the sale of goods in the context of a well-developed market for substitutes, the costs saved through legitimate renegotiations will exceed the increased enforcement costs of policing bad faith modification.