Williams v Roffey Bros & Nicholls (Contractors) Ltd [1991]

English Contract Law

Williams v Roffey Bros &  Nicholls (Contractors) Ltd [1991]
‘Carpenter Shop’ by Carl Larsson

The amendment of an existing contract underpins the argument between contracting parties when a main building contractor secures a residential refurbishment project and accepts the tender of a carpentry subcontractor’s tender despite the low value of his submission.

Having agreed to both first and second fix twenty-seven flats within a specified time for £20,000, the respondent carried out the work on the understanding that payments were made on an arbitrary basis, and so after six months he had first-fixed all twenty-seven flats but second-fixed only nine, while having been paid £16,200 for the work performed.

Aware that his tender was now unprofitable, the respondent renegotiated to keep his business afloat and avoid the financial penalty clause applied to the appellants should the project overrun, whereupon both parties agreed to continue working together on the condition that a further £10,300 would be paid in incremental payments of £575 for each flat completed, however when the respondent left the project only £1,500 had been paid and only seventeen of the twenty-seven flats were substantially completed.

Initially seeking around £33,000 in damages the respondent reduced his claim to around £11,000, citing that the appellants had breached the terms of their oral agreement; whereas the appellants argued that the agreement to pay the additional £10,300 was unenforceable due to non-completion, and that no consideration had been given by the  respondent during revision of the original contract. 

Argued in the Kingston-Upon Thames County Court the judge found that while the flats had not been completed there had been sufficient consideration as to allow calculable damages of around £11,800, and awarded accordingly, while presented to the Court of Appeal the issues around payment for incomplete performance of a contract and the argument for lack of consideration were given closer examination before the Court  noted how p.126, para.183 of Chitty on Contracts stated that:

“The requirement that consideration must move from the promisee is most generally satisfied where some detriment is suffered by him e.g. where he parts with money or goods, or renders services, in exchange for the promise. But the requirement may equally well be satisfied where the promisee confers a benefit on the promisor without in fact suffering any detriment.”

Thus the Court dismissed the appeal on grounds that the respondent’s agreement to continue working toward completion of the flats provided a degree of benefit to the appellants, because failure to do so rendered them subject to the penalty clause, while the Court finally reminded the parties that:

(i) if A has entered into a contract with B to do work for, or to supply goods or services to, B in return for payment by B; and (ii) at some stage before A has completely performed his obligations under the contract B has reason to doubt whether A will, or will be able to, complete his side of the bargain; and (iii) B thereupon promises A an additional payment in return for A’s promise to perform his contractual obligations on time; and (iv) as a result of giving his promise, B obtains in practice a benefit, or obviates a disbenefit; and (v) B’s promise is not given as a result of economic duress or fraud on the part of A; then (vi) the benefit to B is capable of being consideration for B’s promise, so that the promise will be legally binding.”

Dunlop Pneumatic Tyres Co Ltd v Selfridge & Co Ltd [1915]

English Contract Law

Dunlop Pneumatic Tyres Co Ltd v Selfridge & Co Ltd [1915]
‘Tyre’ by Kiku Poch

After litigation is bought against a third party the enforcement of a contract extending beyond reasonable bounds proves the undoing of a commercial tyre distributor when the rules of English contract law move to narrow the scope of claim and protect those party to sub-contracts.

In 1911 the appellant tyre manufacturer set about establishing written agency distributorship agreements with a number of commercial outlets in order to retain control over the sale value of its key products, wherein sch.2 and sch.5 of those contracts required all participating agencies to agree that:

“(2) We will not sell or offer any Dunlop motor tyres, covers or tubes to any private customers or to any co-operative society at prices below those mentioned in the said price list…nor give to any such customer or society any…discounts or advantages reducing the same.

(5) We agree to pay to the Dunlop Pneumatic Tyre Co Ltd, the sum of 5l for each and any tyre, cover or tube sold or offered in breach of this agreement, as and by way of liquidated images and not as penalty, but without prejudice to any other rights or remedies you or the Dunlop Pneumatic Tyre Co Ltd may have hereunder.”

In exchange the agencies were granted a 10% discount and some instances annual rebates for high value orders, and so on this occasion the respondents had purchased a Dunlop tyre from an agency, who as consideration were prevented from selling Dunlop products to any other firms or individuals for less than the standard list price, while afforded a discretionary right to sell Dunlop products to other trade outlets at a maximum of 10% discount on the proviso that those purchasing had pre-signed a prohibitive contract similar to the one held by the agencies.

With this in mind the respondents later sold a particular Dunlop tyre to a private customer at a seven and a half percent discount, and yet when ordering the tyre from the agency they were informed that no discount could be offered to the buyer without the completion of a signed price maintenance agreement (an act later executed by the respondents). 

