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Published: Fri, 02 Feb 2018
It is in my judgment
The essence of the matter is that, as noted by Peter Gibson LJ in Re Selectmove  , on most interpretations, the principle stated by the Court of Appeal in Williams v. Roffey  appears to be inconsistent with that declared by the House of Lords in Foakes v. Beer  . In analysing this, this paper will comprise three sections: an outline of the principles of the two cases, the issues raised by them and, the various suggestions for reform of the situation.
In Williams v. Roffey the defendants promised greater payment to the claimant in return for completing obligations already owed under the original contract between them. On appeal against the trial judge’s award of damages, the Court of Appeal held that the claimant had provided good consideration for the promise of extra money, even though he was merely performing his pre-existing contractual duty to the defendants. It arrived at this conclusion through an extension of consideration to include the concept of practical benefit to the promisor.
In Foakes v. Beer the House of Lords held that a promise to accept part payment of a debt in discharge of the whole was unenforceable due to lack of consideration for the promise to accept less.
In Re Selectmove the Court of Appeal held they were unable to extend the principle of Williams v. Roffey to circumstances governed by the principles of Foakes v. Beer. Whilst Peter Gibson LJ recognised  that any creditor accepting less for the same “will no doubt always see a practical benefit to himself in doing so” he refused to recognize this as valid consideration for two reasons: first because Foakes v. Beer did not do so even after express consideration. Second, to extend Williams v. Roffey in this way would deprive Foakes v. Beer of any application when there had not even been any express consideration of Foakes v. Beer in Williams v. Roffey.
As a result, the law as it stands appears to take an inconsistent approach to these two related sets of circumstances: it will enforce an agreement to pay more for obligations already owed where a practical benefit is conferred but not where a similar benefit is conferred in an agreement to accept less for the same payment.
Whilst, at her own admission, amongst the minority of academic commentators O’Sullivan  argues persuasively that there is no inconsistency here; that promises to accept less for the same are sufficiently different from promises to pay more for the same to justify the different treatment. In support of this proposition she notes three factors:
Remoteness of damage; and
The first acknowledges the point of other commentators that by treating the avoidance of a penalty clause (and the more general “practical benefit” derived from performance of the contract) as something of value to the promisor, the courts are adopting a Holmesian concept of contract law  , that “the duty to keep a contract at common law means a prediction that you must pay damages if you do not keep it – and nothing else”. However, O’Sullivan highlights the fact that these damages cannot simply be equated to performance; the innocent party of a breach of contract must mitigate his loss. Depending upon circumstances, this mitigation can sizably reduce the scale of damages, yet it is, of course, a principle that has no application to debt claims. The reasonableness of the creditor’s actions or inaction is irrelevant to the validity and size of his claim against the debtor. So Foakes v. Beer situations simply do not share this “disbenefit” with breaches of ordinary contractual obligations to do work or perform services.
The second demonstrates the effect of the remoteness of damage rules. These prevent an innocent party to a breach of contract from claiming for losses deemed too remote to justify making the party in breach pay for them. A similar limitation undoubtedly exists in situations of debt claims where a debtor does not pay on time and as a consequence the creditor misses an opportunity to make an exceptionally profitable use of the money; the debtor will not be required to pay extra. However, noting that the role played by remoteness is in compensation clarifies the difference; in debt claims, there is no conversion of losses into compensation, no requirement of sensible limits on the extent of that conversion; instead, the simple fact of a debtor with an obligation to repay an ascertained sum and a windfall if he gets to keep some of it.
The third factor acknowledges that there may well be factual benefit to a creditor accepting less than is owed him (else why would he accept it?) but maintains that this should not be viewed as a legal benefit. Money, it is argued, is fundamentally different from services and other assets in that it is not just something of value – it is what the value of everything else is measured by. Admitting that “less money” is a benefit to the recipient undermines the whole basis of an exchange-based market economy and its underlying legal rules.
