Contract – Consideration

It is commonly accepted within the English Contract Law that the models of contractual fairness must exist in contractual disputes. Essential to these models is the doctrine of consideration and the principles that comes under the doctrine of consideration such as laws derived from both Williams v Roffey (1990) and Stilk v Myrick (1809).

Starting with the development of the doctrine of consideration and the principles developed in Williams v Roffey and Stilk v Myrick, I will discuss why these aspects seem inconsistent and incongruent with the common sense but at the same why they must be maintained to endorse the contractual fairness. This essay will analyse the implications of Williams v Roffey on the law concerning the performance of duty which a promisee is already obliged to perform. The doctrine of consideration has developed over several years.

At first, the doctrine of consideration was merely based on the grounds of moral obligation. However, this doctrine really developed later on and in the year 1842 in the case of Thomas v Thomas, consideration was described as ‘Something which is of some value in the eye of the law, moving from the plaintiff; it may be some detriment to the plaintiff or some benefit to the defendant, but at all events it must be moving from the plaintiff’. [ S. Salzedo, P. Brunner & M. Ottley, 2004.p 48 ].

This standard interpretation of the doctrine of consideration is supported by the idea of ‘reciprocity’ which was considered and further developed in the case of Currie v Misa (1875), where the judge gave a definition of the traditional view as, ‘A valuable consideration in the sense of the law, may consist either in some right, interest, profit or benefit accruing to one party or some forbearance, detriment, loss or responsibility, given, suffered or undertaken by the other’. [R. Stone, 2002.p 76].

This definition suggests that a promisee can enforce any promise only when the promisee has promised to give something in return for the promise. Many previous cases have been decided upon this basis but a clear change of attitude towards the doctrine of consideration is noticeable when we look at the decision made in Williams v Roffey, which added another perspective to the orthodox definition of consideration and not only this but it went as far as to question its importance in the modern contract law.

This essay will now revolve to analyse the implications of Williams v Roffey on the law concerning the performance of duty that a promisee is already obliged to perform. Until recently it was not possible to create two contracts by giving the same consideration again. Originally this principle was established in the case of Stilk v Myrick. In Stilk v Myrick, the sailors promised to work and in return were promised to be paid ? 5 per month. Unfortunately, the group of 11 sailors was reduced to 9 after two of the sailors deserted them in the Baltic.

Rest of the sailors refused to work and pressurised the captain to increase their wages. Due to pressure from the sailors, the captain agreed to split the wages of the 2 sailors among 9 sailors, equally, if they made it back to the destination. Later, the captain refused to pay them extra. The sailors sued the captain but lost. The court held that the sailors were not entitled to extra money which they were promised because at the start of the journey they had promised the captain that they would do the work in return for ? 5 per month.

It was held that the sailors could not later give the same promise again to the captain as a consideration for a new contract. This case laid out a simple rule that when an existing contractual duty owed to the promissor is performed, it does not amount to consideration. Which means that the performance by promisee of an existing contractual duty, which he already owes to the promissor is no consideration for a promise made by promissor to him? This case was an authority for the above proposition for almost two centuries until the recent case of Williams v Roffey, when the orthodox rule laid by Stilk v Myrick was reconsidered.

In William v Roffey , the defendant came into a contract to refurbish a block of flats. The building contractors sub-contracted the carpentry work to Williams. The sub-contract was accepted on a price of ? 20,000. Soon after starting the carpentry work, the claimant found that he was in financial difficulties since he had priced the job too low. He told the defendant that he would not be able to finish the job if he were not paid more. The defendants agreed to pay the claimant an extra ? 10,300 if he carried on and completed the carpentry work as agreed before. The claimant carried on and completed the work.