Having learned of this the appellants sought an injunction and sued the respondents for breach of contract on grounds that the agency were acting under their principle control, therefore by selling the tyre to a prohibited party they were liable for damages as expressed in sch. 5 above. 

In the first instance the judge awarded in favour of the appellants before granting the injunction as requested, while challenged in the Court of Appeal the respondents argued that the contract between the agency and the appellants excluded the right to enforce it upon a third party on grounds that no consideration had been given by the appellants when the price maintenance agreement was drafted between the respondents and the agency. 

Having lost the appeal the appellants pressed the issue before the House of Lords, who unanimously upheld the previous judgment on grounds that lack of consideration at the point the agreement was made precluded the appellants any claim of right under English common law, while reminding the parties that:

“[O]nly a person who is a party to a contract can sue on it.

Carlill v Carbolic Smoke Ball Co. (1893)

English Contract Law

Carlill

The primary ingredients to a valid and enforceable contract are (i) offer (ii) acceptance (iii) consideration and (iv) performance; and so on this occasion, the sale of medicinal apparatus proved the undoing of what may have at first blush appeared to be a lucrative use of marketing and false pretence.

In 1891 an advertisement was placed in the Pall Mall Gazette boasting the remedial powers of carbolic smoke balls, that when used in accordance with the manufacturers instructions could prevent users from the effects of influenza, while the exact words used stated that:

“100l reward will be paid by the Carbolic Smoke Ball Company to any person who contracts the increasing epidemic influenza, colds, or any disease caused by taking cold, after having used the ball three times daily for two weeks according to the printed directions supplied with each ball. 1000l is deposited with the Alliance Bank, Regent Street shewing our sincerity in the matter.”

Having decided to take the challenge, the respondent in this appeal purchased and used the product in full observation of the terms of the advert and yet still caught the virus, whereupon she sued for breach of contract.

Following a general examination of  the nature of her claim, the court awarded in favour of the respondent, before the appellants sought to challenge the existence of a contract on grounds that (i) the advert did not constitute a contract, (ii) that non-specificity of persons prevented any binding effect on consumers, (iii) that no acceptance had been notified so as to bind them, and (iv) that no consideration had been made by the respondent so as to warrant a claim of right.

After addressing each point sequentially the Court of Appeal unanimously held that while the advert did not amount to a contract, it did represent an offer to the world entire, therefore those who chose to purchase and use the product as prescribed within the published text were through their participation, demonstrating full and unconditional acceptance of the offer.

Similarly the money spent and time invested when using the smoke balls (an unpleasant experience in itself) further indicated that consideration had been sufficient enough to allow a claim.

In addition the Court upheld the appeal on grounds while noting how unlike arms-length contracts, the all-encompassing design of advertisements were not such that required acceptance for reasons of practicality and that reasonable application of the promises made prevented revocation by the advertisers on grounds that when drafting the advert, they did so upon the risk that profit may, or may not, have become certain, while reminding the parties that:

“Inconvenience sustained by one party at the request of the other is enough to create a consideration.”

Moore v. Elmer (1901)

US Contract Law

Moore v. Elmer
‘Clairvoyant-Veritas’ by Gabriel Von Max

A promise to pay while absent of any consideration may at first blush appear to be enforceable, however the eyes of the law see things in quite a different light, as was found in this rather bizarre suit between a clairvoyant and the administrators of an estate.

For reasons best known to themselves, the plaintiff and former client had somehow entered into a bargain, whereby a written statement in January 1898 expressed that:

“In consideration of business and test sittings received from Madame Sesemore, the clairvoyant, otherwise known as Mrs. Josephene L. Moore on numerous occasions I the undersigned do hereby agree to give the above named Josephene or her heirs, if she is not alive, the balance of her mortgage note which is the Herman E. Bogardus mortgage note of Jan. 5, 1893, and the interest on same on or after the last day of Jan. 1900, if my death occurs before then which she has this day predicted and claims to be the truth, and which I the undersigned strongly doubt. 

Wherein if she is right I am willing to make a recompense to her as above stated, but not payable unless death occurs before 1900. Willard Elmer.”

And so upon his death, the plaintiff sued for recovery in the Hampden County Superior Court, while his various family members argued that the claim was void for want of consideration, after which the court dismissed the suit and the matter was argued again before the Massachusetts Supreme Court.

Here the court turned first to Chamberlain v. Whitford, wherein it had held that:

“An executed and past consideration is not sufficient to support a subsequent promise. It is not enough to show that a service has been rendered, and that it was beneficial to the party sought to be charged, unless it was rendered at his express request, or under such circumstances that the law would imply a request.”

While in Dearborn v. Brown the court had earlier held that:

“[T]he past performance of services constitutes no consideration even for an express promise, unless they were performed at the express or implied request of the defendant, or unless they were done in performance of some duty or obligation resting on the defendant.”

