PART defendants made an oral agreement to pay

PART A –

 

CASE SUMMARY of WILLIAMS V ROFFEY BROS. & NICHOLLS (CONTRACTORS) LTD. 1990 2 W.L.R.
1153 1991 1 Q.B. 1

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FACTS:

 

The plaintiff (Williams) entered into a
subcontract with the defendants (Roffey Bros), who were simultaneously holding
a main contract with Shepherds
Bush Housing Association Ltd. The defendants told the plaintiff to
complete carpentry work in 27 flats for the mutually agreed price of £20,000. Subsequently,
the plaintiff faced financial difficulties after realising that the price which
was initially mutually agreed upon, was significantly lower than it should have
been. This meant that the plaintiff was unable to complete the work adequately
whilst also gaining a profit, which was not in the best interest for both
parties. The main contract, between the defendants and Shepherds Bush HA Ltd,
consisted of a penalty clause which stated that the defendants would be
penalised if the subcontract carpentry work was not completed according to
schedule. Due to the fear of being penalised, the defendants made an oral
agreement to pay an additional sum of £10,300 at the rate of £575 for each of
the flats to the plaintiff. This agreement was made on the 9th of April
1986. Multiple weeks later (near the end of May 1986), the plaintiff had
completed the carpentry for another 8 flats. However, the defendants made only
one further payment of £1,500 and refused to pay any more than this. As a
result of this, the plaintiff ceased work and sued the defendants for the
additional sum which was promised. Mr. R. Jackson Q.C. at Kingston-upon-Thames
County Court held that the agreement to pay the additional sum was in actual
fact enforceable and did not fail for lack of consideration. This meant that
the judgement held in favour of the plaintiff, Williams.

 

 

ISSUES:

 

1)   
Whether there was good consideration present:

 

(In regard
to the oral agreement made by the appellant on the 9th of April 1986
to pay the respondent an additional sum for the performance of existing
contractual obligations on time).

 

In
particular, (a) whether the promise given by the respondent to complete his
existing contractual obligations was valid as a form of consideration, (b) whether
a practical benefit amounts to good consideration, and (c) whether the
consideration ‘moved from the promisee’.

 

2)   
Whether the ‘substantial’ completion entitles
respondent to payment;

 

3)   
Whether promissory estoppel applies to the
facts of the case;

 

4)   
Whether economic duress applies to the facts
of the case.

 

 

DECISION:

 

The Court of
Appeal agreed with the initial ruling made by the County Court, which was in
favour of the respondent (Williams), stating that the payment was enforceable.

 

 

REASONING
FOR DECISION:

 

1)   
Whether there was good consideration present:

 

1a)
Whether the promise given by the respondent to complete his existing
contractual obligations was valid as a form of consideration;

 

The
judge made the following findings on this issue; firstly, the subcontract price
which was initially agreed upon was too low for the respondent to ‘operate
satisfactorily and with profit’. This was confirmed by Mr. Cottrell, the
surveyor for the appellants, who was also a carpenter. Secondly, after meeting
with Mr. Cottrell on the 9th of April 1986, the appellants agreed to
pay an extra £10,300 to the respondent. The judge further added onto these
findings by claiming that both the respondent and the appellants were acting
contrary to their own interests. This means that the agreement made on the 9th
of April 1968 did not fail for lack of consideration.

 

Franklin
Evans (for the appellants) admitted that his clients did receive a practical
benefit (as stated below). However, Evans claimed that although a practical
benefit was present, there was no benefit in law as the respondent was agreeing
to do no more than what was originally agreed in the first subcontract. Evans
used the argument of Stilk and Myrick (1809) 2 Camp. 317. Within this case, 2
crew members deserted a voyage from London to the Baltic. The captain contacted
the remaining crew members and promised to make give them an extra payment for
their efforts without the 2 crew members who had left. The remaining crew
members agreed but upon arrival back in London, the captain refused the extra
payment. They attempted to sue him as he had promised an extra payment to them
upon their return. However, a decision was made by Lord Ellenborough C.J. that
the seaman had all undertaken to “do all they could under the emergencies of
the voyage”, meaning that they had consented to continue with the work they had
already agreed to do, even if an emergency was present. Lord Ellenborough also
added that the desertion of half of the entire crew (as in Hartley v Ponsonby (1857) 26 LJ QB 322) would be considered
as an extra effort required of the remaining crew members, but juxtaposed this
by saying that on the contrary, the desertion of just 2 crew members would not
be considered as there being much of an extra effort required from the
remaining members of the crew.

