Contract | Formation
Consideration: Existing Duties
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Introduction
Whether performing existing duties can suffice as consideration, depends on the circumstances. Duties may exist for different reasons such as public duties or contractual obligations.
Existing legal or public duty
The general rule is that performance of an existing legal duty may not be good consideration.
Collins v Godefroy (1831) 1 B & Ad 950
Facts:
The defendant promised the plaintiff six guineas to testify in court. However, the plaintiff was subpoenaed, so was obliged by law to attend court. The defendant refused to pay.
Issue:
Can performing a legal duty be sufficient consideration?
Held:
There is clearly a public policy issue but the agreement was unenforceable as there had been no consideration.
Lord Tenterden CJ: .. if it be a duty imposed by law upon a party... subpoenaed to attend from time to time to give his evidence then a promise to give him any remuneration for loss of time incurred in such attendance is a promise without consideration...
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The case law regarding performance of public duty is unclear.
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England v Davidson (1840) 11 Ad & E 856
Facts:
The defendant offered a £50 reward for information leading to the conviction of the offender or offenders who had broken into his house. The plaintiff, a police officer, gave information which led to a conviction. The defendant refused to pay.
Issue:
Was performance of a public duty sufficient consideration?
Held:
The contract was enforceable and the reward should be paid.
Lord Denman LJ:
.. I think there may be services which the constable is not bound to render and which he may therefore make the ground of a contract. We should not hold a contract to be against the policy of the law, unless the grounds for so deciding were very clear...
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Gray v Martino (1918) 91 NJ Law 462
Facts:
An American case which is not binding in the UK.
The defendant offered the plaintiff, a police officer, a $500 reward if he could provide her with the names and addresses of thieves who had stolen her jewels. The plaintiff sued for the reward.
Issue:
Was performance of a public duty sufficient consideration?
Held:
The Supreme Court of New Jersey found that the officer's actions were in pursuance of his public duty and therefore, he was not entitled to the reward.
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Glasbrook Bros v Glamorgan CC [1925] AC 270
Facts:
The defendants, owners of a coal mine, requested police presence during a strike. The plaintiffs, the police, offered a visiting patrol service, which they believed would be adequate. The defendants were concerned about site safety and decided that they wanted a stationary onsite presence and agreed to pay for this service. The defendants refused to pay on the grounds that the police were performing their duty to keep the peace.
Issue:
Was performance of a public duty sufficient consideration?
Held:
The police had gone beyond their existing duties and therefore, the defendant should pay for the services rendered.
Some cases have involved circumstances where a person has exceeded their legal obligations.
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Ward v Byham [1956] 1 WLR 496
Facts:
The plaintiff, the mother of an illegitimate child, agreed to look after her child well and to allow the child to decide who she wished to live with. In return, the defendant, the father, promised to pay maintenance. The defendant ceased to make payments.
Issue:
Was there sufficient consideration?
Held:
The Court of Appeal, in majority decision, decided that the mother had gone beyond her legal duty by allowing the child to decide who she wished to live with and that this was sufficient consideration.
Denning LJ (dissenting) argued that the factual benefit to the father was sufficient consideration:
.. I have always thought that a promise to perform an existing duty, or the performance of it, should be regarded as good consideration because it is a benefit to the person to whom it is given...
.The decision seems to conflict with White v Bluett, where
natural love and affection
of a parent was found insufficient for consideration. It seems that the public policy interest in a father keeping a promise to maintain his child may distinguish the cases. -
Williams v Williams [1957] 1 WLR 14
Facts:
The plaintiff left her husband, the defendant, who agreed to pay her £1 10s per week. The plaintiff agreed not to pledge her husband's credit and to indemnify him against any debts she incurred. The defendant refused to pay arrears of the maintenance, arguing that the plaintiff provided no consideration, because after leaving him she was not entitled to be maintained by him or to pledge his credit.
Issue:
Was there sufficient consideration?
Held:
The plaintiff promise did amount to good consideration because she had only suspended her right to be maintained by the defendant, and she could return at any time.
