Consideration – Part 2

In our last Contract Law blog (Consideration – Part 1) we looked at estoppel and how it relates to the general rule of consideration. We ended by saying that it was not applicable to the case of Williams v Roffey [1991].

In that case, Mr Williams had been promised extra money to complete work. He was under an existing obligation to complete that work. From the case of Stilk v Myrick (1809) we know that the performance of an existing contractual obligation to a party is not good consideration for a promise, from that party, to pay extra. In line with the principle of Foakes v Beer (1884) only if there is some extra work/benefit undertaken or given can the promise to pay more be enforceable, as in Hartley v Ponsonby [1857]. So far this accords with the same principles of Foakes v Beer and Pinnel’s Case (1602). 

Students may know that in the case of Stilk v Myrick there were two law reports. One report from Campbell, who went on to be Lord Chancellor. The other from Mr Espinasse, who was notoriously poor at law reporting. Mr Campbell provided the reasoning of the case based on a failure of consideration, which is the interpretation we accept. Mr Espinasse based the case on economic duress, a question of policy. Given his bad reputation for getting it wrong we may doubt this, however Mr Espinasse was junior counsel in the case so it may be more reliable than other reports he drafted.

Any good law student given the facts of Williams v Roffey Bros would have made a reasonable conclusion that the claim by Mr Williams was doomed to failure. However, not for Glidewell LJ ( a lesson never to give a 100% conclusive answer to a problem). Perhaps echoing Lord Blackburn’s view in Foakes v Beer sometimes there is a practical benefit derived from a promise. Foakes v Beer was not referred to in this case (Re Selectmove [1995]) and the criteria is limited to certain types of contracts so as to leave intact the principle of that case.

Glidewell LJ set out that if:

1. There is a contract for goods or services between A and B (so note it does not cover part payment of debts)
2. And A cannot perform as promised
3. And B agrees to pay more for the performance
4. From which B obtains a benefit, or obviates a disbenefit
5. And there is no evidence of fraud or duress by A to obtain the promise from B
6. Then this can amount to consideration for that promise from B

This is a step by step process and many students fail to deal with the stages and leap to the most contentious elements. This will mean the mark potential is reduced by not showing how the conclusion has been reached. Some students see a practical benefit from a promise, even one to take a lesser sum in settlement of a debt and leap to this being Williams v Roffey.

The first three elements need to be applied to any problem question, this will ensure it is a case to which Williams v Roffey applies. Then deal, with clear application to the facts whether there has been a ‘practical’ benefit to B, or avoidance of a disbenefit. Many students fail to apply the legal test to the facts and just assert, ‘there is a practical benefit’ without pointing out what it is. This will reduce the marks potential.

Then, and only then, deal with the issue of fraud or duress. This means you really should revise economic duress with this topic. It is very closely connected. You need to be able to apply the test to find economic duress, reference to cases such as Pao On v Lau Yiu Long (1980) or Atlas Express v Kafco [1989]. You may find it useful to see the discussion on this issue in R v. Attorney-General for England and Wales[2003]. This will also require good application to the facts to establish if there has been duress.

It seems that if there has been duress then there is no consideration, and the contract is therefore void for no consideration. It may alternatively been seen that the first four elements of the test establish that there could be consideration and a contract but that this contract is voidable for duress, as is the normal result of a finding of duress. This is a point that is unlikely to alter your conclusion but is an interesting point to make which may show an examiner that you have thought more deeply about the nature of the case.

It is an interesting issue and one which sometimes confuses students. I hope this summary, when read with the earlier blog on consideration, will go some way to remove any confusion.

This blog post was written by Anne Street, Law Lecturer at SOAS, University of London. Anne regularly teaches on the Laws Programme’s Regional Revision courses.