 

It was held
that Stilk v Myrick would not apply because of the following reasons; there was
a practical benefit to the appellants, as well as the consideration moving from
the promisee (which was also the appellants). Also, the fact that there was a
pre-existing contractual obligation to carry out the work required was capable
of being good consideration for an additional payment for similar work to be
conducted. This is because of the point that due to the original agreement
acting contrary to both of the parties’ interests, an offer for a higher
payment was a practical benefit for both parties involved, and thus would not
fail for lack of consideration. It is also important to note that the judgement
in Williams v Roffey did not overrule the judgement made in Stilk and Myrick,
it was distinguished from it.

 

1b)
Whether a practical benefit amounts to good consideration;

 

Evans
agreed that his clients received multiple practical benefits, in the following
way, by offering to pay an extra amount to the respondent; i) they made sure
that the respondent would continue with the work and finish it on time, ii)
leading to the appellants avoiding the penalty for late completion or delay of
the work, and iii) as a result of this, would not have to go through the
trouble of finding another carpenter to complete the work.

 

The
judge then focused on the case of Ward v Byham (1956) 1. W.L.R. 496. Within the
facts of the case, the defendant asked the claimant to take care of their
daughter, for which he would pay her £1 a week as long as the daughter was kept
happily and wanted to stay with the claimant. A few months later, the claimant
got into another relationship, at which point the defendant ceased making
further payments to her. When she sued him for this, he claimed that there was
no consideration as he was not asking her to do any more than what would have
been legally expected from her regardless. Denning L.J. held that consideration
was in fact present in the case, because there would be a benefit to the father
(that the child was happy) if the mother took care of the daughter. Also, he
made a promise to make the payments.

 

Applying
this case, we can see that if a practical benefit is involved for the promisee,
then that is enough to satisfy good consideration. In Williams v Roffey, it is
clear that the appellants had multiple practical benefits arising from the oral
agreement as well as avoiding detriments. Also, the respondent did not have any
economic duress as they did not force the appellants to offer more money. The
appellants did this under their own consent after their meeting with their
surveyor, Mr. Cottrell.

 

1c)
Whether the consideration ‘moved from the promisee’.

 

Consideration
‘must move from the promisee’ simply implies that that it must be confirmed by
the promisee that they are providing consideration for what they are promising.
Within this case, the appellant provided consideration as they were the ones
that initiated the oral agreement between the parties for a higher payment to
be made.

 

2)   
Whether the ‘substantial’ completion entitles
respondent to payment;

 

On the 9th of April 1986, it was agreed that
the respondent would be paid an additional £10,300 at the rate of £575 per flat
in order to complete the work on time. Franklin Evans claimed that the
agreement stated the payment would be made upon completion of the work, not
just substantial completion. However, Christopher Makey (for the respondent)
used the case of Hoenig v Isaacs (1952) 2 All E.R. 176 prove his point. Within
this case, a contractor was hired to decorate and furnish a flat for the agreed
price of £750. The agreement stated that the money would be paid as “net cash,
as work proceeds, and balance on completion”. Upon completing his work, the
flat owner only paid him £400, whilst stating that they had found defects in
the furniture which justified why they had taken £350 off the agreed price. It
was held that the plaintiff was entitled to the full payment with some
deductions for minor defects or omissions, and that it was not fair to only pay
£400 to a contractor who substantially did what was asked of him in the
contract.

 

Denning L.J. stated that that lump sum contracts do not
mean that the entire performance of the contract was a condition precedent to
payment. This held that the promise to complete the work within these cases was
a part of the contract, rather than the condition. Denning L.J. also stated
that an employer could not resist payment of price unless some for defects or
omissions. If the contract has substantially been performed, then that is
enough for payment of that sum, deducting some for defects or omissions.

