Lecture 4 – Contract Law Checking to see if other formalities have been complied with: -
Doctrine of Consideration – court is looking for a bargain. One promise in exchange for another. Not the physical act of giving something. Looking for something of economic value. What is it that constitutes economic value? o
(iii) Performance of an existing contractual duty owed to a promisor Can you enforce that promise to do more than contractually obliged. Stilk v. Stilk v. Myrick (1809) Myrick (1809) 2 Camp. 317; 170 ER 1168 – a sailor brought an action for payment of wages for a sea voyage. He is claiming EXTRA money, which was promised to him when two of the ship’s crew c rew deserted. The two deserters’ wages would be shared out between the others. Lord Ellenborough – Sailor not entitled to the money. We’re not sure why because there are two versions of the report of this case. 1809 – independent court reporters reporting on cases, no databases. 1.Campbell report – the reason the sailor was not entitles to the extra money is because there is no consideration and because the sailor was already contractually obliged to sail the ship back to the UK. He offered his labour for first promise of wages. For second promise offering same thing. For Campbell, promise of doing the same thing you were already obliged to do does not = good consideration. 2.Espinasse – he couldn’t claim money on grounds of public policy. Not a good idea to encourage sailor to extort money in the middle of the sea from the captains. He says this is a case of duress and not a case of consideration at all. Nb. REFER TO LECTURES ON DURESS. Problems with having two reports: - Campbell though to be better reporter. But Espinasse was junior counsel on the case as well. - Commonly thought Campbell’s version is better – SEE TREITEL on how to justify Campbell version of this case. Compare: Compare: Hartley v Hartley v Ponsonby (1857) Ponsonby (1857) 7 E & B 872 – sailor claiming wages. Court says he can claim because so many of the sailor’s had deserted it completely changed the nature of the voyage. Offer to provide extra wages was supported with consideration. -
Performance of an existing con duty owed to prom is not good consideration, but if you are doing something considerably different, it is ok. Williams v Roffey Bros & Nicholls (Contractors) Ltd [1991] Ltd [1991] 1 QB 1 (READ THIS CASE) Roffey (def) contract to refurbish a block of flats. They then subcontract some of the work to Williams and they pay Williams by instalments after every flat they complete: payment on piecemeal basis. After nine flats William contact Roffey t o say they might not be able to complete on time – financial problems - Staffing
problems and not pricing the project carefully enough. On this basis Roffey liable to penalty clause under the main contract. This says if Roffey do not deliver flats on time they have to pay main owner of the flat. They decide to pay Williams more money per flat that is completed on time. Roffey fail to pay EXTRA money and Williams sues them. Claim we’re interested in: Where R offey brothers say promise to pay more is not supported by consideration because Williams were only promising to do what they were contractually bound to do anyway. No fresh consideration.
Following Stilk you’d think this extra payment is not enforceable but in this case court found that it was. LJ Glidewell’s judgement (READ): - Proposition 1: A has entered into a contract with B to do work, supply goods or services to B in return for payment – standard contract. - Proposition 2: At some stage before A has completely performed, B has reason to believe that A will not complete. - Proposition 3: B then offers/promises A an additional payment in return for A’s promise to perform on time. - Proposition 4: As a consequence of a promise to pay more, B obtains a practical benefit or obviates a disbenefit. - Proposition 5: B’s promise is not obtained by duress. - Proposition 6: The practical benefit to B is capable of being valid consideration in this case. The basic line is if as a result of the promise to pay more Roffey were getting a practical benefit, that benefit will be sufficient to amount to consideration. That practical benefit is actually a legal benefit – and it is critical that the benefit is not obtained by duress. LJ Glidewell thought the following things would amount to practical benefit: - Williams were continuing to perform the contract. - Roffey didn’t have to got to the expense of hiring anybody else. - Roffey were going to avoid that penalty clause because performance will come in on time. - If you continue on work schedule you can feed in the work to your contractors. Organise workforce - effective. Academics thought that this case meant that the doctrine of consideration had been replaced by this idea of practical benefit. A practical benefit enough to enforce a contract? Trickier than that. If you promise not to enforce legal rights in some way is that good consideration? Most important one: - Part payment of a debt: Is the promise to pay less than what is owed good consideration? o Pinnel’s Case (1602) 5 Co Rep 117a; 77 ER 237: payment of Cole’s debt of 8 pounds and ten shillings. 11 November 1600 – due date. Cole argued that Pinnel had accepted a lesser sum on the 1st October and that should be it. Courts said part payment is not good consideration for the full amoun but two
exceptions: - if you offer to pay less before the due date. - If part payment is made on the due date but you offer something else as well which is of value to the promisee. READ: Foakes v Beer (1884) 9 App Cas 605 – debt claim. Dr. Foakes owes Mrs Beer money. They agree Dr Foakes can pay Mrs Beer by instalments. When the main sum is paid up, Foakes refuses to pay more money says he doesn’t owe anything. Court judgment debt means interest starts to accrue on the debt. He owed he more than the main sum. Is that extra bit enforceable? Judge: part payment of a debt is not good consideration. So Dr Foakes had to pay the extra. Problem: Foakes and Beer is HOL in 1884. Williams and Roffey - CoA in 1991. In Fowakes and Beer what was argued was Mrs Beer was advantaged by the fact that Dr Foakes had paid the debt off, and the courts said no part payment not good consideration. Where does that leave W and R: If you have practical benefit with thing offered – should be enough. Contradiction and CoA is later than HoA. And Foakes and Beer was not even cited in W and R. Conflicting authority.
