#2186 - Performance Of Pre Existing Duty - Contract Law

Performance of Pre-Existing Duty

Pre-existing duties imposed by public law

• Chen Wishart: general rule is that a promise to perform/performance of pre-existing duty in public law is not consideration for a reciprocal promise

  • BUT courts circumvent rule if public policy reasons of using police as private army etc. are not undermined

    • Mainly by holding that more was promised than was strictly owed under the pre-existing legal duty.

    • Baker LJ in West Yorkshire Police Auth. v Reading Festival Ltd [2006]:

      • When services will have been asked for but will be beyond what police consider necessary to meet public duty obligation

      • OR where organisers would else have to pay for the service from their own pocket

        • Then consideration will be given by the police through additional service, and consideration given by X through payment.

    • Ward v Byham [1956]:

      • Denning LJ: Promise to continue to perform pre-existing duty is always good consideration

        • Because gives a direct benefit to the person to whom it is given.

      • Goold: May also be a case about how X did get something beyond that bargained – not just looking after child, but making it “happy”.

      • Chen Wishart: Denning recognises circumvention of ordinary principle of consideration.

Pre-existing duties owed to a third party

• Performance of existing contractual duty to third party = consideration

• So if Y pays X to perform his pre-existing duty to Z

  • Then this will be consideration (by Y, not Z)

  • Pao On v Lau Yiu Long [1980]:

    • Lord Scarman:

      • Promise to perform to 2^nd party, or the performance of a pre-existing contractual obligation to a third party

        • can be valid consideration.

      • Agreement to do an act which the promisor is under an existing obligation to a third party to do,

        • may quite well amount to valid consideration

          • because promisee obtains the benefit of a direct obligation.

Contract Modifications –where there is a pre-existing contractual duty to the other party

Agreements to end the contract

• When contract not fully executed and both parties owe outstanding obligations to each other

  • Each party provides consideration by agreeing release of the other from their obligation in return for release from their own obligation

• BUT if only one party wants to terminate the contract

  • So, if X has outstanding obligations to Y

  • But Y has not no outstanding obligations to X

    • X can only terminate the contract by giving Y something extra in consideration in return for release.

More for same - Where X agrees to modify the contract by paying more for Y’s pre-existing contractual duty

• Traditional Rule

  • Still v Myrick [1809]: M agreed with S to work a voyage. 2 of 11 S deserted, so M agreed to share the wages of the deserters with the remaining 9S if they worked the ship back to London. When they got there, M refused to pay

    • Campbell’s Report: S’s claim failed because provided no consideration for the master’s promise – was already contractually obliged to sail the shop home

      • So unless additional consideration, modification for giving more for pre-existing duty means new agreement is unenforceable.

    • Espinasse’s Report: S’s claim failed b/c didn’t want sailors to make extortionate demands on masters of ships during voyage

      • Leaves door open for modifications allowing greater payment for same duty w/o consideration as long as no duress.

        • Traditionally accepted rule = Campbell.

• Traditional Exceptions to the Traditional Rule

  • Where promisee gives “more” than he was obliged to under pre-existing duty

    • E.g. able seaman promoted to second mate and thus entitled to more pay as more onerous duties to perform

      • X therefore gets “more” as consideration for extra pay.

  • Where original contract is abandoned and a new one formed

    • In which case, no pre-existing duty b/c been extinguished

    • New consideration is the promise to perform a new duty (albeit same one as before) for new price.

      • McKendrick: why didn’t S use this argument instead? Could it not be argued it was a new contract and the former had been abandoned?

• A contradiction to the traditional rule – practical benefit is valid consideration

  • Williams v Roffey Brothers [1990]: D, under a penalty clause for failing to complete on time, subcontracted work to C. C then asked for more money so as to fulfil obligations. D promised this, work completed, but D refused to pay.

    • Glidewell LJ

      • D received numerous benefits from agreeing to pay more

        • Ensures C continues work

        • Avoids penalty for delay

        • Avoiding trouble and expense of finding substitute.

      • If A and B have a contract where A promises to perform for payment and B later promises A an additional payment in return for A's promise to perform his contractual obligations on time

        • And as a result of giving his promise B obtains in practice a benefit, or obviates a disbenefit,

          • the benefit to B is capable of being consideration for B's promise

            • so that the promise will be legally binding

      • This is so even if B receives no legal benefit from the second agreement.

