Chapter 3 – Enforceability Issues

Essay question

The law governing the principles of consideration in the context of alterations to existing contracts is without clarity of principle and in urgent need of reform.

To what extent do you agree?

Essay question answer guidance

You should recognise the need for consideration in the context of alterations to existing contracts (Stilk v Myrick (1809)). The main issue is what amounts to consideration. You should explain the significance of Foakes v Beer (1884), in the context of alterations to accept less, including with reference to Lord Blackburn’s speech. You should also recognise the significance of Williams v Roffey Bros (1991), in the context of promises to pay more. Roffey confirms a practical (or factual) benefit can be consideration. Is it significant that Foakes was not cited in Roffey? Can Roffey be reconciled with Foakes?

Attempts have been made to extend the Roffey principle to promises to accept less and avoid the rule in Foakes. Such an attempt was rejected in Re Selectmove (1995) but succeeded before the CA in MWB v Rock (2016). The CA’s reasoning in MWB is controversial and you should discuss this. Does the ‘additional benefit’ analysis in MWB provide a satisfactory way to reconcile authority? MWB is arguably pragmatic and gives effect to party expectations, but that needs to be analysed in the context of the binding authority of Foakes. You might suggest that the problem is Roffey and the practical benefit concept. Should Roffey be overruled? This argument needs to be reconciled with the opposing view that Roffey is desirable for its pragmatism. Should the SC in MWB (2018) have resolved the consideration issue? How should it be resolved?

You should also recognise the significance of the doctrine of duress (see Chapter 10). Does this provide suitable protection from exploitation, which supports a relaxed approach to the enforceability of alteration promises (Roffey)?

Problem question

In February, Zoe agreed to lease a fitness studio and beauty salon from Harcourt Investments for £5,000 per month. The lease was to run for three years, commencing in May.

In March, Zoe’s aunt, Audrey, sent a letter to Zoe promising to give Zoe £15,000 to help her new business venture. On the strength of this promise, Zoe ordered £10,000 of new fitness equipment from Jaymark Fitness. On 1 April, when Zoe received an invoice from Jaymark, she asked Audrey for the promised £15,000, but Audrey told her she could no longer afford this sum and would give her £6,000 instead. Zoe informed Jaymark that she could not pay the £10,000 owed but could manage £6,000. Jaymark agreed, reluctantly, to accept the £6,000 in full and final satisfaction of the debt.

The studio and salon were due to open for business on 1 July and Zoe engaged a firm of builders, Longshots, to carry out some internal renovation work for which planning permission had been granted. On 3 June, it became apparent that Longshots would not complete by its contractual deadline of 25 June, so Zoe offered a £1,000 ‘bonus’ to get the work completed by that date.

In early June, Harcourt Investments learnt that Zoe was experiencing financial difficulties and offered to reduce her rent on the studio and salon to £4,000 per month ‘to help out at the start’.

Zoe’s business opened on time on 1 July and is proving to be a great success. In August, Harcourt told Zoe to start paying £5,000 per month in rent again from that month onwards and also demanded the balance for June and July.

Advise Zoe.

Problem question answer guidance

Can Zoe can claim the £15,000 promised by her aunt Audrey? There is possibly an intention to create legal relations. Audrey is Zoe’s aunt (social/domestic arrangement), but there appears to be certainty and reliance and it is in a business context, so the social/domestic presumption may be rebutted (Snelling v Snelling (1973)). The promise is not in a deed, however, so needs to be supported by consideration (Combe v Combe (1951)). Zoe appears to have done/promised nothing in exchange so the promise is not enforceable, despite the fact that it was relied on. As such, Audrey is not bound to pay the £15,000.

Is Zoe liable to pay the £1,000 ‘bonus’ to Longshots? This alteration promise to pay more needs to be supported by consideration (Stilk v Myrick (1809)). Applying Williams v Roffey Bros (1991), there appears to be consideration through the practical benefits for Zoe (avoiding the need to find a new builder at short notice and being ready for opening). Economic duress is unlikely to be an issue because Zoe ‘offered’ to pay the additional sum. Zoe is bound by the promise.

Is Zoe liable to Jaymark Fitness for the £4,000 balance? This is an alteration promise to accept less. As with alteration promises to pay more, it must be supported by consideration. Simply paying less is not consideration (Foakes v Beer (1884) but compare Lord Blackburn’s dissent). You should also consider the developments following MWB v Rock (CA (2016) and SC (2018)). Even if the CA’s consideration analysis in MWB is good law, there is no apparent ‘additional benefit’ beyond the receipt of some money for Jaymark. Jaymark is not bound by its promise to accept less and Zoe must pay.

Is Zoe liable to Harcourt Investments for the full rent, and if so, from what date? This is another promise to accept less. There is no obvious consideration (even if what the CA said in MWB is good law, there is no suggestion that Harcourt avoids having empty premises by accepting this promise). Furthermore, a consideration argument is also made difficult by the qualified scope of the promise (£4,000 per month ‘to help out at the start’). It does, however, appear that promissory estoppel applies. Applying Central London Property Trust v High Trees House (1947), Harcourt can require the full rental payment again once it serves reasonable notice to that effect, which appears to have happened in August. (The fact that the business is a great success is probably not clear enough to bring the estoppel to an end automatically.) Harcourt cannot, however, demand the balance for June and July when the estoppel operated (High Trees).