What you’d like to do is argue Beer had a practical benefit by having debt paid off early. But you can’t. How can you reconcile both cases? In Re Selectmove Ltd [1995] 1 WLR 474. – debt claim. Does W v R apply to part payment of debt cases? LJ Peter Gibson: impressed by W v R argument, but bound by HoL decision so the position appears that W v R applies to contracts for goods and services and Foakes v Beer applies to debt. CAVEATS: - this debate is only applies when you’re offering performance of something you promised to do. Either performance of an existing contractual duty generally or performance of the debt. It doesn’t apply outside that remit and following Selectmove, it seems that the whole practical benefit has been really constrained to goods and services only. Can’t apply practical benefit in all instances. WRONG. South Caribbean Trading Ltd v Trafigura Beheer BV [2005] 1 Lloyds Rep 128 – filter thorugh to discussion on performance of exiting duty. Coleman first instance rejected W v R. This is obiter partly due to the fact that he is first instance. – Rubbish because Glidewell relied on reasoning in Pao On to reach practical benefit reasoning here. What Coleman said Pao On is a situation, which involves three parties. That tri-partite relationship between two parties that agree not to sell shares and third part is the company. Benefits were important in that case. W v R has only two people – so cannot compare the two. Therefore wrongly decided, get rid of it. Eng Wales position: W v R – goods and services. F v B – debt. But W v R has been doubted by a good judge so there is flack for this decision, which is getting squashed.
Musumeci v Winadell Pty Ltd (1994) 34 NSWLR 723 (Supreme Court, New South Wales, Australia) READ. In Mc Kendrick. Part payment of a devt. In this case judge appled W v R to debt. Australian so not the law here. Judge reformulates six points of Glidewell’s to represent what he thought was the situation. Point 4 and 5: not only are you looking for a prac ben, you are also looking at the calculation of what that benefit means to you. What cost that you would avoid by paying this extra money/paying early?… and you have to be avoiding a disbeneift as well as getting a benefit. Different to Glidewell’s case. In Aus, W v R been extended, here contracted. For our purposes: think where you are in this debate. What do you think of Glidewell’s judgment? Can you reconcile? Forebearance to sue. Can a promise not to sue somebody amount to consideration? YES, in two situations: - it is good consideration (not to take it forward) if I agree that I owe you money but you agree not to pursue it. - Cook v Wright (1861) 1 B & S 559 - READ - Wade v Simeon (1846) 2 CB 548 Doctrine of Estoppel – developed through equity not common law. If the only thing is change the contract terms, is that change enforceable? In this situation it is unfair to say such agreements are unenforceable. Particularly in debt cases – there would be no consideration in such cases. Promissory estoppel is a way courts have devised how to get around variations in contracts usually in debt claims. The court assists the innocent party who though that the contract terms had been varied in their favour. Nb. Promissory estoppel - is a defence to an action for breach of contract. Not a cause of action in its own right. Can’t force you to pay less, but can resist action to sue for full amount.
Equitable doctrine rising out of court’s desire to ensure fairness/justice in contractual dealings. What are courts doing in promissory estoppel – protecting the bargain struck between two parties. New bargain, which changed the contract and protecting parties’ reliance on that contract. Develops in the following way: Hughes v Metropolitan Railway CO: landlord Hughes lets property to respondent railway co. He gives them six months to carry out repairs on the property. That’s done by official notice. Because official, if repairs are not carried out, lease is forfeited. The railway co asks Hughes if he is interested in buying them out of the lease. They then say while you are thinking about it, we won’t do the repairs. But we are happy to carry out the repairs. Hughes starts to negotiate to buy back the lease, but doesn’t say anything about the deferral of repairs. Negotiations break down on the buy-back. The respondent writed to Hughes and say they will (?) carry out repairs. Unfortunately the six months notice to repair expires on day after letter sent .Hughes serves notice to quit = excercises right of forfeiture. Can he exercise this right under the lease?
Hughes cannot force the railway co out of the premises and technically referred to as the ‘entitlement to relief against forfeiture’. Can’t be forced out.