Denning LJ:
.. a promise to perform an existing duty is, I think, sufficient consideration to support a promise, so long as there is nothing in the transaction which is contrary to the public interest...
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Existing contractual duty owed to a third party
If a person is under a contractual duty to act in a certain way, can the performance of that duty provide good consideration for a contract with another.
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Scotson v Pegg (1861) 6 H & N 295
Facts:
The defendant promised to unload coal if the plaintiff delivered it to him. The plaintiff was already obliged to deliver the coal under a contract with a third party. The plaintiff sued the defendant for delay in unloading the coal.
Issue:
Was there good consideration in light of the plaintiff's contract with a third party?
Held:
There was sufficient consideration. The case provides authority that performing an existing contractual duty can be consideration for another contract.
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Shadwell v Shadwell (1860) 9 CB (NS) 159
Facts:
The plaintiff was engaged to be married, in 1860 this was a binding contract. The defendant, the plaintiff's uncle, wrote to the plaintiff stating:
.. I am glad to hear of your intended marriage with Ellen Nicholl, and, as I promised to assist you at starting, I am happy to tell you that I will pay to you £150 yearly during my life and until your annual income derived from your profession of a Chancery barrister shall amount to 600 guineas...
. The plaintiff claimed the arrears from the uncle's estate on the basis that the consideration was marrying Ellen Nicholl.Issue:
Was the marriage good consideration, despite the plaintiff having a contract with a third party (Ellen Nicholl) to do so?
Held:
The majority found that the plaintiff provided good consideration by marrying Ellen Nicholl.
Erle CJ: .
.. I am aware that a man's marriage with the woman of his choice is in one sense a boon, and in that sense the reverse of a loss: yet, as between the plaintiff and the party promising to supply an income to support the marriage, it may well be also a loss. The plaintiff may have made a most material change in his position, and induced the object of his affection to do the same, and may have incurred pecuniary liabilities resulting in embarrassments which would be in every sense a loss if the income which had been promised should be withheld... The marriage primarily affects the parties thereto; but in a secondary degree it may be an object of interest to a near relative, and in that sense a benefit to him...
.Byles J (dissenting) interpreted the promise as being linked to the plaintiff 's career rather than marriage. He further argued that as the marriage was not requested by the defendant, there was no benefit to the defendant and it could not form good consideration.
Existing contractual duty owed to the other party
The general rule is that performance of an existing duty owed to the same promisor may not be good consideration.
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Stilk v Myrick (1809) 2 Camp 317
Facts:
The plaintiff, a member of an 11 man crew on a ship, had a contract, with the defendant ship master, to be paid £5 per month for working on a journey from London to the Baltic and back. During the journey two crew members deserted and no replacements could be found. The defendant promised the remaining crew members, including the plaintiff, an equal share of the deserters' wages if they completed the journey.
Issue:
Was there good consideration for the additional payment?
Held:
The performance of an existing contractual duty owed to the other party is not good consideration for a promise of additional payment
Lord Ellenborough:
.. The agreement is void for want of consideration. There was no consideration for the ulterior pay promised to the mariners who remained with the ship. Before they sailed from London, they had undertaken to do all they could under all the emergencies of the voyage... the desertion of part of the crew is to be considered an emergency of the voyage as much as their death; and those who remain are bound by the terms of their original contract to exert themselves to the utmost to bring the ship in safety to her destined port...
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Harris v Watson (1791) Peake 102
Facts:
The plaintiff, crew member of a ship, during the voyage the ship faced danger. The defendant, the ship commander, promised to pay the plaintiff 5 guineas extra if he continued to navigate the ship successfully.
Issue:
Did the problems in navigation, posed by the danger amount to good consideration for the additional payment?
Held:
There was not sufficient consideration. For public policy reasons, in an emergency sailors should not be able to demand extra wages.
Lord Kenyon CJ:
..they would in many cases cause a ship to sink, unless the captain would pay an extravagant demand...
