This paper will critically discuss the validity of the doctrine of Consideration, in terms of its result and the reasons advanced by the judges in William v Roffey[1] and how it would seem to permit any variation of a contract.

Arguably, the most distinguishing factor in the case of William v Roffey in contrast to Stilk v Myrick, is that of ‘factual’ and ‘legal’ benefit or detriment.  It could be argued that the judgment in Roffey Bros was reached purely because the judges felt that Williams had provided consideration due to the ‘practical benefit’ Roffey received from William. Therefore, provided Glidewell’s LJ criteria are met and the promisor receives a practical benefit or detriment, sufficient consideration is provided.  In Stilk v Myrick, it was considered that no sufficient consideration was provided as there was only a legal benefit because the crewmembers were only doing what they were already contracted to do. It is important to note that, the principle in Roffey Bros is not extendable to promises to accept less. The case of Pinnel’s Case [1602] and later Foakes v Beer [1884], both provide that part payment of a debt does not suffice good consideration for the whole debt, furthermore, an arrangement to pay in instalments equivalent to the full amount owed at completion is also not good consideration as was apparent in Re Selectmove [1995]. The issue of practical benefit raised in Roffey Bro was argued in Re Selectmove as it was felt that, part payment of a debt in comparison to no payment at all would constitute good consideration. After all, it would be a logical argument to have some sort of money rather than no money at all. However, this argument was dismissed and Gibson LJ clearly stated that the principle from William v Roffey only applies to promises to pay more and not those to accept less. Therefore, the decision in William v Roffey appears to have allowed some flexibility in the application of the doctrine of consideration, an argument advocated by Noble amongst others.

That being said, several exceptions to the rule in Pinnel’s Case were provided, one of them being the defence of promissory estoppel. An equitable defence, applicable where a promise lacks consideration, but bars the promisor from going back on a promise made to the promisee. .   The doctrine was established in Hughes v Metropolitan Railway [1876-77] and espoused by Denning J, in Central London Property Trust Ltd v High Trees Ltd [1947] where he stated that, “a promise intended to be binding, intended to be acted on and in fact acted on is binding, so far as it’s terms properly apply.” The doctrine is subject to certain requirements. It was held in Combe v Combe [1951], that the doctrine is a ‘shield and not a sword’, meaning that it is employed only as a defence and not to bring an action. Additionally, it must be a clear and unequivocal promise (Woodhouse A.C. Israel Cocoa Ltd v Nigerian Product Marketing Co Ltd [1972]), and requires a change of position by the promisee, (Emmanuel Ayodeji Ajayi v RT Briscoe (Nigeria) Ltd (1964). Furthermore, the reliance need not be detrimental as was the case in Alan v El Nasr [1972] and it must be inequitable for the promisor to go back on their promise (D&C Builders v Rees [1966]). In essence, promissory estoppel could be considered the “doctrine of fairness’ and is used to support contracts where consideration is present. It is important to note that the doctrine does not eliminate the need of consideration in contract formation because it cannot be used as a cause of action but only as a defence as previously stated.

On the contrary to consideration, is the doctrine of economic duress. A relatively nascent doctrine in contract law, its uses are employed when rendering a contract voidable and on the occasion where an agreement has been reached illegitimately or under pressure. The doctrine formally surfaced from the decision in Occidental Worldwide Investment Corporation v Skibs (The Sibeon & The Sibotre) [1976], where Mr Justice Kerr in determining whether there was a ‘coercion of the will’, outlined the three elements required in proving economic duress as being, “coercion of the will so as to vitiate consent, protest from the party claiming duress at the time of the duress or shortly thereafter and that the agreement entered into under alleged duress was not seen by the wronged party as being settled and binding. There are instances where focus is laid on the ‘coercion’ of will’ and hence the victims mental capacity. Contrastingly, in The Sibeon & The Sibotre, The Universal Sentinel [1983], focus was more on the legitimacy of the pressure applied.

Mr Justice Mocatta, also considered Kerr’s elements, in The Atlantic Baron [1979]where the court acknowledged that the threat of a breach of contract in itself was not economic duress however, it could have amounted to economic duress, had the plaintiff not affirmed the contract due to the passage of time between the defendants actions and when the claim was brought. Furthermore, Mr Justice Kerr’s decision in The Siboen and the Siborte was affirmed in Pao On v Lau Yiu Long [1980] by Lord Scarman.

The current position of economic duress was more recently defined by Mr Justice Dyson in DSND Subsea Ltd v Petroleum Geo Services ASA [2000] where he outlined that, for economic duress to be established, and normal commercial bargaining to be differentiated from illegitimate commercial pressure, pressure must be present and a distinction must be made as to whether it was applied in good or bad faith. In addition, it must also be determined whether the victim of the pressure experienced a lack of realistic practical choice, whether he protested and whether it could be believed that he affirmed the contract. Only then can economic duress be established.  Although in the above-mentioned cases illegitimate pressure and unlawful threats were the main focus for establishing economic duress or the lack thereof, CTN Cash and Carry Ltd v Gallaher Ltd [1994] provided that a lawful act can also amount to economic duress. Interestingly, from the decision in this case, it is arguable that if an outcome of a decision is made out of good faith, it is unlikely that economic duress for a lawful act will be found.