As an aside, O’Sullivan also notes that in the paradigm example of an acceptance of less for the same – an unsecured creditor accepting less than he is owed from a debtor in financial difficulties – an unsecured creditor will very often get less on his debtor’s bankruptcy or insolvency than the reduced sum he accepts (because of prior claims of secured creditors, the costs of the insolvency etc), but if the debtor does subsequently go bust, payments made to the creditor are liable to be set aside as “preferences”; thus there is no possibility of even factual benefit to a creditor here.
The difficulty with accepting O’Sullivan’s arguments that there is no inconsistency with the position as set out above is that, whilst they do indeed show that the two sets of circumstances are more different than they might at first appear, it does not logically follow that the two should be treated differently. The arguments offer justifications as to why the circumstances of Foakes v. Beer should be treated differently from those of Williams v. Roffey, but not as to why those in Williams v. Roffey are treated as they are. Treating the two sets of circumstances similarly has an elegance of logic and consistency; the position as it is currently, based on confirmation of the rule in Foakes v. Beer alongside Williams v Roffey, the question of whether a promise to perform an existing obligation owed to the promisee may be good consideration is to be determined upon the arbitrary basis of the nature of the obligation in question; an obligation to pay money or perform services.
If, then, the principle should not be extended to Foakes v. Beer, should Williams v. Roffey in fact yield to Foakes v. Beer? Should another solution be found to deal with the problem?
Several issues arise from the concept of practical benefit which require consideration before any conclusions can be drawn. These will be considered as follows:
The scope of practical benefit
How far practical benefit applies
The effect of the decision on the principle of Stilk v. Myrick 
The remedial problem
The extent of enforceability in situations where practical benefit is given as consideration
The effect of the new doctrine of economic duress
The scope of practical benefit
The Court in Williams v. Roffey identified four practical benefits to the defendants. The first three are relatively straightforward to deal with:
(a)The claimant’s continued performance;
(b)The defendants avoiding the trouble and expense of obtaining a substitute; and
(c)The defendants avoiding the penalty payment for late performance under the main contract
Chen-Wishart  gives several reasons why these practical benefits are of dubious value for the purpose of buying the promise to pay more:
The first two are benefits already due under the contract and the third is implicit from them; nothing new is conferred.
This point can be countered with a point recognized by the Court of Appeal in Williams v. Roffey, that the promisor, instead of intending to buy the same promise twice, seeks a re-promise in the hope of obtaining the practical benefit of (a) actual performance; or (b) an objectively better chance of actual performance.
However, this in turn can be answered, as Coote has, by stating that “consideration is required for the formation of a contract. Performance, ex hypothesi, comes too late to qualify”  . Moreover, as Birks argues  , construing the first two reasons as something additional is only possible if one takes the Holmesian  view that a contract party has an option to perform or to pay damages and not perform. On that view, a contractual promise to perform is less valuable than its actual performance. Purchas LJ in Williams v. Roffey  took this view, stating that it was open to the claimant to be in deliberate breach of the contract in order to “cut his losses” commercially. Birks contends this is objectionable; allowing a party to “create” consideration by threatening breach and then promising not to undermines the very idea of contract as creating binding obligations and makes a contract no more than a starting point for further negotiation. Whilst acknowledging the ideological force of the point, it does, however, fail to take account of the applicability of the doctrine of economic duress (considered further below) in circumstances of threatened breach followed by renegotiation, which would substantially deal with the issue.
All are in substance intangible benefits; reassurance of performance amounts to no more than sentimental value, generally regarded as insufficient consideration. One can equally derive satisfaction from a gratuitous promise, but an extension to this in terms of the intangible and arguably self-generated benefit given in return would emasculate the doctrine; benefit would merge with motive, and consideration would become a meaningless criterion of enforceability.
To deal with this, courts could impose a substantive limit, excluding benefits of a purely sentimental nature or requiring that the benefit be of a commercial nature or conferred in a commercial context.
However, this would then beg the question: what is it about the commercial context that is being responded to? Factors commonly considered desirable in a commercial context are the promotion of economic efficiency, the protection of a promisee’s reasonable reliance, or the recognition of a promisor’s serious intention to be bound. If these are the relevant factors should they not be responded to directly, rather than mediated through the doctrine of consideration and the notion of commercial context? In addition, how would a commercial context be identified outside the core of commercial transactions? How and why should non-commercial modifications be dealt with differently?