.Today, the policy issues are less important as courts recognise that economic pressure may amount to duress and therefore make an agreement unenforceable.
However, recently it has been found that in certain circumstances performance of an existing contractual duty owed to the other party may be consideration.
Williams v Roffey Bros & Nicholls (Contractors) Ltd [1991] 1 QB 1
Facts:
The defendants were building contractors who had a contract to refurbish twenty seven flats, there was a penalty clause for late completion. The defendants subcontracted the plaintiff to carry out the necessary carpentry work for £20 000.
The plaintiff ran into financial difficulties after completing the work on nine of the flats and only carrying out the preliminary work on the rest. These difficulties were partially due to underestimating the cost of the work and also not managing it efficiently.
The defendants were aware of the plaintiff's difficulties and promised to pay an extra £10 300, at the rate of £575 per completed flat. The plaintiff completed eight more flats but the defendants only paid him an extra £1 500. The plaintiff stopped working and sued the defendants.
Issue:
Was there good consideration for the additional payment?
Held:
The plaintiff was only carrying out the work he was already contractually obliged to do. However, the defendants had obtained a benefit by making the promise so it was enforceable. The defendants gained practical benefits as they did not have to find replacement carpenters and avoided liability under the penalty clause. There was no detriment suffered by the plaintiff.
Purchas LJ: ..the modern approach to... consideration would be that where there were benefits derived by each party to a contract of variation even though one party did not suffer a detriment this would not be fatal to the establishing of sufficient consideration to support the agreement...
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Glidewell LJ
summarised the current law: .. (i) if A has entered into a contract with B to do work for, or to supply goods or services to B, in return for payment by B; and (ii) at some stage before A has completely performed his obligations under the contract B has reason to doubt whether A will... complete his side of the bargain; and (iii) B thereupon promises A an additional payment in return for A's promise to perform his contractual obligations on time; and (iv) as a result of giving his promise, B obtains in practice a benefit, or obviates a disbenefit, and (v) B's promise is not given as a result of economic duress or fraud on the part of A, then (vi) the benefit to B is capable of being consideration for B's promise, so that the promise will be legally binding...
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The Court of Appeal explicitly stated that this decision does not overrule or contravene the principle in Stilk v Myrick (1809). It does limit the principle to situations where a promisor secures no additional benefit. Arguably the defendant in Stilk v Myrick had also gained some practical benefit, by not having to replace the crew and incur delays. Therefore, in order to reconcile the cases it seems important that there was no question of extortion or public policy issues in the later case.
The case is seen as a practical decision which reflects the need for modifying agreements in modern business. It has been put forward that it is in the public interest for parties to be able to renegotiate as long as there is no economic duress. This has lead many to argue that consideration is no longer a key factor in these types of agreements because businesses are commercially driven so are unlikely to promise additional payment unless they believe that some benefit will be derived. Therefore the pertinent issue has become whether there is any economic duress.
If a person exceeds his existing obligations he may have good consideration and be entitled to additional payment.
Hartley v Ponsonby (1857) 7 El & Bl 872
Facts:
The plaintiff, a member of a ship crew, had a contract, with the captain, the defendant, to work on a voyage. During the voyage half the crew members deserted. The defendant promised the remaining crew members, including the plaintiff, extra money if they completed the voyage.
Issue:
Was there sufficient consideration for the extra payment?
Held:
The plaintiff was entitled to the extra payment promised on the basis that he had exceeded his existing contractual obligations. The crew was so reduced it was dangerous to sail, and on that basis the remaining crew were entitled to negotiate extra payment for completely the voyage.
Part payment of debts
The general principle is that part payment of a debt is not good consideration for a promise by the creditor to forgo the balance. The debtor is already bound to pay the full amount of the debt and performance of an existing contractual duty owed to the other is not usually good consideration.
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Pinnel's Case (1602) 5 Co Rep 117
Facts:
The defendant owed the plaintiff £8 10s. The defendant paid £5 2s 6d, before the debt was due and the plaintiff had accepted the payment in full satisfaction for the debt but later sued for the balance.
