Contract Law

Foakes v. Beer (missed last class – interviews)
•    Why doesn’t the ruling in this case come under pre-existing duty?
•    Why do we need a separate rationale?
o    We do not need the rule from Foakes v. Beer – equally analysable under pre-existing duty
o    Separate island of jurisprudence all to itself, very similar to pre-existing duty rule
o    Could be under Stilk v. Meryk
•    Is is a subset of a preexisting duty, but we treat it separately for historical reasons.

•    Why doesn’t the hypothetical situation whereby one promises to write off a $100 debt in exhange for $50 fall under the rule that we saw earlier (stilk v. merit)
o    S & M was a legal dispute
o    The answer is that the s & m type scenario was about a compromising legal dispute
o    Whereas, in our hypothetical situation, there is no legal dispute.  One is not claiming that one does not owe the money.  One is simply admitting that one cannot pay it.

Given the similarity between the Foakes v. Beer and Stott v. Merit Investment Corporation, would the way around exhibited in williams v. roffey brothers be gotten around the same was as in Stott v. Merit?
o    Williams v. Roffy brother scenario takes some of the sting out
o    Why is it not equally applicable to the Foakes v. beer scenario?
•    It would be.
•    The English courts have addressed this.  They have said that one cannot use a Williams approach to defang the approach of Foakes.
•    This is because Foakes is a decision of the house of lords, and it would take a decision of that same house to overturn it.
•    Further, the argument goes that if Williams got one out from under Foakes, there would be nothing left to Foakes.
•    Whereas, in Williams, all three judges said they were not overturning Stilk v. Merit.
•    Why won’t a Williams argument apply?  (Consideration can be found in practical benefit…)
o    The answer is because the courts have said that it won’t.
•    Williams v. Roffy Brothers says that a prac. benefit can be consideration
o    applies only if the parties already have a contract
o    though limited in this way, nevertheless, is a precedent of great interest.
o    The natural question is, “what can Canada do?  Will they follow?”
•    If Gilbert Steel were decided today, would it go another way?
•    Under Quicklaw, search “Roffey” and see what the cndn courts do when they cite Williams v. Roffey Brothers.
•    ***Look and see whether it is being followed in Canada.  This may be important for midterm.
•    Will it stand as a great precedent of our time, or will it be forgotten?
•    P. 309, para 1. – “The case not being one of a composition with a common debtor, agreed to, inter se, by several creditors. “
o    If the first creditor who gets judgment against a credit gets 100%, then the fifth creditor (for instance) may get nothing as there is nothing left.
o    Sometimes, creditors will agree amongst themselves that none of them will actually execute a judgment against the debtor.  They will take the entire assets of the debtor and divide them up.
o    Earl of Selborne says that this arrangment is binding, but cites it in a way that it would seem to be an exception to the Foakes v. Beer way, but does not mean it in this way.  In fact means that there is consideration in this arrangment.
•    This agreement between creditors is called a composition.
o    Note on page 310 para 3 – there is a point that the “chequeness” is not consideration unless it is a bargained-for chequeness.
•    Nothing is consideration unless it is treated as consideration – unless it is bargained for.  Read this over to clarify.
o    P 312 – contracts with a 3rd party.

Criteria to select promises worthy of legal enforcement
•    Promises given in return for something which the law is prepared to regard as consideration.
o    This is narrower than what ordinary people might view as consideration.
•    Promises under seal (will look at later).