 

Romer L.J., another judge, agreed to the saying of that
of Denning L.J. He also added that it would be considered wrong to hold the
person who hired the contractor liable if the contractor does not fully follow
the instructions within their contract. For example, if the hirer asks for the
contractor to build a fence which is 2 metres tall, and the contractor only
makes it 1 metre tall and then does not continue with the work, then in that
case it would not be fair to hold the hirer accountable. He then juxtaposed
this by saying that if the contractor does fully or substantially perform his
contract by supplying what he had been asked to do, then it would be wrong to
refuse him of payment that he has rightfully earned.

 

This means that within this case, due to the respondent
having substantially completed the work he was asked to do by the appellants,
he is entitled to the payment of the work he has done, after deducting some
payment for any defects or omissions.

 

3)   
Whether promissory estoppel applies to the
facts of the case;

 

In regard to promissory estoppel, it was acknowledged by
Glidewell L.J. that although it was a thought-provoking principle, “no reliance
can in my view be placed on this concept in the present case”. This was then
further elaborated by saying that “it may well be possible for a person to whom
a promise has been made, on which he has relied to make an additional payment
for services … to show that the promisor is estopped from claiming that there
was no consideration for his promise”. This means that promissory estoppel may
well be able to be used for the side of the appellants, however it was noticed
that the application of the doctrine of promissory estoppel to facts similar to
those of Williams v Roffey had not yet been developed.

 

4)   
Whether economic duress applies to the facts
of the case.

 

It was
arguable whether or not economic duress could be applied to the facts of the
case, but it was decided that it economic duress was in fact not present. The
main reason for this was simply due to the fact that the appellants themselves offered
the extra money to the respondent. As a result of them doing this, they gained
a practical benefit and avoided suffering a detriment. There was no economic
duress on the part of the respondent.

 

 

 

 

RATIO
DECIDENDI:

 

If
a contract is abandoned with reciprocal agreement from both parties, this can
be classed as good consideration for another contract in which; the party which
is promising to increase the payment which was initially offered then receives
a practical benefit of any kind or avoids a disbenefit. In order for this to apply,
there must have not been any economic duress or fraud by the receiver of the
payment.

 

 

PART B –

 

 

(i)            
Is this case
still current law?

 

The case of Williams v Roffey is still good law, also known
as current law. This can be confirmed as the ratio of this case has not been
overruled by a higher court, nor was the decision reversed on appeal, as the
decision of the Court of Appeal was the same as that of the initial ruling of
the County Court. Another indicator is the fact that Williams v Roffey has been
used within multiple other cases in order to prove the judgement decided upon
in them. All of these are positive indicators of the status of a good law case.

 

 

(ii)          
What cases
have followed this decision?

 

One case that followed the decision made in Williams v
Roffey is Scomadi Ltd v RA Engineering Co Ltd 2017 EWHC 2658
(IPEC).
Another case that also followed the decision is MWB Business
Exchange Centres Ltd v Rock Advertising Ltd 2016 EWCA Civ
553.

 

 

(iii)         
Name 2 cases that have distinguished this decision and outline the grounds for this
distinguishment.

 

One case which
used the judgement in Williams v Roffey to distinguish the judgement made in
their own is Corbern v Whatmusic Holdings Ltd 2003
EWHC 2134. The courts dismissed the company’s application for an order that
would restrain the advertisement of a winding up petition, and strike it out on
the premise that the alleged agreement could not be seen as viable in regard to
contract law since it lacked the required consideration. This would have been distinguished from Williams v Roffey due to the
fact that there was no consideration present within this case, and there was in
Williams v Roffey.

 

Another case which distinguished the judgement
is Re Selectmove Ltd 1993 EWCA
Civ 8. Within the facts of this case, the Crown had demanded money in tax from
the company Selectmove Ltd as they had been underpaying. They agreed to pay in monthly
instalments of £1000. After accepting a few months of these instalments, the crown
sought a winding up order. However, it was held that the tax collector lacked authority
to bind the amount. This meant that the agreement was not binding. Once again,
this case can be distinguished from Williams v Roffey due to the lack of consideration,
similarly to Corbern v Whatmusic Holdings Ltd.

 

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