Variation of Terms Flashcards
What is the traditional principle in Stilk v Myrick [1809]?
The traditional principle established in Stilk v Myrick (1809) is that performing an existing contractual duty does not constitute valid consideration for a new promise. In this case, sailors who were already contractually obligated to complete a voyage were not entitled to extra payment for fulfilling those same duties, even after other crew members deserted, because they were simply performing what they had originally agreed to do.
How does the court in Williams v Roffey Bros & Nicholls get around the Stilk v Myrick principle?
In Williams v Roffey Bros, the court introduced the idea of a “practical benefit” as valid consideration. It ruled that, even if a party is performing an existing duty, if the promisor gains a practical benefit (e.g., avoiding penalties, not having to find new subcontractors), this can be sufficient to constitute consideration. This allowed the court to enforce the agreement to pay more money, diverging from the stricter stance in Stilk v Myrick.
How does the doctrine of economic duress impact on these key principles?
The doctrine of economic duress serves as a counterbalance by ensuring that any agreements to vary contract terms (e.g., promises to pay more) are not enforceable if they were obtained under coercive or undue pressure. This means that, even if a practical benefit is present, the agreement might still be invalidated if one party was forced into the arrangement against their will.
How did Lord Denning use the idea of “promissory estoppel” in Central London Property Trust Ltd v High Trees?
In Central London Property Trust Ltd v High Trees (1947), Lord Denning introduced promissory estoppel to prevent a party from going back on a promise, even if it was not supported by consideration. If a party made a clear promise and the other party relied on it to their detriment, the promisor could be estopped (prevented) from retracting the promise. In this case, the landlord was estopped from claiming full rent during the wartime period when they had agreed to a reduced rate.
When is a promise to pay more money under an existing contract enforceable?
A promise to pay more money under an existing contract can be enforceable if:
The promisee provides new consideration (e.g., agrees to additional work).
Practical benefit can be demonstrated, as in Williams v Roffey Bros. The promisor receives something beneficial, even if the promisee is only performing existing obligations.
The agreement was not reached under economic duress, ensuring that any variation was made freely.
When is a promise to accept less money under an existing contract enforceable?
A promise to accept less money is generally not enforceable due to Foakes v Beer (1884), which states that part payment of a debt does not discharge the whole debt. However, it can be enforceable if:
Promissory estoppel applies — the debtor relied on the creditor’s promise to accept less, and it would be inequitable for the creditor to go back on this promise.
There is new consideration or some additional benefit to the creditor, such as early payment or payment in a different form.
The arrangement is part of a genuine settlement or compromise agreement, known as “accord and satisfaction.”
Williams v Roffey Bros [1991]
R appealed against judgement in favour of W for payments arising out of a building contract. W was engaged by R, building contractors to carry out carpentry work. W was offered bonus payments by R when it became apparent that W’s financial difficulties would make it unlikely that the work would be completed in time and therefore R would be penalised under the main contract. R failed to make the promised payments and W ceased work. R’s grounds of appeal were that W had substantially completed the work and the promise to pay the bonus was enforceable.
KEY PRINCIPLES:
Expansion of Consideration:
The case broadened the concept of consideration by acknowledging that practical benefits (like avoiding financial penalties or the inconvenience of finding new contractors) can serve as valid consideration, even if the promisee is fulfilling an existing obligation.
This ruling marked a departure from the strict rule that performing an existing duty cannot be good consideration for a new promise.
Central London Property Trust Ltd v High Trees House [1947]
In the case establishing the principle of High Trees promissory estoppel, the landlord agreed, in writing, to reduce the tenants’ rent provided in leases under seal due to war damage. There was no agreed duration and no consideration was paid. The landlord issued proceedings to recover some of the rent. The King’s Bench Division held that, as the lease and at common law, it could not be varied by parole or by writing, but only by deed. However, on considering recent developments in the law, a promise, intended to be binding, intended to be acted on and in fact acted on, was binding so far as its terms properly applied. That was so notwithstanding the absence of consideration.
KEY PRINCIPLES:
Promissory Estoppel:
This case introduced the doctrine of promissory estoppel into English law, establishing that if one party relies on a promise (even if unsupported by consideration) to their detriment, the promisor cannot later go back on that promise as long as the conditions remain the same.
However, promissory estoppel only suspends the original obligation, and once the conditions change, the original rights (such as full rent) may resume.
Baird Textile Holdings Ltd v Marks & Spencer [2001]
B, who had supplied clothing to M&S for 30 years until M&S terminated the arrangement without warning, appealed against a finding dismissing their argument that there had been an implied contract requiring M&S to give reasonable notice of termination. M&S cross appealed in respect of a finding that the issue of whether they should be estopped from terminating the arrangement without giving reasonable notice should proceed to trial. The court held, dismissing B’s appeal and allowing M&S’s cross appeal, that the alleged obligation on the part of M&S to acquire clothing from B was insufficiently certain to found either a contractual obligation or a claim based on estoppel.
KEY PRINCIPLES:
Limits of Promissory Estoppel:
Promissory estoppel cannot be used to enforce new or ongoing contractual obligations. It may prevent a party from enforcing their strict legal rights in certain circumstances but does not create new ones.
Pao On v Lau Yiu Long [1980]
Pao On (plaintiffs) were the owners of shares in a company, Shing On.
Lau Yiu Long (defendants) were directors of a company, Fu Chip, which was acquiring Shing On’s shares from Pao On.
To protect Pao On from a fall in the value of the shares after the sale, the parties entered into an agreement: Pao On agreed to retain 60% of the shares for a year, and Fu Chip would indemnify any losses.
Initially, Pao On was to be compensated in case the value of the shares dropped.
Later, a new agreement was reached where Pao On agreed not to sell the shares for a specific period but demanded a side agreement from Lau Yiu Long that they would buy back the shares at a minimum price if needed.
Pao On sued when Lau Yiu Long failed to honour the buy-back agreement.
Lau Yiu Long argued that the agreement was not binding because there was no fresh consideration and was obtained under economic duress.
KEY PRINCIPLES:
Past Consideration:
Consideration given before a promise is made can be valid if:
It was done at the request of the promisor.
Both parties understood it would be compensated later.
The payment or benefit was legally enforceable.
Economic Duress:
Economic duress could invalidate a contract if one party is forced into the contract without genuine consent.
Past Consideration as Valid: Past actions can be valid consideration if certain conditions are met.
Clarification of Economic Duress: The case distinguished between hard bargaining and improper pressure, setting a precedent on what constitutes duress.
Rock Advertising v MWB Business Exchange Centres [2018]
Rock Advertising Ltd (the tenant) entered into a licence agreement with MWB Business Exchange Centres Ltd (the landlord) to occupy office space.
The agreement included a “No Oral Modification” (NOM) clause, stating that any changes to the agreement had to be made in writing and signed by both parties.
Rock Advertising fell behind on rent payments.
The two parties had a conversation where they verbally agreed to reschedule the payment plan, allowing Rock to pay overdue sums in instalments to catch up.
MWB later sought to terminate the licence, arguing that Rock had not adhered to the original payment terms.
Dispute:
Rock claimed that the oral agreement to reschedule the payments was binding.
MWB argued that the oral modification was invalid due to the NOM clause.
KEY PRINCIPLES:
Enforceability of NOM Clauses:
NOM clauses are legally effective and can prevent parties from making valid oral modifications to agreements.
The decision reinforces the importance of maintaining contractual certainty and respecting the agreed process for modifications.
Party Autonomy vs. Contractual Certainty:
While parties have the freedom to modify contracts, they can also restrict that freedom by agreeing to NOM clauses.
