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Formative Coursework - Grade: 1st
Elements of Contract Law (LAW4005)
Queen Mary University of London
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Department of Law
Formative Coursework Cover Sheet
This form MUST be completed and submitted as the front page of any non-assessed coursework submitted to the Department of Law – coursework without a suitable coursework cover may not be passed on to the correct member of staff for marking. Student ID: 180081358 Student Name: Kapledev Rauth Module code: LAW Module Title: Elements of Contract Law Tutor Group: Q Tutor name: Word Count: 2191
Read the following statement carefully and sign below: I hereby confirm that the submitted document represents my own work in all respects, except in so far as is indicated either in the text or in the footnotes; and that I have acknowledged by express reference any use of material derived in whole or in part from any other published source.
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Question 4
Consideration can be defined as something exchanged between parties, of value to the receiving party. For example, A pays B £10 to perform an act. A offers £10 in consideration, and B offers performance as their consideration. In English Law, consideration is required from both parties to make an agreement legally enforceable. When a contract is varied, as in this case, consideration again must be provided by both parties to make the varied agreement enforceable. For consideration to be valid, it must be of value in the eyes of the receiving party (factual), however courts may insist on there being a benefit in the ‘eyes of the law’ (legal). Courts may deny consideration even if there is a factual benefit, or courts may find a legal benefit even if there is no stated factual benefit, as in Williams vs Roffey Bros 1991.
In this case, the general rule is that if no consideration was provided by Carr’s Steel PLC for the additional £300,000, then they cannot recover the extra money. This rationale uses the doctrine created by Stilk vs Myrick. However, it is highly debated in English Law as to whether this doctrine still holds weight in the modern day. Williams vs Roffey Bros and Nicholls Ltd arguably contradicts the doctrine by claiming that a ‘practical benefit’ is good consideration, and being the more recent case, this may take higher priority over Stilk vs Myrick. I will explore the argument on both sides using these cases in order to give well justified advice to Dynamo Ltd.
On one hand, I would advise Dynamo Ltd that they do not have to pay the extra £300, because Carr’s Steel PLC did not offer valid consideration in this agreement, and only did what they were legally obliged to do in the original contract i complete the delivery by 1st June. In Stilk vs Myrick, a return voyage from the Baltics fell in peril after two of the crew abandoned the ship. The captain promised the remainder of the crew an even share of the wages of the two missing crewmen if they fulfilled their duties and returned to London. On return, the captain refused to pay the extra money, claiming that the sailing of the ship was not valid consideration for the payment of the extra money because the crew were simply fulfilling their pre-existing contractual duties. The decision was found in the captain’s favour, as Campbell’s report states “there was no consideration for the ulterior pay promised... before they sailed to London they had undertaken to do all they could under the
existing contractual duty. Economic duress occurs when a party is forced to either renegotiate a contract or vary the terms of the contract because the other party threatens to cancel the contract. Therefore, the only practical reason for the threatened party is to offer new terms. This gives rise to differing interpretations and therefore reduced credibility of the judgement in Stilk vs Myrick. The case was brought up again in Williams vs Roffey Bros, however Espinasse’s reasoning was the preferred rationale, which could indicate that the case has become outdated and would not be used in a modern court. If this report was to be applied to Dynamo Ltd vs Carr’s Steel PLC, it would be difficult to prove duress induced by Carr because Dynamo offered the extra money of their own accord, with no pressure from Carr’s Steel, but rather pressure from the worldwide steel shortage.
It may be more suitable for Dynamo Ltd to pay the extra money, so as to avoid a larger fine if they were to lose the case. Williams vs Roffey Bros conflicted the ruling in Stilk vs Myrick. Roffey Bros (RB) contracted to refurbish 27 flats, which had a penalty clause for late completion. RB then subcontracted carpentry work to Williams. Williams fell behind in work due to poor supervision of his workers. To avoid the penalty clause, RB promised to pay Williams and extra £575 for every flat he finished. Williams continued work and refurbished 8 flats however RB did not pay the sums, and so Williams stopped work and decided to bring action against RB for breach of contract. 4 RB claimed that Williams did not provide valid consideration for the variation in the contract and claimed he was just doing what he was contractually obliged to do in the original contract. RB used the doctrine from Stilk vs Myrick to argue their case, however the Court of Appeal held that “the policy of the law... has developed considerably since the early 19th century when Stilk vs Myrick was decided”. 5 RB claimed that even though they received factual practical benefits from the on-time completion, they did not receive practical benefits in in the eyes of the law. One of the practical benefits stated by the defendants was “seeking to ensure the plaintiff (Williams) continued work and did not stop in breach of the subcontract”. 6 Russell LJ dismissed this claim, stating that where “a party undertakes to make a payment because by doing so it will gain an advantage arising out of the continuing relationship with the promisee” 7 there is a
4 Williams v Roffey Bros & Nicholls Ltd [1991] 1 QB 1 CA 5 Williams vs Roffey Bros & Nicholls Ltd [1991] 1 QB 1 CA (Russell LJ) 6 Williams vs Roffey Bros & Nicholls Ltd [1991] 1 QB 1 CA (Glidewell LJ) 7 Williams vs Roffey Bros & Nicholls Ltd [1991] 1 QB 1 CA (Russell LJ)
practical legal benefit and therefore there is valid consideration, so the promise is enforceable. When applying this to Dynamo Ltd, it can be argued that they received a practical benefit in keeping a continuous relationship with Carr’s Steel, and to avoid contracting with a different firm. The benefit of keeping the relationship relates to the worldwide steel shortage; having a continuous relationship with a steel company in this economic climate is a clear practical benefit. Dynamo Ltd would have to prove that there was no practical benefit arising from keeping the relationship with Carr’s Steel, however this would be difficult to prove as the facts state that there is a steel shortage. This would therefore be considered valid consideration from Carr’s Steel, using the ruling in Williams v Roffey Bros, resulting in Dynamo Ltd’s promise to pay the extra money to be enforceable.
Another claim that Dynamo could make is that the offer for the extra money was made out of duress. The fact that many clients began to cancel contracts due to the steel shortage may have caused Carr’s Steel PLC to threaten cancellation of the contract also. For a successful duress plea, there must be what is known as illegitimate pressure enforced by Carr’s Steel PLC. This means a ‘threat’ amounting to a breach in contractual duty, i Carr’s Steel PLC may have intended to cancel their contract, like the other companies. Due to this threat, Dynamo Ltd may have panicked and made the agreement to pay the extra £300,000, because they were pressured. As other clients were cancelling contracts, it may be argued that they had no other practical option. These are the pre-requisites for a duress claim. If this was the case, then I would advise that Dynamo Ltd claim the agreement was made under duress and is therefore unenforceable. In Universe Tankships of Monrovia vs International Transport Workers Federation, Lord Scarman stated “economic pressure can in law amount to duress; and that duress... renders voidable a transaction into which a person has entered under its compulsion”. 8 Citing Stilk vs Myrick (Espinasse’s version), there was a case for economic duress because the crew had pressured Myrick into making the offer. Furthermore, it can be argued that Myrick had no other practical alternative, as with Dynamo Ltd. In Adam Opel vs Mitras Automotive, Mitras Automotive claimed payment from Adam Opel as debt owed. AO offered a smaller fee; however MA gave an ultimatum – AO must pay the higher fee or seek to find a new supplier. Therefore, in fear of losing a
8 Universe Tankships of Monrovia vs International Transport Workers Federation [1983] 1 AC 366 HL (Lord Scarman)
Formative Coursework - Grade: 1st
Module: Elements of Contract Law (LAW4005)
University: Queen Mary University of London
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