Chapter 3 Interactive key cases

When Ps acquired shares in a company its majority shareholders wanted to protect themselves against a fall in value of shareholding if shares all sold at once. At request of Ds and on basis of some form of protection being provided by Ds, Ps promised the company that they would not sell 60% of their shares for one year. Ds later made a promise to indemnify Ps against a loss in not being able to sell. Ps wanted to enforce this promise. Held: it was not a promise extracted as a result of duress, and Ps had provided consideration for it through their promise to the company (promising to perform an existing duty owed to a third party—the company). Consideration was not past consideration since the promise had been made following a request by Ds which carried with it a promise of protection. The later promise of indemnity merely fixed the method of protection.

This is an important case discussing:

  • previous request device as a means of avoiding past consideration;
  • consideration in the form of promising to perform an existing contractual duty owed to a third party;
  • ingredients for a claim in duress.

On a voyage where two of the sailors deserted, the ship’s captain had promised the remaining crew extra wages to sail the ship to the home port. But the contract terms required the sailors to sail the ship anyway if there were such minor desertions. The promise was unenforceable since (i) the sailors had done no more than they were contractually bound to do in any event, and/or (ii) the promise was obtained as a result of extortion so that policy dictated that it should not be enforceable.

Alteration promise to pay more: need to show consideration to support that promise and the general rule is that the consideration cannot be performing a contractual duty already owed to the same promisor.

Promise by main contractor to pay more money to the subcontractor in order to get the subcontract work completed by the original deadline in the contract with the building owner and thereby avoid payment of a penalty. The promise was enforceable as supported by consideration since there were factual benefits to the promisor in making such a promise.

Alteration promise to pay more—avoiding the Stilk v Myrick restriction where the promisor’s promise gives rise to factual benefits to the promisor (and so provides consideration to enforce the promise). This consideration is not provided by anything done by the promisee.

Existing judgment debt was to be paid by instalments and creditor therefore promised not to take any enforcement proceedings in relation to the debt. The instalments did not cover the interest on the judgment debt, however, and the creditor went back on this promise to recover that sum. The creditor could do this because the debtor had not provided any consideration for the promise not to sue on the debt. Part payment of an existing debt was no more than the debtor was already contractually bound to pay.

Alteration promise to accept less than the debt owed: needs to be supported by consideration, and this consideration is not provided by performance of existing contract, i.e. by making a part payment of the existing debt. More is required, e.g. payment earlier at creditor’s request.

Licence agreement by which Rock occupied property managed by MWB. Rock fell behind on payments and MWB promised to accept a smaller sum from Rock (the agreement being that Rock would later pay the balance).

CA held MWB’s promise to accept less was supported by consideration (applying Roffey factual benefit principle). Although payment of a smaller sum could not itself be consideration (Foakes), MWB received the additional benefit of retaining Rock as occupier of the property, thus avoiding having an empty and unproductive property. This amounted to a separate factual benefit beyond the mere receipt of payment, which was good consideration to support the promise to accept less.

The SC reversed the decision on a different ground. The CA’s analysis and application of Roffey was not subjected to scrutiny but was not overturned.

Landlords of block of flats promised to reduce the rent charged to tenants during the bombing in the Second World War when the tenants were unable to sublet. The reduced rent was paid until September 1945 when the landlords claimed to receive the full rent. Despite the fact that the tenants had provided no consideration to support the promise to accept less rent, the landlord could not go back on that promise because of the tenants’ reliance on it until it was no longer inequitable to do so. Obiter: the landlord was unable to recover the balance on the rental payments while this estoppel operated.

Promissory estoppel as a defence to prevent a promisor from going back on his promise to forgo legal rights (accept less than it is owed) where the debtor has acted on that promise, and it would be unfair to do so.

D owed P builders £482 and was taken to know that P was in financial difficulties when D offered £300 in full settlement. P accepted the smaller sum and then sought to recover the balance. CA held that there was no consideration to support P’s promise. Lord Denning considered that promissory estoppel could not operate on these facts since it was not inequitable for P to go back on a promise that was not freely given.

It is not unfair to go back on a promise to forgo legal rights and accept less than is owed where that promise was obtained by duress. Duress will prevent the promissory estoppel defence from operating as the promise must be freely given.

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