Consideration in the context of contractual variations
Where contracting parties have an on-going relationship, a change of circumstances may mean
that one, or other, of them seeks to vary the contract. For example, a contractor who has
underestimated his costs may seek to be paid more for what he has agreed to do, or a debtor
who suddenly finds himself in financial difficulties may ask his lender to temporarily accept
reduced repayments on the loan. These are referred to as upward and downward variations
respectively.
Where a party seeks to enforce a contractual variation, the legal issue will often centre round
consideration. What, if anything, did that party promise, or give, in return for the other party’s
agreement to either pay extra money or to accept less money?
In the absence of consideration a variation will not be enforceable at common law, although in
the case of downward variations(i.e. promises to accept less money) a debtor may have an
equitable defence to enforcement if he can show that in all the circumstances it would be unfair
for the creditor to renege on his promise. This equitable defence is known as promissory
estoppel.
We are going to be focusing on 2 things:
1) Upwards variations
2) Downwards Variations
Can not use the laws of upward for instances of downwards variations. Can’t mix and match (for
this course)
Upward Variations:
Question is: Is there consideration for an UV for a contract. Meaning, is performance of an
existing contractual duty sufficient consideration for a promise of extra payment?
Stilk v Myrick [1809] - The claimant, a seaman, agreed to sail a ship from London, to Cronstadt,
to Gottenburgh and then back to London. The crew was eleven people. The wages of the
seamen were £5 per month. The ship sailed from London to Cronstadt. Whilst at Cronstadt, two
of the crew deserted.
The master, to induce the remaining nine seamen to perform the rest of the voyage, promised to
split the wages of the two deserters between them, in addition to their normal wages, provided
they continued the voyage. The voyage was then completed. The defendant refused to pay the
claimant the additional sums promised. The psak was the defendant didn’t have to pay them
back because there was no consideration. Why? Because the extra payment is coming about
due to the completion of an already present contractual obligation.
, However, we have a very similar case where the ruling is different seems to be the opposite??
Hartley v Ponsonby [1857] - The claimant, a seaman, agreed to sail a ship from Liverpool, to
Port Philip in Australia, to Bombay in the East Indies and back to the United Kingdom. The
complement of crew was 36. The wages of the seamen were to be £3 per month. The ship
sailed from Liverpool to Port Philip. Whilst at Port Philip, 17 of the crew deserted. The master, to
induce the remaining nineteen seamen (an unreasonably small number to sail the ship safely) to
sail on to Bombay, promised to pay them a sum of money in addition to their wages to continue
to Bombay. The voyage was then completed. The defendant refused to pay the claimant the
additional sums promised. In this case the defendant had to pay them the extra money because
there was consideration!
How do we reconcile this stira?
In S v M, only 2 sailors deserted ∴ this didn’t substantially increase the workload on the other
sailors. However, in H v P, there was a large number who left and those who remained had an
increasing burden of work. This was considered as sufficient consideration.
These 2 cases are massively important.
The general rule is S V M and the exception is H v P.
Practical Benefit Consideration:
Williams v Roffey Brothers [1990] - A contract to refurbish a block of flats. The defendants were
the main contractors, and they subcontracted the carpentry work to the claimants for £20,000.
Part way through the work the claimants realised they had underestimated the cost and told the
defendants of their financial difficulty. The defendants (mindful of the fact that if the work was not
completed on time the defendants would be liable to pay compensation under the main
contract) promised to pay the claimants extra money (i.e. £575 per flat) to complete on time. On
this basis the claimants continued to work on the flats but in the event were not paid the extra
money promised by the defendants and sued.
The main issue before the Court of Appeal was what, if any, consideration the claimants had
given in return for the promise of additional money. Whilst it was conceded by the defendants
that they had secured practical benefits (i.e. avoiding liability under the compensation clause in
the main contract and the cost and expense of finding other carpenters to finish the job), the
defendants argued that there was no legal benefit.