When examining the relationship between consideration and economic duress, it is important to take into account Deputy Judge David Donaldson QC statement in Adam Opel GmbH [2007] into account. He stated his bemusement by the decision in Roffey Bros but was bound to follow it, and further went on to enunciate that in relation to consideration and economic duress, “ the law of consideration is no longer to be used to protect a participant in such a variation. The role has passed to the law of economic duress, which provides a more refined control mechanism, and renders the contract voidable rather than void”. It therefore appears that indeed the presence of the doctrine of economic duress has in one way or the other affected the doctrine of consideration particularly in regards to pre- existing contractual duties. Roffey Bros, appears to have slightly relaxed the rules of consideration and demonstrated that the courts are willing to find a solution when one is not presently provided in law by further developing or extending certain areas of the law. Arguably, the same can be mentioned about economic duress, as being an extension to the law that still requires the doctrine of consideration to be present because for an agreement to be a valid one, it requires the existence of consideration otherwise it is void whereas economic duress will render an agreement reached under duress voidable. Therefore, consideration concerns the formation of contracts and ensuring that contracts are correctly formed in the eyes of the law, making them legally binding thus valid. On the other hand, the role of economic duress is concerned with ensuring that agreements are legally reached where consideration has already been established in a fair legitimate manner. It is also important to note that economic duress in comparison to consideration is still a ‘young’ doctrine in contract law, and has room to develop further with support from future case law. It appears only time and further developments of the law of consideration will tell whether in fact, economic duress has indeed affected the doctrine of consideration or whether the development of law in this area maintains the status quo; with both preserving their functionality and playing their distinct yet symbiotic roles within the formation and validity of a contract.

 

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Bibliography

Table of Cases

(1) Adam Opel GmbH (2) Renault S.A v Mitras Automotive (UK) Limited. [2007] EWHC 3205 (QB).

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Central London Property Trust v High Trees House [1947] KB 130.

Chappell & Co v Nestle Co Ltd [1960] AC 87 (HL).

Combe v Combe [1951] 2 KB 215.

CTN Cash and Carry Ltd v Gallaher Ltd [1994] 4 All ER 714.

Currie v Misa [1875] 153 lr 10 ().

D & C Builders v Rees [1966] 2 WLR 28.

DSND Subsea Ltd v Petroleum Geo Services ASA [2000] BLR 530.

Dunlop v Selfridge [1915] 847 847 (AC).

Emmanuel Ayodeji Ajayi v RT Briscoe (Nigeria) Ltd (1964) 1 WLR 1326.

Foakes v Beer (1884) 9 App Cas 605.

Hartley v Ponsonby [1857] 7 E&B 872 (QB).

Hughes v Metropolitan Railway [1876-77] LR 2.App Cas 439 (HL).

North Ocean Shipping Co Ltd v Hyundai Construction Co Ltd and Another (The Atlantic Baron) [1979] QB 705.

Occidental Worldwide Investment Corporation v Skibs (The Sibeon & The Sibotre) [1976] 1 Lloyds Rep 293.

Pao On v Lau Yiu Long [1980] AC 614 .

Pinnel's Case v [1602] 5 Rep 117 (CCP).

Re Selectmove Ltd v [1995] 2 All ER 531.

Stilk v Myrick [1809] 170 ER 1168 (KB).

Thomas v Thomas [1842] 2 851 at 859 (QB).

Universe Tankships v International Transport Workers Federation, The Universe Sentinel [1983] 1AC 366.

Williams v Roffey Bros & Nicholls (Contractors) Ltd [1990] 2 WLR 1153 (CA).

Woodhouse A.C. Israel Cocoa Ltd S.A and Another v Nigerian Produce Marketing Co Ltd. [1972] AC 741.

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Textbooks

Barrow, Caroline et al. GDL & LLB Cases And Materials On Contract Law. 4th ed. London: Bpp Learning Media Ltd, 2014. Print.

McKendrick, Ewan. Contract Law.  10th ed. Basingstoke: Palgrave Macmillan, 2011. Print.

Peel, Edwin, and G. H Treitel. The Law Of Contract. London: Sweet & Maxwell, 2011. Print.

Poole, Jill. Contract Law. 12th ed. Oxford: Oxford University Press, 2014. Print.

Taylor, Richard, and Damian Taylor. Contract Law Directions. 3rd ed. Oxford: Oxford University Press, 2011. Print.

Articles

Noble, Margaret. 'For Your Consideration'. New Law Journal 141.1529 (1991): n. pag. Web. 14 Apr. 2015.

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