Courts generally follow the principle that ‘past consideration is no consideration’. It can thus be deemed insufficient if one party carries out a task before the receiving party has promised something in exchange. Clearly indicating that when the party varies the contract and states that they will pay (or give something of value), to the other party this cannot be seen as valid consideration as the receiving party had already received thus, the promise will not be enforced. The ‘past consideration is no consideration’ rule can be seen applied in; Roscorla v Thomas. However circumstances in which the courts will accept, ‘past consideration as valid consideration’ is where performance has been requested; application of such exceptions can be seen in, Lampleigh v Braithwaite . The circumstances whereby an alteration promise can be enforced despite the terms of the original contact in requested performance can be neatly consolidated in Pao On v Lau Yiu Long where Lord Scarman created a 3-stage-test. Such exceptions to the doctrine of consideration imply that Mulcahy’s statement cannot be taken as the whole truth.
Another principle which generally rules out the enforceability of alteration promises is where one has only performed a duty which was already imposed upon them; as, can be seen in the case of Collins v Godefroy . Therefore generally if someone choses to vary the contract by promising the other party that they will give them more for the same contractual duty they are not legal obliged to pay them more unless fresh consideration has been provided from the other party. For example; if X makes Y an offer claiming that X will give Y £1000.00 if she does all his coursework. But, then later X alters the promise and says he will in fact give Y £1500.00 for doing his coursework. Then if after Y has completed her contractual duty of completing coursework X only gives Y £1000.00 X; if a dispute rises, the Courts will not enforce the alteration promise. This is because Y has provided no fresh consideration when X varied the terms of the original contract. However had Y in response to the alteration promise, promised X she would in return of the additional £500.00 come personally to give X the coursework this would have shown fresh consideration. This rules was essentially derived from the decision made in Stilk v Myrick . As a result the courts have upheld the view that the alteration promise was enforceable because of the principle that ‘consideration must be sufficient but not adequate’. Such court decisions further emphasise that Mulcahy is correct in claiming that; “whenever the parties wish to vary the terms of the original contract… fresh consideration must be provided”. Nevertheless there are still, circumstances where alteration promises have been enforced by courts where the party has only carried out performance that was already part of their original contractual duty. This exception is most exceptionally evident in the case of Williams V Roffey Bros & Nicholls (Contractors) Ltd ; where the plaintiff was able to enforce the varied terms of the contract even though all he did in reality was perform contractual duty already imposed upon him. The courts reason for enforcing the altered promise was because the courts held that, performance of an existing contractual duty can be taken as fresh consideration but only if the performance resulted in a “practical benefit” to the other party.
However the decision made in William v Roffey Brothers was criticised on the bases that the decision had undermined the authority of, Stilk v Myrick because it had altered the common law rule that existing duty cannot amount to fresh consideration. The response to such criticisms however is that the reason for such conflicting decisions was the application of economic duress in both cases. The two conflicting decisions were reconciled on the bases that; the captain had no other choice but to bribe his companions in order to return home whereas in Williams v Roffey Brothers no element of economic duress was present. Decisions such as these further emphasise the fact that despite the other party only performing what is required from them, the courts may still be willing to enforce alteration promise(s). Thus we can assume that Mulcahy’s view cannot be upheld as: ‘fresh consideration’ is not always needed for courts to enforce a promise that vary a contact.
Additionally the most common circumstances in which the courts do not enforce a promise which varies a contract in where only; part payment of a debt has been made. This is because the common law rule clearly states that, part payment is not good consideration. The origins of this rule is rooted in the decision made in Pinnel’s Case in which it was clearly stated; “Payment of A lesser sum on the day in satisfaction of a greater cannot be any satisfaction for the whole, because it appears to the judges that by no possibility a lesser sum can be a satisfaction to the plaintiff for a greater sum”. This rule was further emphasises by the decision made by the House of Lords in, Foakes v Beer. In Foakes the dispute was that although Mrs Beer agreed to accept the balance in instalments was she later able to claim the interest because Dr Foakes had shown no fresh consideration for the alteration of the promise to repay the debt in instalments. It was decided by the House of Lords that following the rule in Pinell’s case Mrs Beer could indeed demand interest which supports Mulcahy’s claim of the need of ‘fresh consideration’ when the terms of the original contract are amended.
