Consideration in English Law - Pre-existing Duties - Factual Benefits

Factual Benefits

However, the strictness of this rule was severely limited in Williams v Roffey Bros & Nicholls (Contractors) Ltd. The Roffey Brothers entered into a contract to refurbish a block of flats for a fixed price of £20,000. They sub-contracted carpentry work to Williams. It became apparent that Williams was threatened by financial difficulties and would not be able to complete his work on time. This would have breached a term in the main contract, incurring a penalty. Roffey Brothers offered to pay Williams an additional £575 for each flat completed. Williams continued to work on this basis, but soon it became apparent that Roffey Brothers were not going to pay the additional money. He ceased work and sued Roffey Brothers for the extra money, for the eight flats he had completed after the promise of additional payment. The Court of Appeal held that Roffey Brothers must pay Williams the extra money, as they had enjoyed practical benefits from the promise they had made to Williams. The benefits they received from it include: Having the work completed on time, not having to spend money and time seeking another carpenter and not having to pay the penalty. In the circumstances, these benefits were sufficient to provide consideration for the promise made to Williams of additional payment. It now seems that the performance of an existing duty may constitute consideration for a new promise, in the circumstances where no duress or fraud are found and where the practical benefits are to the promisor. The performance of an existing contractual duty owed to the promisor is not good consideration for a fresh promise given by the promisor. However, performance of an existing contractual duty owed to a third party can be good consideration, see further below.

According to the Court of Appeal, it is unlikely that either avoiding a breach of contract with a third party, avoiding the trouble and expense of engaging a third party to carry out work or avoiding a penalty clause in a third party contract will be a "practical benefit". In Simon Container Machinery Ltd v Emba Machinery AB, the practical benefit was held to be the avoiding of a breach of contract, which was clearly not an extension of the principle.

This is true unless the debtor provided fresh consideration for the promise. The following, mentioned in Pinnel's Case itself and confirmed by Sibree v. Tripp, may amount to fresh consideration:

1. If the promisee offers part payment earlier than full payment was due, and this is of benefit to the creditor;
2. If the promisee offers part payment at a different place than where full payment was due, and this is of benefit to the creditor; or,
3. If the promisee pays the debt in part by another chattel (note, however, that part payment by cheque, where full payment was due by another means, is not consideration (see D & C Builders Ltd v. Rees)).

Another exception is that part payment of the debt by a third party as consideration for a promise to discharge the creditor from the full sum, prevents the creditor then suing the debtor for full payment (see Welby v Drake).

The Court of Appeal, in Re Selectmove Ltd stated that the practical benefit doctrine arising from Williams v Roffey cannot be used as an additional exception to the rule. In that case, it was held that the doctrine only applies where the original promise was a promise to pay extra and not to pay less. It should be noted, however, that the Court of Appeal in Re Selectmove were unable to distinguish Foakes v. Beer (a House of Lords decision), in order to apply Williams v Roffey (Court of Appeal). It therefore remains to be seen whether the House of Lords would decide this point differently. In any event, the equitable principle of promissory estoppel may provide the debtor with relief.

• Atlas Express Ltd v Kafco QB 833