Issue:
Could the early part payment be consideration and satisfy the debt?
Held:
The defendant had provided consideration by paying early, therefore part payment was acceptable. However, obiter the Court of Appeal noted that if a fixed sum is owed then payment of a lesser sum can never be satisfaction for the full amount owed if no consideration has been provided (such as early payment or additional goods).
Lord Coke:
.. payment of a lesser sum on the day in satisfaction of a greater, cannot be any satisfaction for the whole, because it appears to the Judges that by no possibility, a lesser sum can be a satisfaction to the plaintiff for a greater sum: but the gift of a horse, hawk, or robe, etc. in satisfaction is good for it shall be intended that a horse, hawk or robe etc, might be more beneficial to the plaintiff than the money... or otherwise, the plaintiff would not have accepted it in satisfaction...
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Foakes v Beer (1884) 9 App Cas 605
Facts:
The plaintiff, had a High Court judgment for payment of a debt of £2 090 19s against the defendant. The plaintiff agreed that if the defendant paid off the debt, by making a £500 lump sum payment followed by six monthly instalments of £150, so that the debt was paid within five years then she would
not take any proceedings whatever on the said judgment
. The defendant complied and paid off the judgment debt in full. However, the plaintiff then sued for interest which had accrued under the judgment.The agreement was ambiguous, as the promise could have meant not suing on the judgment at all, including for the interest or merely not suing for enforcement of the judgement, if the defendant was paying off the debt.
Issue:
Was the agreement made for part payment of the debt, excluding the interest, enforceable?
Held:
The House of Lords accepted that the plaintiff had agreed not to sue on the judgement at all, even for interest but that this was not enforceable as the defendant did not provide good consideration for this promise.
The House of Lords were not bound by the decision in Pinnel's Case (1602), as the rule was strictly obiter because the debtor had paid the debt early and therefore provided consideration. However, the court did feel constrained to apply it and confirmed the principle in set out in the Pinnel's Case.
Earl of Selborne LC:
.. I cannot think that your Lordships would do right, if you were now to reverse, as erroneous, a judgment of the Court of Appeal, proceeding upon a doctrine which has been accepted as part of the Law of England for 280 years...
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Re Selectmove [1995] 1 WLR 474
Facts:
The defendant company owed tax to Inland Revenue.
The defendant was in financial difficulties and offered to pay £1000 off the arrears in addition to the tax it owed each month. The defendant made several of the payments by instalment. Inland Revenue then demanded the defendant pay the full arrears immediately.
The defendant argued that the principle in Williams v Roffey Bros & Nicholls (Contractors) Ltd [1991] should be extended to part payment of a debt.
Issue:
If part payment of a debt confers a practical benefit and is freely accepted without duress or fraud can the practical benefit be consideration?
Held:
There was no consideration for the alternative payment arrangement. The Court of Appeal felt it was constrained by the House of Lords decision in Foakes v Beer (1884).
Gibson LJ: .. I see the force of the argument, but the difficulty that I feel with it is that if the principle in Williams v Roffey Bros and Nicholls (Contractors) Ltd is to be extended to an obligation to make payment, it would in effect leave the principle in Foakes v Beer without any application. When a creditor and a debtor who are at arm's length reach agreement on the payment of a debt by instalments to accommodate the debtor, the creditor will no doubt always see a practical benefit to himself in so doing.. Foakes v Beer was not even referred to in Williams v Roffey Bros and Nicholls (Contractors) Ltd, and it is in my judgment impossible, consistently with the doctrine of precedent for this court to extend the principle of Williams' case to any circumstances governed by the principle of Foakes v Beer. If that extension is to be made, it must be by the House of Lords or.. by Parliament...
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Therefore, currently Williams v Roffey & Nicholls (Contractors) Ltd is limited to applying in cases regarding variation of contracts containing a promise of extra money for goods and services. It is uncertain whether in the future, the House of Lords may decide to extend the principle to cases involving part payment of debt.