Transcript Slide 1

Alteration promises on the
back of an original contract enforceable?
If A and B make a contract and then later
make an alteration agreement relating to the
original contract, either to pay more for the
original contract or to accept less payment
than is due under the original contract, is this
alteration promise ‘enforceable’ in the
courts? Is there consideration for it?
Promises to PAY MORE for
the same work
Key cases that we need to look at here
are:
• Stilk v Myrick 1809
• Hartley v Ponsonby 1857 and
• Williams v Roffey Brothers & Nicholls
(contractors) Limited 1991
Williams v Roffey Bros Ltd 1991
It was held in Court of Appeal that the
carpenters were entitled to the extra
payments because they had provided
consideration to the main contractors for their
promise in that:
• the promise secured completion of the work
on time so that the main contractors avoided
the penalty clause, and,
• the main contractors avoided the need to
employ another sub-contractor if the original
ones decided to quit.
Judgment of Glidewell LJ
His lordship held that the promise by the
main contractors to pay extra to avoid a
penalty and to get the work done by the
original subcontractors gave them a
PRACTICAL BENEFIT or avoided a
DISBENEFIT to them and this was
consideration – so long as economic
duress or fraud was absent.
Judgment of Russel LJ
‘Consideration there must still be but in
my judgment the courts nowadays
should be more ready to find its
existence so as to REFLECT the
INTENTION OF THE PARTIES to the
contract where the bargaining powers
are not unequal and where the finding
of consideration reflects the true
intention of the parties’.
Judgment of Purchas LJ
His lordship expresses the view that the
Stilk v Myrick case was in large part
decided for POLICY reasons – to
protect masters of ships from being held
to ransom by crews at sea. And he
suggests that the lack of consideration
argument was only really used because
the duress was not available.
Commentary on Williams v
Roffey Bros Limited 1991
In addition, the move away from the need for
‘legal’ consideration in Williams v Roffey
Brothers Limited 1991 was NOT FOLLOWED
in recent cases concerning promises to
ACCEPT LESS payment than is due under
an original contract. Remember that in
Williams v Roffey, the consideration that was
said to exist was of a ‘practical’ or ‘factual’
nature as opposed to really ‘legal’ in nature.
PROMISES TO ACCEPT ‘LESS
PAYMENT’ THAN IS DUE UNDER
AN ORIGINAL CONTRACT
In PINNEL’S CASE it was held that if A
made a promise with B to accept LESS
PAYMENT for a debt and NOT TO SUE for
the balance, then this agreement was
UNENFORCEABLE unless B gave some
extra consideration for it
A promise to accept less than is
due is only supported by
consideration where there is:
• payment in kind rather than in money, or
• payment in advance of the due date, or
• payment at a different location to the creditors
advantage, or
• payment by a 3rd party accepted as full
satisfaction, or
• a composition by creditors to accept less.
Foakes v Beer 1884
The House of Lords held that Mrs Beer could
claim the interest from Dr Foakes because
although in the agreement between her and
Dr Foakes she had stated that she WOULD
NOT take proceedings to enforce the debt,
this agreement LACKED CONSIDERATION
by Foakes – he had to pay the debt to her
anyway as scheduled and so he gave no
additional consideration for her to accept
LESS than she was due, which was the
DEBT PLUS INTEREST.
Re Selectmove Limited 1995
In this case, Williams v Roffey Brothers
Limited was given a NARROW RATIO
DECIDENDI– so that it could only apply to
contracts for goods and services. In this way,
the rule in Foakes v Beer was not challenged
which would have been impossible anyway
as it was a House of Lords case and Re
Selectmove was only in the Court of Appeal –
thus it would have been against the rules of
precedent to attempt to overrule Foakes v
Beer.
Promissory Estoppel
‘Where by words or conduct a person makes
an unambiguous representation as to his
future conduct, intending the representation
to be RELIED on and to affect legal relations
between the parties, and the representee
alters his position in reliance on it, the
representor will be unable to act
inconsistently with the representation if by so
doing the representee would be prejudiced’.
McKendrick
A few early points on
Promissory Estoppel
1. There is the potential for Promissory
Estoppel (PE) to replace consideration
2. PE is just one strand of the broader
equitable
doctrine of estoppel
3. PE does not support a distinct cause of
action
4. PE only protects one’s reliance interest not
one’s
expectation interest
6 key points for Promissory
Estoppel
1. The promise must be clear
2. He who comes to equity must have clean
hands
3. PE usually involves reliance and detriment
4. PE is usually only suspensory in nature
5. PE is a shield and not a sword
6. PE must be explicitly pleaded in court
7 key cases for Promissory
Estoppel
• Hughes v Metropolitan Railway Company 1877
• Central London Property Trust Ltd v High Trees House Ltd
1947
• Combe v Combe 1951
• Tool Metal Manufacturing Co Ltd v Tungsten Electric Co Ltd
1955
• D & C Builders v Rees 1966
• Williams v Roffery Brothers & Nicolls (contractors) Limited
1991
• Baird Textile Holdings Ltd v Marks & Spencer plc 2001
Hughes v Metropolitan
Railway Co 1877
‘It is the first principle upon which all Courts of Equity
proceed, that if parties who have entered into definite
and distinct terms involving certain legal results …
afterwards by their own act or with their own consent
enter upon a course of negotiations which has the
effect of leading one of the parties to suppose that the
strict rights arising under the contract will not be
enforced or will be kept in suspense or held in
abeyance, the person who might otherwise have
enforced those rights will not be allowed to enforce
them where it would be inequitable, having regard to
the dealings which have thus taken place between the
parties.’. Per Lord Cairns LC at 448.
High Trees case 1947
The key importance of the case comes from the
obiter dicta remarks of Lord Denning.
He said that HAD CLPT sued for the full rent
between 1940 and 1945 it would have been
estopped from doing so because of the promise
not to demand full rent.
He relied on the Hughes case.
Combe v Combe 1951
In this case and husband and wife got
divorced. The husband then promised to pay
his wife £100 a year as a permanent
allowance. In reliance on this promise, the
wife did not apply to the courts for
maintenance. When the husband failed to
make the payments, she sued him on the
promise.
She failed because Promissory Estoppel is a
‘shield and not a sword’.
D & C Builders v Rees 1966
In this case, although D & C builders agreed
in writing to accept less than was owed to
them they could still sue for the balance. This
was argued on the basis of Pinnel’s case and
Foakes v Beer and the defence of Promissory
Estoppel was unsuccessful because Mrs
Rees had not come to equity with clean
hands - she had held them to ransom.
Per Dankwerts LJ
His lordship stated:
‘Foakes v Beer, applying the decision in Pinnel’s case,
settled definitively the rule of law that payment of a
lesser sum than the amount of a debt due cannot be a
satisfaction of the debt unless there is some benefit to
the creditor added so that there is accord and
satisfaction’.
He felt that a cheque was basically the same as cash
and so it was not extra consideration that could be used
to avoid Foakes v Beer. Thus, the builders could sue for
the balance due.
Baird Textile Holdings Ltd v
Marks & Spencer plc 2001
Baird was contending that M&S was
estopped from not ordering garments from
them, that M&S should order garments from
them. They failed because:
firstly, Promissory estoppel is a shield and
not a sword and
secondly, that there was no clear unequivocal
promise by M&S that they would continue to
order garments from Baird.