The Performance by Contracting Parties

The Law Has Made It Quite Clear That The Performance By Contracting Parties Of Their Existing Duties Will Not Constitute Good Consideration For A Fresh Promise.

For almost two centuries we had been complying with the strict ruling from Stilk v Myrick (1809) , where if A performs, or promises to perform, something of an existing contractual duty which A already is obliged to do for B there is no sufficient consideration to constitute a fresh promise. This essay will explore the developments in the law from this rigid approach to the more flexible approach recently taken in Williams v Roffey Bros & Nicholls (contractors) Ltd [1991] which has turned such orthodoxy on its head and led to the courts having to refine other policing mechanisms.

Existing duty; does it amount to consideration? Initially we need to clarify the meaning of consideration. Consideration is the primary component determining enforceability of agreements. Good consideration makes a promise enforceable. The existence of good consideration is determined by proof of a benefit to the promisor, a detriment to the promisee or both. In Currie v Misa (1875) , Lush J stated that:

“A valuable consideration, in the sense of the law, may consist either in some right, interest, profit or benefit accruing to the one party, or some forbearance, detriment, loss or responsibility, given, suffered, or undertaken by the other.”

If there is no good consideration the promise is unenforceable and it may be referred to as a nudum pactum, literally meaning a bare or naked promise. Consideration is when something is obtained in return for the promise or performance of another party. Both parties must agree for there to be a contract, i.e. I will give you my car and you give me £1,000. If the promisee is already bound to perform by an existing legal duty it is traditionally not accepted as constituting sufficient consideration. Merely upholding their existing duties, they’re suffering no legal detriment and conferring no legal benefit.

When A does, or promises to do, something he is already legally bound to do, does he provide consideration for any reciprocal promise from B?

In terms of the definition of consideration it is clear why in most circumstances the performance of an existing duty cannot be good consideration for a further promise:

“Where I am already under a legal duty to perform an act or make a promise, I cannot be said to have been induced to do that thing by a further promise made by another, since the obligation to do it already existed.”

This traditional rule can be subdivided in to three different types of case: performances of a duty imposed by law; performance of an existing contractual duty owed to a third party; performance of an existing contractual duty owed to the promisor.

The first and the latter, performance of a duty imposed by law and performance of an existing contractual duty owed to the promisor (arising in the context of a promise to alter an existing contract between the parties) are usually regarded as insufficient to act as good consideration. Performance of an existing contractual duty owed to a third party has been long recognised as an exception, it is accepted as amounting to good consideration. However, this rigid approach to accept performances of existing duties as consideration to support fresh promises has become more flexible.

When A’s promise to B is in exchange for something he was obliged to do by the law the traditional view is that it is not sufficient consideration. In Collins v Godefroy (1831) , the promisor said he would pay Collins for being a witness. The court held that as Collins was already under a duty imposed by law to attend and give evidence, performance of that duty could not support Godefroy’s promise to pay. Nevertheless, if a promisee has done more than he was legally obliged to do, that will constitute consideration for a promise to pay. In Williams v Williams Denning LJ stated,

“A promise to perform an existing duty is, I think, sufficient consideration to support a promise, so long as there is nothing in the transaction which is contrary to the public interest”

Enforcing the promise in Collins would clearly be contrary to the public interest.

In Ward v Byham, the Court of Appeal (CA) found ample consideration in the mothers actions, i.e. keeping the child happy, which they held to go beyond the scope of her duty obliged by the law. This ‘going beyond the duty’ principle has been vital in mitigating the strictness of the court’s refusal to accept existing duties as consideration to support fresh promises. Denning LJ took a different, more radical, approach to the case. He held that even though the mother is only doing what she is legally bound to do, in looking after the child, the factual benefit to the father, in securing the performance, was sufficient consideration to support the child.

The performance of an existing contractual duty owed to a third party is recognised as an exception and constitutes good consideration. If B promises A that B will do something that B is already bound to do by a contract with C. Then B can rely upon that promise (or his performance of that promise to C) as consideration to support the promise by A [see diagram]. This is shown in Shadwell v Shadwell, the promisee is obliged to marry his fiancé, his uncle promises him money if he marries. Erle CJ refers to the fact that the marriage could be seen as a detriment to the nephew; he may have relied upon the promise in incurring additional expenses. It can also be seen as a benefit to the uncle in seeing his nephew settled. Therefore it constitutes good consideration and the promise is binding. Byles J opposed the decision but however the principle that performance of existing contractual duty owed to a third party can be good consideration has been approved by the Privy Council in other recent cases. In New Zealand Shipping Co. Ltd v A.M. Satterthwaite & Co. Ltd, The Eurymedon, the performance of the duty the stevedores were bound to do (unloading the goods) amounted to good consideration for the shipper’s promise of exemption.

The principle was also extended to promises to perform an existing contractual duty owed to a third party, not just the performance of that duty in Pao On v Lau Yiu Long [1980] AC 614. Lord Scarman’s argument in this case was broad enough not only to apply to pre-existing duties as consideration for third party promises but also to other pre-existing cases which traditionally it has been said to be no consideration. This supported the proposal made earlier by Denning LJ in Williams v Williams [1957] when he stated that performance of existing duties should be a good consideration ‘so long as there is nothing in the transaction which is contrary of the public interest’.

Lastly is the performance of The doctrine of consideration has been used as one of the piecemeal solutions adopted by the English courts rather than overriding any principle. The court’s underlying desire is to see fair dealing during contract renegotiation, but for this to work it must be prepared to refine other policing mechanisms to take the place of the doctrine of consideration.

The Pao On case was a vital development of the doctrine of economic duress making the possibility of a success claim much greater.