To which it had been evident that no money had been exchanged for the readings, nor any express terms set out during their meetings. And so when summarising the fruitlessness of the claim, the court finally relied upon Johnson v. Kimball in which it had later held that:

“An executed gift is neither consideration for an express contract nor a ground for implying one as a fiction of law.”

Thus the claim was one without merit and so the suit was again dismissed to the relief of the surviving parties and the dismay of a wanton clairvoyant, although one might have expected her to learn of the outcome prior to any litigation.

Greiner v. Greiner (1930)

US Contract Law

Greiner v Greiner
Image: ‘Plaza Lights, Kansas City’ by Thomas Kinkade

Inducement of consideration on the part of a promisee to a contract, whether written or oral, is an action that while not seemingly of benefit to the promisor, requires completion of the gesture by lawful means should natural justice be seen to be done.

In 1926, the appellant inherited a substantial amount of land from one of her sons, after which she aimed to use it to make amends for her late husband’s death, whose own will had disinherited four of his children, while the remaining four became beneficiaries to portions of his estate.

By way of reparation, the appellant sought the counsel of a number of those children, while on a number of occasions, explaining that she intended for the respondent to relocate from his home in Logan County, to a plot estimated at around 80-97 acres in size. This became problematic for the respondent as he was indebted by way of mortgage and could not just ‘up sticks’ and move, at which point the appellant took steps to reassign the mortgage to herself, so as to allow the respondent to take up residence on the land set aside for him.

This was duly executed until around a year later, when the respondent was served with a notice to quit by one of his brothers, whereupon he sought remedy by way of a conveyance from the appellant to support his right to title. Given that the appellant was illiterate, it became apparent that she had not taken the steps needed to complete such a disposition, but had instead relied upon her own insistence that she would bequeath him the land by way of a will, which was yet to be drafted.

When heard at the district court, the judge ruled in favour of the respondent, whereupon the appellant contested it within the Supreme Court of Kansas. Here, reference was made to s.32 of the Restatement Law of Contracts which reads:

“In case of doubt an offer is interpreted as inviting the offeree to accept either by promising to perform what the offer requests or by rendering the performance, as the offeree chooses.”

While s.90 of the same document reads:

“A promise which the promisor should reasonably expect to induce action or forbearance of a definite and substantial character on the part of the promisee and which does induce such action or forbearance, is binding if injustice can be avoided only by enforcement of the promise.”

Which translated that despite a failure to endorse her intentions through written expression, the appellant had by virtue of her repeated declarations, created an enforceable contract of disposition that by extension had led to the relocation of the respondent on the pretence that title was both implied and ultimately due through either deed or testamentary powers. It was this irreversible fact that led the Court to uphold the previous decision and dismiss the appeal outright on grounds that financial remedy would not be sufficient to the cause in hand.

Maple Leaf Macro Volatility Master Fund v Rouvroy (2009)

English Contract Law

Maple Leaf Macro Volatility Master Fund v Rouvroy
‘Still Life with Vodka and Herring’ by Roxana Paul

When consideration is given by at least one party to a contract (whether interim or final) it becomes in principle, very hard for the other party to claim no contract could stand, irrespective of signatures or third-party withdrawal. In this case, the founder-directors of a beverage firm sought to rescind an agreement between themselves and a hedge fund provider, despite a long-standing commercial history, and openly agreed terms of engagement.

After enjoying moderate success as an alcoholic drinks manufacturer, and having recently acquired a smaller company as part of their expansion, it was decided that the time had come to recoup on their investment, and so a controlling share of their business was sold to a large financial holdings company. Within a year, the working relationship between the investors and owners deteriorated, to the degree that the appellants moved to buy back their company and regain controlling influence.

As part of this reversion, the terms of the arrangement required them to obtain significant loans within a very narrow timeframe, which themselves provided stakeholder rights to the lenders. During the construction of the funding package, the defendants took the step of paying the monies loaned directly to the controlling firm, as part of their commitment to the loan arrangement and repurchase scheme. When a third party to the draft contract renegotiated a different arrangement with the appellants, they declined to add their signature to the final agreement, leaving only the appellants’ and defendants’ ink upon the document.

It was then argued by the appellants that the absence of a third signature rendered the contract void, and so there now existed no binding obligation on their part to continue with the loan or invitation to share control, however when stripped down and reassembled in its proper context, it was found by the Court of Appeal that due to the significant consideration given by the defendants, there was sufficient evidence to show an enforceable contract that bound both signatories, despite the reluctance of the third party, and so the court dismissed the appeal, while holding that:

“[A]lthough no contract can be made without an intention to be legally bound, that intention has to be ascertained objectively, not by looking into the parties’ minds.”