Uncertainty in defining practical benefit and thus consideration has serious implications in the uncertain enlargement of contractual liability. As Patterson says, “rules of contract should not make contracting so easy that it hooks the unwary signor or casual promisor.”  It should protect parties’ freedom to as well as freedom from contract.
The limitations on contract, such that specific performance is rarely ordered and damages often under-compensate the innocent party, give the party threatened with breach an incentive to agree to pay more for the same. Modifications may additionally be commercially necessary, realistic and in the promisor’s best interests but widening the scope of permissible modifications will necessarily increase the risk of the promisee “taking unfair advantage of the difficulties he will cause if he does not complete the work”  . Chen-Wishart  argues that the law’s recognition of the practical benefit of avoiding contract law remedies as valuable consideration is at least open to debate; the conflicting interests of certainty, predictability and risk allocation in holding parties to their bargain are insufficiently protected under this analysis.
The last practical benefit highlighted by the court was:
(d) The defendants’ promise to pay the additional amounts only as and when each flat was completed gave the complainant the incentive to perform in a more orderly manner, benefiting the defendants by enabling them to co-ordinate their other subcontractors more effectively and efficiently towards timely completion of the main contract.
Chen-Wishart argues this should not constitute a legal benefit; orderly performance was not promised, nor could it be enforced, it was merely consequential on the timetable set for the additional sums. In other words, the defendants only obtained the chance of a more desirable sequence of performance. Practical benefit in the form of chance of obtaining a benefit (or avoiding a disbenefit) was confirmed in Anangel Atlas v. Ishikawajimi-Harima (No. 2)  . Here as in Williams v. Roffey the benefit was not promised by the promisee but merely desired and hoped for by the promisor; and the source of the desired benefit came not from the promisee but from third parties. Thus it proves awkward to fit into the orthodox requirement that the benefit must flow from the promisee. But the matter of most significance is if a chance of obtaining a specified benefit is sufficient for the purposes of practical benefit, how small must this be before it ceases to qualify as consideration? If any hope of benefit is to count, consideration amounts to little more than a requirement of motive for a promise. It is unclear how the courts will draw the line here.
How far practical benefit applies
On a purely speculative basis, practical benefit could logically be extended by the courts beyond contract modification to contract formation and include the chance of making a contract or some other un-promised benefit, or, equally, the chance of avoiding some nuisance or other harm threatened by the promisee. An extension along these lines would make it impossible to prevent enforcing all promises, such that any motive or desire would be capable of constituting practical benefit. Illusory consideration, bad faith compromise or forbearance, merely gratuitous options, and promises to perform an existing legal duty could all now support enforcement of reciprocal promises. Past consideration may also be sufficient if it consists of an executory promise; the actual performance or the increased chance of its performance may now confer practical benefit. Whilst the Court of Appeal in Re Selectmove refused to extend the finding of practical benefit in promises of the same for more, to promises of less for the same, this limitation is arbitrary, difficult to defend (although possible as demonstrated by O’Sullivan) and threatens the internal coherence of the consideration doctrine.
The effect of the decision on the principle of Stilk v. Myrick
The court in Williams v Roffey was adamant that it has not overruled Stilk v. Myrick but only “refined” and “limited” it. Although Williams v Roffey explains Stilk v. Myrick in terms of duress, this does not explain the different outcome in Williams v Roffey; there was no less evidence of pressure inducing the promise in that case. In substance, Williams v Roffey affirms Stilk v. Myrick on the need for fresh consideration to enforce an additional promise, but overrules it as to what can constitute this consideration. Stilk v. Myrick requires legal benefit; Williams v Roffey accepts practical benefit. In South Caribbean Trading Ltd. v. Trafigura Beheer BV   EWHC 2676 (Comm) Coleman J openly acknowledges this, recognizing the amelioration of the rigidity of the rule in Stilk v. Myrick by Williams v Roffey  but making clear that he would not have followed it but for it being binding on him (not having “yet” been declared “wrongly decided” by the House of Lords  ).
The remedial problem
If consideration is to be found not in what was promised but in a party’s hopes of benefits, then it is unclear what the appropriate measure is. By definition, the benefits have not been promised – to what extent should their expectation be protected?