However after completing the work, the claimant was not paid the extra money promised and he sued for the breach of contract. It was held that the defendants were in a breach of contract and had to pay the extra ? 10,300 which they had agreed to pay. It is noticeable that Williams v Roffey has challenged the authority of Stilk v Myrick, because the doctrine relating to the performance of duty that promisee is already obliged to do, set by Stilk v Myrick has not been followed and on the very surface of it, it seems like an inconsistency in the contract law. The reasons for this particular decision was elaborated by Glidewell L.

J as, ‘(1) if A has entered into a contract with B to do work or to supply work or services to B in return for payment by B and (2)at some stage before A has completely performed his obligations under the contract B has reason to doubt whether A will, or will be able to complete his side of the bargain and (3) B then promises A an additional payment for A to complete his obligations on time and (4) as a result of giving his promise B obtains a benefit or obviates a disbenefit, and (5) B’s promise is not given as a result of economic duress or fraud on the part of A, and(6) the benefit to B is capable of being consideration for B’s promise, so that the promise will be binding. ’

[Ewan McKendrick, 2003] By considering the above statement, a question that comes to mind is what exactly amounts to practical benefit and whether it is sufficient consideration? In order to answer this question, one shall analyse each point stated by Glidewell L. J.

In my personal view in the case of Williams v Roffey, there was certainly a practical benefit available because firstly, the claimant despite having financial difficulties continued working under a new promise. Secondly, claimant by agreeing to finish the job in return for extra payment saved the defendants from paying large amounts of damages to the owner of the flats. Not only this but also they enabled the defendants to avoid the trouble of searching for another carpenter. By considering the above arguments it is noticeable that the defendant clearly had a practical benefit. This practical benefit also amounts to surely sufficient might not adequate consideration. But then, it must not be overlooked that there were clearly practical benefits to the Captain as well in Stilk v Myrick.

Ensuring that the ship reached home short-handed was clearly a practical benefit in Stilk v Myrick too. On the other hand this is also factual that the claimant in Williams v Roffey was simply completing his terms of contract and was not doing any favour to the defendant. So again it can be argued that having to look for other carpenters was not a practical benefit to the defendants because they already had bought that benefit. On the very face of it, the decision made in William v Roffey seems inconsistent due to the fact that Williams v Roffey required consideration in the shape of practical benefit and placed new standards to what is called practical benefit. But, according to the words of Glidewell L. J.

in the leading judgement of the case; ‘If it be objected that the propositions above contravene the principle in Stilk v Myrick, I answer that in my view they do not: they refine and limit the application of that principle, but they leave the principle unscathed.. ’ [H. G. Beale, W. D. Bishop, M. P. Furmston, 2008, p 113].

By analysing closely it is recognised that decision made by the judges in William v Roffey did not abolish the old law as the court did consider the case of Stilk v Myrick and did not deny that an agreement cannot be enforced without consideration, but the court basically expanded the concept of consideration. According to (E. Maclntyre, 2009), ‘in Williams v Roffey the court of appeal claimed to have refined Stilk v Myrick, rather than to have over ruled it. The question still remains, whether this different approach taken by the Court of Appeal was a fair one or not?

In order to give appropriate answer, this essay will now explore other relevant cases that dealt with the subject of consideration. In relation to Stilk v Myrick, the first case that comes to mind is of Hartley v Ponsonby (1857) which had very similar facts. In this case almost half of the crew was deserted. A crew of 36 was reduced to 19, and under those circumstances the court enforced the extra payment promised by the captain to the crew, because the journey with such a small crew was considered dangerous and the court held that the crew is entitled to extra payment because the crew had exceeded their original duty. This case clearly shows that the courts do not apply the principle laid out in Stilk v Myrick harshly.

An extra danger in Hartley v Ponsonby was used to justify the different decision made in Stilk v Myrick. Each sailor left on the ship had to do the work of two men, which was clearly more than what they had agreed to do originally. Therefore because the voyage was dangerous and crew exceeded their original duty, amounted to a fresh consideration of the captain’s promise. It can be seen from this case that a promise to pay more was also enforceable before Williams v Roffey but only if there was consideration available in the form of legal benefit and not a practical benefit. So, the real difference that amounted in Williams v Roffey was that the court of appeal justified practical benefit as sufficient consideration as well.