Where contracting parties have an on-going relationship, a change of circumstances may mean
that one, or other, of them seeks to vary the contract. For example, a contractor who has
underestimated his costs may seek to be paid more for what he has agreed to do, or a debtor
who suddenly finds himself in financial difficulties may ask his lender to temporarily accept
reduced repayments on the loan. These are referred to as upward and downward variations
respectively.
Where a party seeks to enforce a contractual variation, the legal issue will often centre round
consideration. What, if anything, did that party promise, or give, in return for the other party’s
agreement to either pay extra money or to accept less money?
In the absence of consideration a variation will not be enforceable at common law, although in
the case of downward variations(i.e. promises to accept less money) a debtor may have an
equitable defence to enforcement if he can show that in all the circumstances it would be unfair
for the creditor to renege on his promise. This equitable defence is known as promissory
estoppel.
We are going to be focusing on 2 things:
1) Upwards variations
2) Downwards Variations
Can not use the laws of upward for instances of downwards variations. Can’t mix and match (for
this course)
Upward Variations:
Question is: Is there consideration for an UV for a contract. Meaning, is performance of an
existing contractual duty sufficient consideration for a promise of extra payment?
Stilk v Myrick [1809] - The claimant, a seaman, agreed to sail a ship from London, to Cronstadt,
to Gottenburgh and then back to London. The crew was eleven people. The wages of the
seamen were £5 per month. The ship sailed from London to Cronstadt. Whilst at Cronstadt, two
of the crew deserted.
The master, to induce the remaining nine seamen to perform the rest of the voyage, promised to
split the wages of the two deserters between them, in addition to their normal wages, provided
they continued the voyage. The voyage was then completed. The defendant refused to pay the
claimant the additional sums promised. The psak was the defendant didn’t have to pay them
back because there was no consideration. Why? Because the extra payment is coming about
due to the completion of an already present contractual obligation.
, However, we have a very similar case where the ruling is different seems to be the opposite??
Hartley v Ponsonby [1857] - The claimant, a seaman, agreed to sail a ship from Liverpool, to
Port Philip in Australia, to Bombay in the East Indies and back to the United Kingdom. The
complement of crew was 36. The wages of the seamen were to be £3 per month. The ship
sailed from Liverpool to Port Philip. Whilst at Port Philip, 17 of the crew deserted. The master, to
induce the remaining nineteen seamen (an unreasonably small number to sail the ship safely) to
sail on to Bombay, promised to pay them a sum of money in addition to their wages to continue
to Bombay. The voyage was then completed. The defendant refused to pay the claimant the
additional sums promised. In this case the defendant had to pay them the extra money because
there was consideration!
How do we reconcile this stira?
In S v M, only 2 sailors deserted ∴ this didn’t substantially increase the workload on the other
sailors. However, in H v P, there was a large number who left and those who remained had an
increasing burden of work. This was considered as sufficient consideration.
These 2 cases are massively important.
The general rule is S V M and the exception is H v P.
Practical Benefit Consideration:
Williams v Roffey Brothers [1990] - A contract to refurbish a block of flats. The defendants were
the main contractors, and they subcontracted the carpentry work to the claimants for £20,000.
Part way through the work the claimants realised they had underestimated the cost and told the
defendants of their financial difficulty. The defendants (mindful of the fact that if the work was not
completed on time the defendants would be liable to pay compensation under the main
contract) promised to pay the claimants extra money (i.e. £575 per flat) to complete on time. On
this basis the claimants continued to work on the flats but in the event were not paid the extra
money promised by the defendants and sued.
The main issue before the Court of Appeal was what, if any, consideration the claimants had
given in return for the promise of additional money. Whilst it was conceded by the defendants
that they had secured practical benefits (i.e. avoiding liability under the compensation clause in
the main contract and the cost and expense of finding other carpenters to finish the job), the
defendants argued that there was no legal benefit.