If the promisee, in line with the contract, performs what he is required to do and the promisor’s hoped for consequential benefits fail to materialize, the promisor has got the chance bargained for; there can be no remedy. Practical benefit in the sense of a chance cannot be independently enforced.
If, on the other hand, the promisee still fails to perform, the promisor’s expectations will either be protected under the original contract already or will not be protected any further by virtue of having been purchased twice. Compensation for breach of contract operates through the rules of remoteness and causation  . Where the loss is too remote and hence uncompensable paying more does not improve the promisor’s position  . Where the chance of some consequential gain has been lost, damages may be awarded in proportion to the chance of loss  , unless the chance was purely speculative. Loss of benefits in the form of hope of favourable future contracts or, as in Anangel Atlas v. Ishikawajimi-Harima (No. 2), the hope other buyers would follow suit and perform their contracts are most unlikely to be within the remoteness rules. Compensation for such benefits is not increased by payment of an additional sum. Halson  suggests that the scope of practical benefit should be confined to avoiding uncompensable losses on breach by the promisee but this clearly does not advance the situation in remedial terms.
Considering the position from the other side, it would appear that practical benefit does not buy an expectation to the reciprocal promise of the additional sum. The award made to the complainants in Williams v Roffey appears to be reliance- and not expectation-based  . This jars with orthodox contractual analysis that promises formed with good consideration buy the expectation. The inference must be that practical benefits impose a less than expectation liability on the promisor, and confer a less than expectation right on the promisee. As Chen-Wishart points out, such rights and liabilities cannot be described as contractual without seriously compromising contract as an action that enforces expectations, but that is not to say that expectation is the appropriate measure. It can be seen to be particularly inappropriate by considering the example of the promisee who still fails to perform existing obligations, despite having been promised further payment. A contractual analysis requiring losses to be mitigated would treat the greater sum as cost avoided or saved by the promisors and would be deducted from damages. Thus, promisors faced with breach would find that while they have obtained no more enforceable rights than were already due, their own promises to pay more are enforceable, with the effect that they will be worse off than if no additional promise had been made. The intuitive injustice of this situation is recognized by the Ontario Law Reform Commission which recommends that in such an instance the appropriate deduction is the original sum promised, because “it would be an implicit understanding between the parties that failure to comply with the terms of the new agreement would revive the old one”. 
The effect of the new doctrine of economic duress
Prior to Williams v Roffey, the risk of improper pressure in the context of contract modifications in the “same for more” category did not need to be directly addressed because the Stilk v. Myrick rule automatically barred them due to lack of consideration. The liberalized approach of Williams v Roffey is ostensibly balanced by the ability to control improper pressure through the doctrine of economic duress. In The Alev  Hobhouse J said: “[n]ow that there is a properly developed doctrine of the avoidance of contracts on the grounds of economic duress, there is no warrant for the Court to fail to recognize the existence of some consideration even though it may be insignificant and even though there may have been no mutual bargain in any realistic use of that phrase”.
However, the difficulty with the doctrine is that, in practice, what is given with one hand in recognition of practical benefit, is liable to be taken away with the other through acknowledgment of economic duress. Duress rests on the finding that; (i) an “illegitimate threat” by one party; (ii) leaves the other party with “no practicable alternative” but to submit  , thus vitiating the other party’s consent. Chen-Wishart notes  this leaves a very wide potential to invalidate modifications of more for the same since:
Illegitimate pressure includes a threatened breach of contract and that may be implied; this could cover facts similar to those of Williams v Roffey where a promisee, knowing of the promisor’s need for completion simply makes known his unlikelihood of finishing and passively waits for, rather than actively demands, extra payment.
The reasons for finding duress are the very same ones for finding practical benefit as the promisor had “no practicable alternative” but to agree (to avoid the detriment consequent on breach). The doctrines of consideration and economic duress are likely to rely on the same facts to arrive at different conclusions as to the question of enforceability. There will be great difficulty in practice in drawing a rational line between the presence of practical benefit indicating enforceability and the presence of economic duress denying it.