Same for less – Where X promises to pay the same despite Y having only given part performance

• Traditional Rule:

  • Foakes v Beer: B promised to forego the interest of F’s debt if F paid up in time. When F paid up within the required time, B turned round and demanded the interest as well.

    • Lord Blackburn:

      • Authorities say you need something collateral in addition to a lesser sum in order to discharge a greater sum

        • Can’t just pay the lesser sum in discharge of a greater

          • So do actually need legal benefit, not just practical.

      • Problem = all men of business recognise that prompt payment of part of their demand may be better for them

        • rather than sticking to their rights and demanding the entirety

• Arguably, even though Foakes recognised no legal benefit, it could have seen some practical benefit per Roffey

  • Re Selectmove Ltd [1994]:

    • Held Practical benefit not recognised b/c would disapply Foakes without authority to do so – was up to HoL and/or Parliament.

• Exceptions to the Traditional Rule

  • Lord Blackburn: Need something collateral to support new agreement

    • Could be a different item in lieu of the payment e.g. hawk, cloak

    • Or deliver the lesser payment more quickly than agreed for greater payment

      • E.g. lesser payment week before deadline for greater payment

      • But not lesser payment on same day as greater payment

    • Or deliver lesser payment somewhere else than agreed

      • E.g. pay 10 in London, can agree to pay 5 in York

        • And this expense and inconvenience in travelling would be considered as good consideration.

  • Chen Wishart:

    • Where the claim is disputed, the new sum = compromise

    • Where claim is unliquidated and new agreement merely fixes price

    • Where promises made to third parties (e.g. Z agrees to accept less from a third party in exchange for not suing M)

      • Is especially relevant where multiple creditors b/c otherwise fraud to the other creditors to agree to receive less and then sue for balance.

Debate - How should the law move on from this contradiction?

Leave Foakes as it is

• Roffey is different from Foakes

  • O’Sullivan: Performance not the same as debt

    • Courts recognised in Roffey that perhaps damages are not the equivalent of performance and actual performance could be worth more than the damages from breach.

    • However with debt cases, the focus is not on “what amount will compensate this person for his loss”

      • And merely “what amount does this D owe this C?”

        • Foakes v Beer situations do not share this disbenefit with breaches of ordinary contractual obligations to do work or services.

  • O’Sullivan: Performance subject to remoteness rules, debt is not

    • In Roffey situation, performance breached is converted into damages, and a promisor derives a real benefit from actual performance

      • as otherwise remoteness rule would prevent recovery of many consequential losses that weren’t brought to breacher’s attention at original contract formation.

    • In debt claims there is no conversion of losses into compensation, or a remoteness rule on the extent of that conversion

      • Thus no benefit if business agrees to waive debt

  • O’Sullivan: There is no incontrovertible benefit

    • Mantra = bird in the hand worth two in the bush is deceptive

      • BUT If debtor goes bust, payments to unsecured creditors may be set aside as preferences

        • And where the debtor doesn’t go bust, why should creditor be prevented from recovering balance originally owed (in absence of estoppel)

      • Me: Perhaps b/c it was a commercial risk they were willing to take? To get out earlier and avoid the potential risk of not being paid at all?

  • O’Sullivan: Money is not an asset

    • We can accept parties fixing their own prices onto promises/obligations and this being objectively inadequate, E.g. 1, Hawk, Rose

      • But money is the measure of value itself

        • If we admit that “less money” is of more value than “more money”

          • Then you begin to undermine the market based economy.

    • Me: Problem: is an unnecessarily narrow view of what’s going on

      • Obviously less money =/= more money prima facie

        • But less money + fact that you’ve avoided losing it all

          • Is worth more than the promise of more money which you will never obtain

      • If we’re going to give value to a hawk being worth more to the creditor than 1000

        • Surely we can also give effect to idea that 800 in the hand is worth more than an unobtainable promise for 1000.

• Problem with leaving situation as it is

  • Peel: Means that the question of whether a promise to perform an existing obligation is enforceable rests on the arbitrary...