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 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, while 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.
First argued in the Kingston-Upon Thames County Court, the judge found that while the flats had not been completed, there had been sufficient consideration to allow calculable damages of around £11,800 and so awarded accordingly.
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 as 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.”