•    Does our legal tradition enforce promises merely because the promisee has relied on them?
o    This is against theory, but may exist practically.
•    We now come to a series of cases where this appears to be the scenario.
o    What is going on will look like promise enforcement, but the question is whether it is really promise enforcement, or protecting resonable reliance.
•    Is it harm prevention as opposed to promise enforcement?
•    With promise enforcement, all the attention is on the promisor.
•    With harm prevention, all the attention is on the promisee.
o    The case that discovered the possibility that there might be something that strongly resembled considerationless promise enforcement was Central London Property Trust Ltd v High Trees House ltd.
•    Lord Denning, prior to becoming a Lord.  He is a Justice here – trial judge.
•    One of the few trial cases in our text.
•    Friendly parties – just want an answer, which they will be willing to accept.
•    In this case, one of the two parties (plaintiff) have become insolvent, and is in the hands of a receiver.  The receiver has a fiduciary duty to try to take in as much money as legally possible.
•    99-year leases are quite common in England.
•    The landlord sues for 2 things (which may be the same thing, 2 ways)
o    Full rent prospectively
o    Full rent retrospectively.
•    First thing we look for is consideration (to enforce the landlord’s promise to let them pay ½ rent).
o    The promissee did rely on this promise
o    Consideration:  The tenant did pay the ½ rent, but that is not consideration – that falls under pre-existing duty.
o    There is no seal on the changed contract.  No change vis-à-vis the change.  No consideration vis-à-vis the change.
o    Denning J. does something revolutionary while saying that he is not doing anything revolutionary.
•    Claims to be following jurisprudence.
•    He makes up something and attributes it to the widom of the past.
•    Estoppel – this is the leading case of estoppel.
•    What Denning J. is faced with is a situation where the promisor made a promise to the promisee, the promisee relied reasonably on the promise, and now the promisor wants to break the promise.
•    The landlord gave the tenant a representation of the future – we call this a promise
•    This case is about whether to enforce a promise.
•    Because it is a promise.  Does not fall under trad. Jurisprudence of estoppel.
•    Allows us to make some enforcement.
•    (para 1 on page 316) – “With regard to estoppel, the representation made in relation to reducing the rent was not a representation of an existing fact.  It was a representation, in effect, as to the future, namely, that payment of the rest would not be enforced at a full rate but only at a reduced rate.  Such a representation would not give rise to an estoppel, because, as was said… a representation as to the future must be embodied as a contract or be nothing.”
•    (Para 2) “There have been a series of decisions over the last fifty years which, although they are said to be cases of estoppel, are not really such.  They are cases in which a promise was made which was intended to create legal relations and which to the knowledge of the person making the promise, was going to be acted on by the person to whom it was made, and which was in fact so acted on.  In such cases the courts have said that the promise must be honoured…  As I have said they are not cases of estoppel in the strict sense.  They are really promises – promises inteded to be binding, intended to be acted on, and in fact acted on.”
•    “In each case the court held the promise to be binding on the party making it, even though under the old common law it might be difficult to find any consideration for it.”
•    Continues – is this promise enforcement, or is it something that looks like promise enforcement, but is not?
•    Is there a meaningful difference between ordering a defendant to keep their promise, and ordering a defendant to act consistently with their promise.
•    Para 3 & 5 address the question (which we would never have to address with consideration)
•    How Binding?
•    The tenant had the audacity to argue that the promise was for the entire 99-year lease.
o    Lord Denning says no.  Will enforce the promise to some extent, but not that extent.
o    Says that the promisor can take back their promise to this promise

Reset.
•    It may be that the promisor can take back their promise
•    Estoppel-based promise-enforcement differs.
•    Promisory-estopple, or equitable-estoppel.
o    A different category of estoppel.

Next class:  Down to D & C Builders v. Rees

On TWEN is last year’s midterm.  Address questions 2 & 3 by way of sample.

5 Slogans:  (find ‘em)

*The pl always sues in his/her capacity of promisee
*The consideration is that which the promisee must demonstrate to the court that he/she exchanged to the promisor for their promise
Must take this decision path initially to get one’s bearings in the actual case.
Identifying the promise and dispute will tell you who the parties are – will coincide.

Too often students do not know where to begin with a problem.  Must orient oneself as per above.

*A promise of consideration is as good as consideration for this purpose.

In the eyes of the law, for this purpose, the law is prepared to treat the promise of something as equivalent to consideration – which is why it can be that my promise to convey my car to you for $1000, and your mutual promise to pay me $1000 for title to my car, gives rise to a binding agreement.

*Consideration is always a bargained-for detriment to the plaintiff-promissee
•    Always; bargained-for; detriment
•    Bargained-for is not just any detriment that counts as consideration.
o    It must be a detriment that was part of the bargain.
o    Ex:  In Dalhousie, the buildings (though a detriment) were not bargained for.
•    Something for something – an arrangement.
•    Consideration is always a bargained-for detriment.
•    **”Always”:  will come back to this word in this statement.

*Past Consideration is no consideration.

P 264
*Consideration need not be adequate;
or, the law does not inquire into the adequacy of consideration.
•    But, law does look at the sufficiency of consideration.
•    By adequacy – we mean the equivalence of the exchange; the quantum; quantity
•    Ex:  Arguing that selling one’s $10,000 car to another person for $1000 – the court does not allow us to go back and examine the adequacy of the arrangement.
o    If one is prepared to part from one’s property for a given price, then the value is simply seen as subjective; as in the appetite of the contractor.
•    By sufficiency (quick and dirty distinction between the two), we mean the ‘substance’ as opposed to the quantity.
o    Comes up in a surprising number of cases.
o    Means the consideration must partake of the substance of things that the law is prepared to accept as consideration.
•    Obvious example is moral consideration.
•    Cannot enforce moral considerations.
•    Past consideration does not count as sufficient consideration either.
•    Means that for something to be considered consideration, it needs to be of the substance of things that the law is willing to look at as consideration.
•    Mere detriment is not sufficient consideration – only bargained-for detriment.
•    Non-bargained-for reliance on a promise does not count as sufficient reliance.
•    SO, the law does not look at the adequacy of the consideration, but does require that it be sufficient
o    Means that the law doesn’t care how much consideration is involved, as long as it is consideration.