However there are indeed limitations to Pinnel’s rule that; ‘Part payment of debt is not good consideration’. The court suggested themselves in Pinnel’s that: “.. the gift of a horse, hawk or robe in satisfaction is good, for it shall be intended that a horse, hawk or robe, might be more beneficial to the plaintiff than the money, in respect to some circumstances or otherwise the plaintiff would not have accepted it in satisfaction”. Therefore the courts will be willing to enforce a promise which varies a contract in which only part payment of the debt has been paid but something of value has been exchanged in order to make up for the remaining payment. By accepting such exchange as valid consideration the courts are implying that Mulcahy is correct because where the part payment has been made fresh consideration has been provided via the exchange of a valuable as substitute of the remaining sum of debt. Therefore the courts will enforce such alteration promises.
Finally, the introduction of promissory estoppel has given courts the right to enforce alteration promises without fresh consideration present. Hence, Mulcahy’s claim can be deemed as not applicable in the new modernised law of contract . Promissory of estoppel was a device originally founded in equity law but not in common law. However common law was criticised for being too rigid and inflexible and even unjust at times thus in 1873 the two bodies were bought together with the, Judicature Acts 1873-75 in hope to make common law more just. Promissory estoppel can in its most simplest form be defined as a the principle of reliance. The principle was developed in equity law in order to protect the vulnerability of the party who heavily relied on the altered promise.
Promissory estoppel received judicial recognition in Lord Denning J’s obiter in Central London Property Trust Ltd v High Trees House Ltd. In this case the issue of part payment of the debt was good consideration and thus the court decided that under Judicature Act the defendants did not have to pay the full rent now that the war had ended. Lord Denning was willing to accept that the notion of promissory estoppel required no need for further or fresh consideration to be provided. Failing to uphold the authority of Foakes; instead Denning relied on the authority of, Hughes v Metropolitan Railway Co. The decision made in High Tree House encouraged courts to not only focusing on the test of enforceability on consideration alone but to place importance on the test of enforceability on reliance.
On the whole it can be seen that Mulcahy’s claim can be seen as being the orthodox view and no longer applicable. Though the principle of fresh consideration continues to play an integral part in aiding the courts to decide whether or not a promise which has been varied from the original agreement can be enforced it is no longer the only factor considered. As, we can see in cases such as; High Tree House the test of enforceability of a promise in which the terms of the original contract have been varied is now very much depending on the reliance and no longer consideration. Still, by no means does this mean that consideration is no longer an importance factor as promissory estoppel is not valid unless consideration was present in the original contract to begin with.
Bibliography
Primary Source
Cases:
Collins v Godefroy (1831) 1 B & Ad. 950
Foakes v Beer (1883-84) L.R. 1 App. Cas. 605 (LH)
Hughes v Metropolitan Railway Co (1876-77) L.R. 2 App. Cas. 43
Lampleigh v Braithwaite (1615) Hob. 105
Misa v Currie; sub nom. Currie v Misa (1875-76) L.R 1 App. Cas. 554, HL (Lush J)
Pao On v Lau Yiu Long [1980] A.C. 614
Pinnel’s Case , 77 E.R. 237; (1602) 5 Co. Rep 117a QB
Property Trust Ltd v High Trees House Ltd [1997] K.B. 130
Roscorla v Thomas (1842) 3 Q.B 234
Stilk v Myrick (1809) 2 Camp. 317, 170 E.R.
Williams V Roffey Bros & Nicholls (Contractors) Ltd [1991] 1 Q.B. 1; [1990] 2.W.L.R 1153
Statutes and Statutory Instruments:
Judicature Acts 1873-75
Secondary Sources
Books:
L Mulcahy, Contract Law in Perspective, (Routledge, 2008), 85
Misa v Currie; sub nom. Currie v Misa (1875-76) L.R 1 App. Cas. 554, HL (Lush J)
L Mulcahy, Contract Law in Perspective, (Routledge, 2008), 85
Roscorla v Thomas (1842) 3 Q.B 234
Lampleigh v Braithwaite (1615) Hob. 105
Pao On v Lau Yiu Long [1980] A.C. 614
Past consideration can be seen as valid consideration if: act done by at promisor’s request; parties understood that the act was to be remunerated and finally the payment of conferment of a benefit would be enforced if had been promised in advance.
Collins v Godefroy (1831) 1 B & Ad. 950
Stilk v Myrick (1809) 2 Camp. 317, 170 E.R.
Williams V Roffey Bros & Nicholls (Contractors) Ltd [1991] 1 Q.B. 1; [1990] 2.W.L.R 1153
Pinnel’s Case , 77 E.R. 237; (1602) 5 Co. Rep 117a QB
Foakes v Beer(1883-84) L.R. 1 App. Cas. 605 (LH)
Pinnel’s Case , 77 E.R. 237; (1602) 5 Co. Rep 117a QB
Property Trust Ltd v High Trees House Ltd [1997] K.B. 130
Hughes v Metropolitan Railway Co
(1876-77) L.R. 2 App. Cas. 43