Contract Law 5

7/30/2019 Contract Law 5

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Alteration promises on the back of

an original contract - enforceable?

If A and B make a contract and then later

make an alteration agreement relating to the

original contract, either to pay more for theoriginal contract or to accept less payment

than is due under the original contract, is this

alteration promise enforceable in thecourts? Is there consideration for it?


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Promises to PAY MORE for

the same workKey cases that we need to look at here

are:

Stilk v Myrick 1809

Hartley v Ponsonby 1857 and

Williams v Roffey Brothers & Nicholls

(contractors) Limited 1991


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Williams v Roffey Bros Ltd 1991

It was held in Court of Appeal that thecarpenters were entitled to the extrapayments because they had providedconsideration to the main contractors for theirpromise in that:

the promise secured completion of the workon time so that the main contractors avoidedthe penalty clause, and,

the main contractors avoided the need toemploy another sub-contractor if the originalones decided to quit.


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Judgment of Glidewell LJ

His lordship held that the promise by the

main contractors to pay extra to avoid a

penalty and to get the work done by theoriginal subcontractors gave them a

PRACTICAL BENEFIT or avoided a

DISBENEFIT to them and this wasconsideration so long as economic

duress or fraud was absent.


5/21

Judgment of Russel LJ

Consideration there must still be but inmy judgment the courts nowadays

should be more ready to find itsexistence so as to REFLECT theINTENTION OF THE PARTIES to thecontract where the bargaining powers

are not unequal and where the findingof consideration reflects the trueintention of the parties.


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Judgment of Purchas LJ

His lordship expresses the view that the

Stilk v Myrick case was in large part

decided for POLICY reasons toprotect masters of ships from being held

to ransom by crews at sea. And he

suggests that the lack of considerationargument was only really used because

the duress was not available.


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Commentary on Williams v

Roffey Bros Limited 1991In addition, the move away from the need for

legal consideration in Williams v Roffey

Brothers Limited 1991 was NOT FOLLOWEDin recent cases concerning promises to

ACCEPT LESS payment than is due under

an original contract. Remember that in

Williams v Roffey, the consideration that wassaid to exist was of a practical or factual

nature as opposed to really legal in nature.


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PROMISES TO ACCEPT LESS

PAYMENT THAN IS DUE UNDER

AN ORIGINAL CONTRACT

In PINNELS CASE it was held that if A

made a promise with B to accept LESSPAYMENT for a debt and NOT TO SUE for

the balance, then this agreement was

UNENFORCEABLE unless B gave someextra consideration for it


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A promise to accept less than is

due is only supported by

consideration where there is:

payment in kind rather than in money, or

payment in advance of the due date, or payment at a different location to the creditors

advantage, or

payment by a 3rd party accepted as fullsatisfaction, or

a composition by creditors to accept less.


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Foakes v Beer 1884The House of Lords held that Mrs Beer couldclaim the interest from Dr Foakes becausealthough in the agreement between her and

Dr Foakes she had stated that she WOULDNOT take proceedings to enforce the debt,this agreement LACKED CONSIDERATIONby Foakes he had to pay the debt to heranyway as scheduled and so he gave noadditional consideration for her to acceptLESS than she was due, which was theDEBT PLUS INTEREST.


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Re Selectmove Limited 1995

In this case, Williams v Roffey BrothersLimited was given a NARROW RATIODECIDENDI so that it could only apply to

contracts for goods and services. In this way,the rule in Foakes v Beer was not challengedwhich would have been impossible anywayas it was a House of Lords case and Re

Selectmove was only in the Court of Appealthus it would have been against the rules ofprecedent to attempt to overrule Foakes vBeer.


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Promissory Estoppel

Where by words or conduct a person makesan unambiguous representation as to hisfuture conduct, intending the representation

to be RELIED on and to affect legal relationsbetween the parties, and the representeealters his position in reliance on it, therepresentor will be unable to act

inconsistently with the representation if by sodoing the representee would be prejudiced.McKendrick


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A few early points on

Promissory Estoppel1. There is the potential for Promissory

Estoppel (PE) to replace consideration

2. PE is just one strand of the broaderequitable

doctrine of estoppel

3. PE does not support a distinct cause of

action4. PE only protects ones reliance interest not

ones

expectation interest


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6 key points for Promissory

Estoppel1. The promise must be clear

2. He who comes to equity must have clean

hands

3. PE usually involves reliance and detriment

4. PE is usually only suspensory in nature

5. PE is a shield and not a sword6. PE must be explicitly pleaded in court


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7 key cases for Promissory

Estoppel Hughes v Metropolitan Railway Company 1877

Central London Property Trust Ltd v High Trees House Ltd1947

Combe v Combe 1951

Tool Metal Manufacturing Co Ltd v Tungsten Electric Co Ltd1955

D & C Builders v Rees 1966

Williams v Roffery Brothers & Nicolls (contractors) Limited1991

Baird Textile Holdings Ltd v Marks & Spencer plc 2001


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Hughes v Metropolitan Railway

Co 1877It is the first principle upon which all Courts of Equityproceed, that if parties who have entered into definiteand distinct terms involving certain legal results afterwards by their own act or with their own consent

enter upon a course of negotiations which has theeffect of leading one of the parties to suppose that thestrict rights arising under the contract will not beenforced or will be kept in suspense or held inabeyance, the person who might otherwise haveenforced those rights will not be allowed to enforcethem where it would be inequitable, having regard tothe dealings which have thus taken place between theparties.. Per Lord Cairns LC at 448.


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High Trees case 1947

The key importance of the case comes from theobiter dicta remarks of Lord Denning.

He said that HAD CLPT sued for the full rentbetween 1940 and 1945 it would have beenestopped from doing so because of the promise

not to demand full rent.

He relied on the Hughes case.


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Combe v Combe 1951

In this case and husband and wife gotdivorced. The husband then promised to payhis wife 100 a year as a permanentallowance. In reliance on this promise, thewife did not apply to the courts formaintenance. When the husband failed tomake the payments, she sued him on the

promise.She failed because Promissory Estoppel is a

shield and not a sword.


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D & C Builders v Rees 1966

In this case, although D & C builders agreed

in writing to accept less than was owed to

them they could still sue for the balance. Thiswas argued on the basis of Pinnels case and

Foakes v Beer and the defence of Promissory

Estoppel was unsuccessful because Mrs

Rees had not come to equity with cleanhands - she had held them to ransom.


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Per Dankwerts LJ

His lordship stated:

Foakes v Beer, applying the decision in Pinnels case,settled definitively the rule of law that payment of alesser sum than the amount of a debt due cannot be a

satisfaction of the debt unless there is some benefit tothe creditor added so that there is accord andsatisfaction.

He felt that a cheque was basically the same as cash

and so it was not extra consideration that could be usedto avoid Foakes v Beer. Thus, the builders could suefor the balance due.


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Baird Textile Holdings Ltd v

Marks & Spencer plc 2001

Baird was contending that M&S wasestopped from not ordering garments from

them, that M&S should order garments fromthem. They failed because:

firstly, Promissory estoppel is a shield andnot a sword and

secondly, that there was no clearunequivocal promise by M&S that they wouldcontinue to order garments from Baird.

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