Consideration - Pre-Existing Duties

Question 1

Pre-Existing Duties

Answer 1

-I am doing something in promising to pay more, but what are you doing if you are just doing something that already had promised to do?
-Promising to do what you have already promised to do is not fresh consideration.

Question 2

Problem with pre-existing duties?

Answer 2

Problem with pre-existing duties:
if each party promises to do something but one party already has a contractual obligation to perform that duty then not promising anything at all because already had to do it- consideration needs to move from both and be fresh so this is a gratuitous promise

Question 3

Pao On v. Lau Yiu Long [1980] A.C. 614 (P.C.)
(3 Party Case, A Re-Promise is Valid Consideration)

Issues:
- Was there a binding contract because Shing Co offered no fresh consideration in Contract 3? (they had a pre-existing duty because of contract 1)
- Is promising a pre-existing duty valid consideration?

Answer 3

Rules:
- Promising to do what you already have to do is valid consideration as long as you are making that promise (pre-existing duty) to a new 3rd party.
- If Shing On was trying to only keep their pre-existing duty under the 3rd Agreement, but only to the original party Fu Chip Corp instead of the addition of the Majority Share Holder of Fu Chip (3rd party), then it would not be valid consideration.
- Rule because reinforces obligation because the new thing they are giving is exposing themselves to double liability – if Shing On doesn’t go through with the agreement, they can be sued by 2 different parties.
- Promising the same thing to 2 different parties is an additional detriment since you can now be sued by 2 different parties and is therefore a meaningful promise that escapes the pre-existing duty rule.

Question 4

Stilk v. Myrick (1809), 2 Camp. 317, 170 E.R. 1168, S.C. 6 Esp. 1290 (Eng. K.B.)
(Fresh Consideration, 2 Parties, The Standard In Canada)

Issues:
- Did the crew members provide consideration to oblige the Captain to increase wages.

Answer 4

Rules:
- Promise to pay more to another party to continue a pre-existing duty is not binding because it’s a gratuitous gift since the other party gave no fresh consideration.
- Promising to perform a pre-existing duty is not fresh consideration between 2 parties.

Analysis:
- There was no fresh consideration on behalf of the crew members in exchange for a fresh consideration of additional pay from the captain.
- Captain’s potential consideration: additional pay.
- Crew’s consideration: nothing aside from their normal duties that were pre-existing.
- The captain’s offer of additional pay is nothing more than a gratuitous gift that can be revoked since there was no fresh consideration from the crew in exchange for the payment.
- Desertion of part of the crew is considered merely an emergency, so those still on board working are still bound by the terms of their original agreement set up before leaving London.
- Another reason case influential: captain made practical choice under duress to offer more money rather than consideration, so was not binding because not freely given.

Question 5

Gilbert Steel Ltd. V. University Const. Ltd. (1976), 12 O.R. (2d) 19, 67 D.L.R (3d) 606 (C.A.)
(Fresh Consideration)

Issues:
- Was there consideration in this oral agreement by both parties?

Answer 5

Rules:
- Modern example of Stylk and Myrick being applied, promising a pre-existing duty does not count as consideration.
- Promising to do what you already promised to do under a pre-existing agreement is not fresh consideration.
- You can get around fresh consideration if you show good evidence that pre-existing contract was cancelled and a new contract was formed – generally in writing .
-Essentially cancelling your pre-existing duty to make new duty since the 1st contract has been cancelled in in favour of the new contract (Pao On v. Lau Yiu Long [1980]).

Question 6

Williams v. Roffey Bros. , 1990
(EXCEPTION TO PRE-EXISTING CONDITION RULE - ENGLAND. Exception to Stylk v Myrick )

Issues:
- Was W just fulfilling a pre existing duty?
- Is this promise to pay more enforceable without fresh consideration?

Answer 6

Rules:
- Modification to a pre-existing contract can be legally binding if there is a mutual practical benefit from the modification (commercial advantage) and the promise was made voluntarily and not under duress (undue pressure).
1) Although no consideration, there are mutual practical benefits flowing to each party.
- Getting the work done on time and avoiding a reputation of being late for R.
2) Modification to pre-existing contract must be made voluntarily and not under duress.

Question 7

Nav Canada v. Greater Fredericton Airport Authority [2008]
(Test For Duress/Modification of Williams v Roffey Bros)

Issues:
- Was there sufficient consideration?
- Was the promise obtained under economic duress?
- Was Nav Canada just performing their pre-existing duty?

Answer 7

Rules:
- A modification of a pre-existing contract, unsupported by consideration, may be enforceable if it is established that the variation was not procured by economic duress which has 2 conditions:
1) The promise made under illegitimate pressure (demand/threat of non-performance)
2) The pressured party must have no option but agreeing – no practical alternative
· Presumption is promising what you already must do doesn’t count because it’s a pre-existing duty the modification will be binding if the promise to pay more in exchange for pre-existing duty was not procured under duress.
· Presence or absence of mutual benefit will influence the duress question.
· Don’t necessarily NEED to show mutual practical benefit, modification of agreement just can’t be made under duress. However, a mutual practical benefit can help demonstrate whether or not there was any duress. Without mutual practical benefit, you COULD POSSIBLY assume duress, otherwise, why else would I agree to offer more money for no consideration or benefit given back from the other party (gratuitous).
- Economic duress = illegitimate pressure (threat of breach of original contract unless a modification is made) + doing so in bad faith + other party had no choice but to agree/comply to offer more.

Question 8

Rosas v. Toca (2016) BCSC
(Exception to Fresh Consideration, No New Consideration, Modification of Contract Valid)

Issues:

Answer 8

Rules:
- Court takes a flexible approach, if the modification was made freely, informatively, and there was no duress (external pressure) brought to bear against either of the parties to pay more money than they owe then the promise to continue a pre-existing duty waives the consideration requirement.
- In assessing whether there was duress, it’s a good sign if there is mutual benefit but mutual benefit is not required.

Analysis:
- Rosas’ consideration: forbearance from suing Toca under each extension.
- Toca’s consideration: promising to pay the money (which she already has to do).
- The parties agreed to vary the terms of their original loan each time Toca told Roasas, “I will pay you back next year”, and Rosas agreed to extend the time for repayment forbearing to sue. Otherwise, Toca would have been considered in breach of their original contact.
-Problem in this was that there was no fresh consideration from Toca.
-Rosas’ consideration could therefore be considered gratuitous in theory.

-There are practical benefits flowing from Rosas to Toca, despite a lack of explicit consideration.
-Rosas gained the benefit of maintaining her friendship with Toca in forbearing from suing Toca.
-Toca and her husband provided benefit to Rosas in driving her around and volunteering for her in exchange of consideration of Rosas not to sue.
-If one party is not getting anything new and the other benefits, then this may suggest but not confirm there is duress
-No evidence that the variation of contract in Rosas extending the payment term and forbearing to sue was ever done out of duress, unconscionable, or are otherwise invalid on the basis of public policy to either of the parties.