Nb. HoL: Hughes’ conduct had led the railway co to believe that they didn’t need to carry out repairs. That in fact the second they started negotiation on buy back of lease, time on notice stopped running. Hughes didn’t do anything to say that that was not the case. Hughes led them to believe that time on notice had stopped. According to court, Hughes is estopped from going back and enforcing notice by his conduct. -> If a party by their conduct leads another to believe by their conduct a new state of affairs then that party is stopped by their conduct from enforcing their contract. ESTOPPEL BY CONDUCT – prevented from going back. Hughes is authority for estopped by conduct. *Central London Property Trust v. High Trees House Ltd . [1947] K.B.130 (READ THIS) Concerns the rent on a block of flats. The flats let on a 99-year lease. Annual rent = £2500. In 1940, London was getting bombed, so it was difficult to get tenants for the flats. So HTH asked CLPT if they would reduce rent to help them get tenants. Rent dropped to £1250. Then the war ends, easy to get tenants again and CLPT want to go back to original rent fee. 1. Argue they want to increase rent to original figure 2. Claim back rent. Question for court: Can they insist on the new and back rent? Denning case: invents new law in it. CLPT were going to be able to increase the rent at the end of the war, but not claim arrears during war. Reasoning: There is a case Jordan and Money (promises in the future). Core – Where a person makes a promise and that promise is then relied on by another party, that first party can then not go back on that promise and insist on their contractual rights and claim full contractual rights. Relies on Hughes for this general idea and says that Hughes although estoppel by conduct, can in fact be extended to promissory estoppel. This means that the promise to vary tenancy is binding, but only binding during war period because the was is the reason for the change. For Denning what is important is that both parties were aware of the effect the promise would have. Promissory estoppel – suspendary effect. Basic criteria in High Trees. Subsequently courts have developed in more detail. Six things you have to show for promissory estoppel: 1.There must be a pre-existing relationship between the two parties. What does that mean? Durham City Fancy Goods v Michael Jackson (Fancy Goods) Ltd [1968] 2 QB 839 – liability on bill of exchage What does this pre-exisitng relationship have to be? He says doesn’t have to be contractual, but there must be a personal relationship which can in certain circumstances can give rise to certain liabilities and pnalities. If not contractual, could be relationship set up by a statute. Relatiionships in BoE set up in BoE Act in 1882. In this case, a relationship created by statute would be enough for the per el, for promissory estoppel for wor.
The Henrik Sif [1982] 1 Lloyds Rep 456 – extension of what is pre-exiting contract. Complex shipping case. Hire of goods, and sale of ship. Court says: even if no contractual relationship if you have something which looks like a contractual relationship, that is sufficient. The essence of a contract – enough to form/found relationship for promissory estoppel. Believed in rel, but weren’t, courts said it was enough. 2. Clear unequivocal promise must be shown – must affect legal relationship between parties. Must be certain its affect legal relationship of both parties. Woodhouse Israel Cocoa v Nigerian Produce Marketing Co Ltd [1972] AC 741: involves a situation of the purchase of goods for a fixed price. Nigerian pound = pound sterling. Then there was a devaluaion of Nigerian currency. Wat does that do tto the contract? Can you insist same or MORE? The courts said in this case it was impossible to tell. You cannot say what the parties thought was going to happen on devaluation. Because you cant make a definitive determination, not a clear and unequivocal promise. Court did say the assessment of clear and unequivocal promise is an objective one and it has to be a promise and not anything else because of Jordan v Monney (statements of future condict are not enforceable). Doesn’t have to be made express, but implied (has o be clear). Question for court. 3. Reliace on promise by promisee. Q: Does it need to be detrimental reliance? Because idea of claim is that it is an equitable claim founded in fairness. It also seems to be that it needed to be detrimental reliance in Hughes. WJ Alan & Co v El Nasr [1972] 2 All ER 127 : Denning; didn’t think detrimental reliance was necessary but you need some sort of change instead. Ahnge of circumsances but don’t have to suffer. Oils M’sia (The Post Chaser) [1982] 1 All E.R. 19 3 – In post chaser: What do we mean by change of postion? Problem of loss of of opportunity. In this case, the other thing that happened was that money w as saved as money was saved and then lost. 4. it must be inequitable to go back on promise. In Post Chaser again and Look at D & C Builders v Rees [1966] 2 QB 617. The claimant (builders) had worked for defendant. The claimant pushes to get paid. The finally agrees to take three hundred pounds. Part payment of a debt – full £500. Unlike Foakes v Beer, the def knows claimant is under sever financial hardhip but hey still sue for full amount. Lj arden: this is going to be promissory estoppel because it is inequitable to go back on teh promise to take part. Clearly taking advantage of financial diffulties – pushing for final amount. 5. It is important ot see this as suspensory only. High trees. Only for the suration os the promise. Toolmetal case. 6. Prmissory estoppel is only a defence. Denning: In Coomb and Coomb, promissory estoppel is a shield not a sword.”
Promissory estoppel used by cancer patient. Primary reason, lost fertility, stored eggs. Partner broke up and refuse to let her have access to embryos –she argued we have pre-existing, and you will be estopped. Evans v Amicus Healthcare Ltd [2003] EWHC 2161 Promissory estoppel in a non-contractual contract.
