Existing obligations Flashcards
Before entering into a contract, a party might already be under an obligation to do the same thing, perhaps due to… (3 things):
1) An existing contract between the same parties;
2) A public duty; or
3) An existing contract with a third party (ie not one of the parties entering into the contract –the existing obligation is clearly owed to third party).
What happens in relation to an existing contract between the same parties?
If party already contractually bound to Party A to do something, then agreeing w Party A again to do it isn’t generally good consideration for a new contract
What happened in Stilk v Myrick?
Captain of ship promised his crew that, if they shared between them the work of two seamen who had deserted, the wages of the deserters would be shared out between them.
POL: promise not binding bc seamen gave no consideration - they were already contractually bound to do any extra work to complete the voyage.
If the sailors had agreed to exceed their existing obligations, then there would have been consideration
What were the facts in Williams v Roffey Bros?
Ds = Roffey Bros - contracted to build a block of flats and they sub-contracted the plaintiff, Lester Williams, to carry out the carpentry work in 27 of the flats for an agreed price of £20,000.
Before the work was completed, Williams got into financial difficulty and it was clear that, without additional money, he would be unable to finish + would be in breach of contract.
Had the work not been finished on time, Roffey Bros would have been liable for substantial penalties to the main contractors under their contract to build the flats.
Consequently, D promised C additional £575 per completed flat. D did not stick to their promise and C sued for the additional sum.
What did the court find in Williams v Roffey for consideration?
Consideration found in form of ‘practical benefit’ that Roffey received.
practical benefit Roffey obtained = avoidance of late completion payment in main contract, a more efficient working arrangement + avoiding need to find an alternative contractor to do the work.
Note: court called consideration in this case ‘factual’ consideration distinguishing it from legal consideration. The term ‘factual’ consideration acknowledges that nothing new is being promised but the party in receipt of the promise is still getting something out of the reshaped deal.
What are the necessary conditions to establish factual consideration?
- if A has entered into a contract with B to do work for/ supply goods/ services to, B in return for payment by B; and
- at some stage before A has completely performed his obligations under the contract B has reason to doubt whether A will/ will be able to, complete his side of the bargain; and
- B thereupon promises A an additional payment in return for A’s promise to perform his contractual obligations on time; and
- as a result of giving his promise, B obtains in practice a benefit, or obviates a disbenefit; and
- B’s promise is not given as a result of economic duress or fraud on the part of A; then
- the benefit to B is capable of being consideration for A’s promise, so that the promise will be legally binding.
Will merely carrying out a public duty imposed by the law will amount to sufficient consideration?
No
What happened in England v Davidson?
held: duty of a police officer is prevention of crime - they aren’t under a duty to provide info to a priv individual. In doing so he went beyond his public duty + provided consideration for the offer of reward.
D offered reward for info leading to the conviction of a particular criminal. The plaintiff, a police officer, gave the rel info, but D refused to pay, alleging that police officer, by supplying info, was doing no more than the public duty imposed on him by law.
Is it possible to have given consideration by doing something one was already bound to do under a pre-existing contract with a third party?
the performance of the pre-existing duty owed to a third party will be regarded as sufficient consideration for a promise given by the promisor.
What happened in New Zealand Shipping Co v AM Satterthwaite & Co?
An agreement to do an act which the promisor is under an existing obligation to a third party to do, may = valid consideration + did here: the promisee obtains the benefit of a direct obligation which he can enforce.
C made offer to D that, if D unloads C’s goods from a ship, then C would treat D as exempt from any liability for damage to the goods. In fact, D was already bound to do this by a contract with a third party.
party offering this sort of consideration is offering to put itself at risk of double liability – if it fails to meet its obligations, it will face action from two parties.
What happens on agreements to accept a lesser sum?
= not good consideration: debtor remains L even where creditor has agreed to release them from further L. Simply paying a smaller sum than that owed will not be sufficient consideration. (Foakes v Beer)
When won’t Foakes v Beer apply? (2)
INTRODUCING A NEW ELEMENT INTO PAYMENT
at creditor’s request some new element introduced = amounts to good consideration
court won’t enquire as to value of new element.
Examples: payment at a different place/ at a different time/ by providing a different thing in place of money
When won’t Foakes v Beer apply? (1)
PAYMENT OF A LESSER SUM BY A THIRD PARTY
Where third party enters into an agreement w creditor + creditor accepts payment by third party of a lesser sum than debt (in full satisfaction of debtor’s obligation) = creditor cannot sue debtor for the difference.
Therefore, a promise to do something which a party is obliged to do pursuant to an obligation owed to a third party will…
be good consideration