Chen-Wishart opines that, as formulated above, the doctrine is also too coarsely calibrated to distinguish between meritorious and unmeritorious variations  . It will have difficulty accommodating the kind of wide-ranging inquiry which may be thought essential to the assessment: the circumstances prompting renegotiation  , the quality of the promisee’s conduct in obtaining a variation,  the quality of the promisor’s decision to consent to the modification,  the reasonableness of the modification,  and any subsequent change in the circumstances of the parties. To deal with this, Halson suggests allowing the modification if it is reasonably related to the impact of ‘unanticipated circumstances’ upon the performing party where there was an adequate alternative to the modification available to the promisor. Otherwise the modification is unenforceable for duress  .
The obvious difficulty with this solution is in defining ‘unanticipated circumstances’. Take Williams v Roffey, here the court found no duress  based on there being no threat to breach by Williams and on Roffey’s having taken the initiative in increasing the contract price. However, the circumstances which necessitated the modification, the bad bargain made and Williams’ poor supervision of his workers can hardly be described as ‘unanticipated’. It was also clear to Roffey that Williams would not complete on time without additional payment despite there being no threat to breach.
In South Caribbean Trading Ltd. v. Trafigura Beheer BV Coleman J widened the effect of economic duress, apparently dispensing with the requirement of coercion on the promisor. He stated that any unjustified threat by the promisee not to perform an existing duty would invalidate any practical benefit conferred in the making of the new promise of more for the same  . This approach could, however, totally negate the effect of the recognition of practical benefit.
The extent of enforceability in situations where practical benefit is given as consideration?
As already noted, the court in Williams v Roffey gave what appear to be reliance-based damages even though good consideration for the promise of more for the same was found in the form of practical benefit. This, if it was the case since the court did not explicitly state this was the basis of the damages, was another move away from the traditional view of consideration which would award expectation damages for breach of a contract. However, this change now opens the question of to what extent should a promise now be enforceable, whereas previously all contracts formed with good consideration would be enforced to their expectation.
In any particular case it needs to be asked whether a promise should be:
fully enforceable if there has been performance or substantial performance or substantial reliance by the promisee; or
enforceable to the extent of performance or reliance; or
enforceable to the extent of performance or reliance not revoked; or
enforceable to the extent of performance or reliance not revoked and not inequitable to go back on the promise; or
some other basis and extent?
If enforcement is to be divorced from exchange it is not clear what the proper measure should be and as Professor Waddams comments:
“There seems little point in arguing strenuously for the use of a single word for all enforceable promises if an immediate division is to be required between fully enforceable promises and promises that are only partially enforceable” 
Furthermore, expanding consideration in this way dilutes the distinctiveness of contract as the means for an action giving the promisee the value of the promised performance because they have paid the agreed equivalent for it. This is not to deny legitimate enforcement of non-bargain promises, simply to suggest it would be better administered through enforcement by a method outside contract rather than by distorting the notion of consideration. In Professor Waddams’ view:
“It is surely simpler to follow the American Restatement in continuing the present usage of reserving ‘consideration’ for bargains leading to fully enforceable contracts and to recognize that though some promises may be enforceable without consideration the full ‘normal’ panoply of contract remedies, in particular damages measured by the value of the promised performance, may not always be appropriate.” 
This leads into the third section of the paper.
Reforms can be categorized broadly into three groups:
Returning consideration to its traditional position and extending promissory estoppel to deal with non-bargain enforcement of promises.
As O’Sullivan has argued, it is possible to leave the situation as it is. This would be an unattractive course to take as the concept of practical benefit creates more questions than it resolves and, based on confirmation of the rule in Foakes v. Beer alongside Williams v Roffey, the question of whether a promise to perform an existing obligation owed to the promisee may be good consideration is currently to be determined upon the arbitrary basis of the nature of the obligation in question; an obligation to pay money or perform services.
Chen-Wishart  suggests three ways of reforming consideration:
Replace consideration completely with a test of intention
Replace consideration in contract modifications with a test of intention
Acknowledging that consideration means a ‘good reason for enforcement’
(a) Replace consideration completely with a test of intention
In Williams v Roffey Russell LJ said [
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