BetterLawNotes-5 (2)

CONTRACT LAW

(i) The issue here is whether B is bound by her concession over delivery – ie is the variation of the contract binding? The modification will be binding if S provided sufficient consideration for B’s promise to extend the delivery date. Consideration is a benefit to the promisor (B) or a detriment to the promisee (S) (Currie v Misa) On the face of it, there is no consideration as S is merely performing, or promising to perform, an existing duty (Pinnel’s case; Foakes v Beer). While S may argue that B obtains a practical benefit from her promise (Williams v Roffey), it is (i) difficult to see what benefit accrues to B here (the promise seems merely to be not to enforce the damages clause), (ii) Re Selectmove states that Williams does not apply to the situation where the promisor promises to accept less than is due.

The stronger argument as far as S is concerned is whether B is estopped from reneging on his promise to extend the delivery date (High Trees). For promissory estoppel to apply, there must be (i) an unambiguous promise by one party not to enforce his strict contractual rights, (ii) which that party intends the other party to rely on and (iii) which the other party does rely on, and (iv) in the circumstances it would be inequitable to allow the first party to go back on his promise and enforce his strict legal rights (High Trees). Here, (i) to (iii) appear to be satisfied. The Postchaser establishes that the other party’s reliance need not be detrimental: simple reliance on the promise is sufficient. As for (iv) this appears to be established when reference is made to High Trees itself: it seems that the element of unconscionability arises from the presence of the first three factors.

Assuming estoppel is established, it remains to consider its effect: is B’s right to claim damages for the delayed delivery extinguished or merely suspended? It seems to be the case (following the Tool Metal case) that estoppel is extinctive as regards past or existing obligations and suspensory as to future obligations. The obligation here is past (ie to deliver on 1st June) so that B will be estopped from insisting on her strict contractual right to claim damages for the delay. Whilst Tool Metal provides Court of Appeal authority for this view, it can be argued that this is nevertheless inconsistent with the decision of the House of Lords in Foakes v Beer: ie the obligation to pay interest was a past obligation but nevertheless remained enforceable. Further the HL in the second Tool Metal case made clear that they were not endorsing the promissory estoppel principle itself: the promisor there was estopped from questioning the correctness of the CA decision in the first action (but that is a different type of estoppel to promissory estoppel).

If S had been lying, it seems clear that B would be entitled to the agreed damages, as it would not be inequitable for B to insist on her strict legal rights since her promise not to was induced by fraud (D & C Builders v Rees is the closest authority, although there economic duress appears to have been the relevant factor rather than fraud. B’s case would, if anything, appear to stronger than that of D & C Builders as fraud seems to be a more serious wrong than duress, the former be actionable in damages, the latter not). Note that misrepresentation would not appear to be relevant here, as the promise is not contractually binding in the first place as it lacks consideration.


(ii) Again the issue is whether the variation is effective, ie is B bound to pay the additional £2,500? On the face of it, S does not provide sufficient consideration for B’s promise of additional payment as he is merely performing, or promising to perform, an existing duty (Stilk v Myrick). However Williams v Roffey establishes that a promise to pay more for the same thing will be enforceable where the promisor obtains a practical benefit. Glidewell LJ set out 6 requirements: (i) contract for work or supply of goods or services; (ii) at some stage before A has completed performance, B has reason to doubt whether A will, or will be able to, complete performance; (iii) B promises extra payment in return for A’s promise to complete; (iv) as a result of the promise B obtains a benefit or obviates a disbenefit; (v) B’s promise is not given as a result of duress or fraud; (vi) the benefit is capable of being consideration for B’s promise.

Here, B has reason to doubt that S will be able to complete performance on time as the work is more difficult than S had realised. Does B obtain a benefit? He gets his car on time. If Roffey Bros obtained a benefit in their case, this would seem to be a benefit here: in practice, B gets something he would not have got but for the promise of additional payment, ie, his car on time. The CA in Williams said that Stilk remains good law and it is arguable that if the captain there obtained no benefit from his promise of additional payment, there is no benefit here. Nevertheless, it seems that up to CA level, the courts will apply Williams: see, eg, Anangel Atlas. Accordingly, B would have to pay the additional £2,500. Note that promissory estoppel has no application here as it cannot create a cause of action where none existed already: ie it can only be used as a sword and not a shield (Combe v Combe).

If S had been lying, then he would be unable to claim the additional money. According to Glidewell LJ in Williams, S’s fraud would mean that there was no consideration for B’s promise, which would therefore be unenforceable. This would seem to be peculiar to the ‘practical benefit’ doctrine, as generally, the fact that the promisee is lying does not mean that there is no consideration (eg Lewis v Averay). Rather, S’s fraud renders B’s promise of additional payment voidable for misrepresentation. The result is the same (as is there is nothing to suggest affirmation): B is not bound to pay the additional amount.

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