Another very relevant case for this discussion is Re Selectmove (1994), in which the Inland Revenue tried to windup the company for not paying their debts. In July (1991), the company offered to pay Inland Revenue all future liability as and when it became due. It was suggested that the company should pay of past tax in instalments of ? 1000 per month. In October (1991), at which time the company had only paid 1 months tax and insurance as it became due, the Inland Revenue asked for the full outstanding amount. After that date, the payments in relation to the company’s offer were paid late. The Inland Revenue then sought to windup the company.

The Inland Revenue claimed that it could not be held as an agreement due to the reason that Selectmove has not offered any consideration. The court decided the case in favour of Inland Revenue due to the reason that Inland Revenue never signified that they accepted the proposals of the company. Secondly as claimed by Inland Revenue, there was no consideration. One can again argue that it can be clearly seen in this case that Court of Appeal has clearly abandoned the decision made in Williams v Roffey by relating this case with Foakes v Beer (1884). In both cases, Foakes v Beer (1884) and Re Selectmove (1994), no practical benefit can be identified and thus no consideration was given.

But it must not be overlooked what was said by Glidewell L. J earlier in elaboration of the decision of William v Roffey. The decision made in Williams v Roffey was not followed because the judge in Re Selectmove (1994) pointed out that Williams v Roffey case was for supplying of goods and services, whereas this case was about an obligation to pay money. In order to conclude, in the light of some of the relevant cases discussed above it can be seen that an uncertainty with regards to what is assumed to be practical benefit is clearly incongruent with the commercial practice. Williams v Roffey has placed new limits as what is termed practical benefit.

In Hartley v Ponsonby (1857), the situation was quite much the same as in Stilk v Myrick (1809), but the court held that the sailors were in a right to enforce the promise of extra money. Therefore in order to answer the question that whether this different approach taken by the Court of Appeal in Williams v Roffey was a fair one or not, I would say that Williams v Roffey can be taken as a part of the adjustment and extension to the orthodox doctrine of consideration laid out in Stilk v Myrick. Even though it seems that Williams v Roffey overruled Stilk v Myrick, it is also evident that Stilk v Myrick still remains a good law. The court has given a wider meaning of consideration.

As mentioned above, there was a practical benefit to the captain in Stilk v Myrick as well, but the major point of difference among both cases is that no pressure was put on the defendant in Williams v Roffey to make an offer of extra payment, whereas in Stilk v Myrick sailors pressurised the captain to increase their wages. This also directs us to consider the concept of economic duress. There was no such thing as economic duress when the decision for Stilk v Myrick was made, and it’s briefly discussed by (E. Maclntyre, 2009 p. 50) that if there had been, it seems likely that the contract would have been voidable. Thus, if Stilk v Myrick was decided today, it is quite likely that the decision would have been in the favour of the Captain and not the sailors because the sailors pushed the captain into an agreement whereas in Williams v Roffey the fact was that the defendants offered the extra payment in order to save themselves from paying huge amount of damages.

Therefore, I strongly believe that decision in William v Roffey should be welcomed as despite of its problems, it is a good progress and modification on the concept of performance of existing duty. Bibliography 1)E. Maclntyre, 2009. Essentials of Business Law. 2nd Ed. Pearson Education Limited, GB 2)H. G. Beale, W. D. Bishop, & M. P. Furmston, 2008. Contract cases & materials. 5th Ed. Oxford University Press 3)Oughton. D and Davis. M, 2000. Source Book on Contract Law. 2nd Ed. British Library Cataloguing: GB 4)R. Stone, 2002. The Modern Law of Contract, 5th Ed. Cavendish Publishing Limited. GB 5)S. Salzedo, P. Brunner & M. Ottley, 2004. Briefcase on CONTRACT LAW. 4th Ed. Cavendish Publishing Limited. GB.