Chapter 3 Enforceability: consideration, promissory estoppel, formalities

3.1.5.4 ‘Less for the same’: part performance

p138, after the Pause for reflection

On appeal, the Supreme Court held, in MWB Business Exchange Centres Ltd v Rock Advertising Ltd [2018] UKSC 24, [2018] 2 WLR 1603, that the contract variation was unenforceable because the original contract contained an enforceable ‘no oral variation’ clause. Since this disposed of the appeal, it was unnecessary to decide whether practical benefit amounts to good consideration in part payment cases. Lord Sumption, who delivered the leading judgment, can be read as: (i) recognising the difficulty of reconciling the notion of practical benefit with Foakes v Beer, (ii) clearly opposing practical benefit as a mere repromise of performance, but (iii) accepting the need to re-examine Foakes v Beer. He said:

That makes it unnecessary to deal with consideration. It is also, I think, undesirable to do so. The issue is a difficult one. The only consideration which MWB can be said to have been given for accepting a less advantageous schedule of payments was (i) the prospect that the payments were more likely to be made if they were loaded onto the back end of the contract term, and (ii) the fact that MWB would be less likely to have the premises left vacant on its hands while it sought a new licensee. These were both expectations of practical value, but neither was a contractual entitlement. In Williams v Roffey Bros & Nicholls (Contractors) Ltd [1991] 1 QB 1, the Court of Appeal held that an expectation of commercial advantage was good consideration. The problem about this was that practical expectation of benefit was the very thing which the House of Lords held not to be adequate consideration in Foakes v Beer (1884) 9 App Cas 605: see in particular p 622 per Lord Blackburn. There are arguable points of distinction, although the arguments are somewhat forced. A differently constituted Court of Appeal made these points in In re Selectmove Ltd [1995] 1 WLR 474, and declined to follow Williams v Roffey. The reality is that any decision on this point is likely to involve a re-examination of the decision in Foakes v Beer. It is probably ripe for re-examination. But if it is to be overruled or its effect substantially modified, it should be before an enlarged panel of the court and in a case where the decision would be more than obiter dictum.

Only the Supreme Court can overrule Foakes but it declined the opportunity to do so in this case (given the complexity of the issue, the fact that a panel of seven judges had not been convened and any consideration of the issue would have been obiter). The consequence is that Foakes v Beer remains good law.

3.1.6 Consideration: an assessment

3.1.6.2 Abolish consideration in contract modifications

p142 before Counterpoint, add-

Rosas v. Toca 2018 BCCA 191

The appellant won the lottery and loaned $600,000 interest-free to her friend. Approximately one year after the loan was formed, the appellant’s friend told her “I will pay you next year”, and the appellant agreed to the extension on payment. This request was repeated for several years, but the loan was never repaid. Eventually, the appellant brought a claim against her friend. The trial judge found that the original term of the loan was for one year, and, based on the original repayment date, the limitation period had expired. The judge held that the subsequent promises from the friend to repay a year later were unenforceable for lack of consideration as the friend was already under an obligation to pay. The appellant’s claim was therefore dismissed as statute-barred.
The Court of Appeal for British Columbia allowed the appeal.
There has been an evolution in the doctrine of consideration in the context of contract modifications. When parties to a contract agree to vary its terms, the variation should be enforceable without fresh consideration, absent duress, unconscionability, or other public policy concerns, which would render an otherwise valid term unenforceable. The parties repeatedly agreed to modify the repayment date each time the appellant’s friend told her “I will pay you next year”, and there is no suggestion that the modifications were procured under duress, were unconscionable, or were unenforceable on the basis of public policy. Since those modifications are enforceable, the limitation period has not expired and the claim is granted.