Past Consideration is no consideration
o    Implies a reference to something that is present.
o    The ‘something’ that is present is the promise.

Eastwood v. Kenyon
o    The husband undoubtedly made the promise, but this is not enough.
o    What did Eastwood exchange to Kenyon?
o    The consideration was rendered to Sarah a long time before her husband made the promise (or likely even knew her).
o    Could simply say that consideration is always a bargained-for detriment, and there was none of that here.
o    Can also say here, more particularly, that past consideration is not consideration.

o    Eastwood v. Kenyon is the case where consideration ceases to be simply ‘a word’.  It is a watershed in giving ‘consideration’ its modern meaning.
o    Goes to having a technical meaning in the law.
o    Para 9, page 267 – Lampleigh v. Brathwait (1615) – “the leading case on the subject…”
o    Distinguishable from Eastwood and Kenya
o    In E. v. K., have 1) Eastwood’s spending, then 2) Kenya’s promise
•    (1) had already been done before (2) came along.
o    In L. v. B., there are 3 acts:
•    Facts:  braithwaite killed someone, and was sentenced to hang.  At the time, those who were sentenced to hang were in fact not hanged.  They were usually pardoned (either conditionally or unconditionally).  Braithwaite told Lampleigh to go to the King and lobby for a pardon.  This is Act (1).
•    Next sig thing that happens (2), is that Lampleigh does attempt to find the court, to lobby it.  It takes him awhile, but he does it – successfully.
•    (3) – Braithwaite promised Lampleigh compensation
•    In this case, the court said that braithwaite’s promise was enforceable.
•    Said that Lampleigh’s actions were consideration.
o    In Eastwood, the judge says that Lampleigh v. Brathwait was distinguishable from a past-consideration scenario.
o    Says that in L. v. B., the consideration was implicit in the original request.
o    (3) is implicit in (1).
o    P 267 – Hobart C.J. says that a mere voluntary courtesy will not have a consideration to uphold a promise.
o    If someone offers someone something as a courtesy for something already done, then the consideration is already in the past, and not-binding.
•    Ex: ‘b’ mows ‘a’s’ lawn.  ‘A’ offers ‘b’ $20 as compensation.
o    If the courtesy were moved at the request of the party who made the promise, then it is binding.  Then, it is not naked (nudem pactum) – but couples itself with the suit before…
o    This means that if, for example, ‘a’ asks ‘b’ to mow their lawn, ‘b’ mows the lawn, and then ‘a’ promises to pay $20 – the promise for $20 can be interpreted as implicit in the original request.
•    The coupling is through an implication.
•    It is implicit that one is not asking for a gratuitity.  This is, of course, much clearer in the realm of business as opposed to friends or neighbours.
o    [Aside:  Remember that juries determine questions of fact, judges determine questions of law.]

p 282.  Guiding Transaction Adjustments
o    a pre-existing legal relationship, that the parties wish to adjust.
o    How is this accomplished in a way that ‘sticks’?
o    Ex: ‘a’ promises ‘b’ to sell his car for $1000.  ‘B’ says yes.
o    ‘A’ regrets selling for too little, so ‘B’ agrees to up the price to $1200.
o    Often times, this would result in an amendment  – cross out $1000, write in $1200, and both parties initial.
o    Had a living contract, and decided to adjust it.
o    The question is whether this perfectly intuitive action is actually legal…
•    Does this actually result in a legal obligation to pay the $1200.
•    No.
•    This is very likely not legal.

Stilk v. Myrick [1809]
•    Napoleonic wars
•    Embargoes on Britain forced them to go far-afield for materials such as timbre.
o    In this case, there is a contract of hire for a vessell.
o    £5/month for the sailors.
o    2 sailors desert at Cronstadt (now Finland, then Russia).
o    The captain promised the other men that, were the places not filled, they would have the deserters’ wages split amongst them.
o    The places proved impossible to fill, and the remaining 9 crew worked the ship back to London from what is now Finland.
o    The captain, upon their return to London, would only pay the £5.
•    Garrow, for the masters of the ship, was one of the first famous lawyers – known for his appeals to juries
o    Garrow argues that if this sort of action were permitted, crews could extort captains to pay them more, or they would allow ships to sink during emergencies, etc.
o    Judges say that the deal is in fact unenforceable because the sailors gave the captain no consideration.
•    At this time, the answer to the question “Why can’t one sell oneself into slavery?” changed.
•    The trad answer was that it was against public policy.
•    Around this time, the answer changed to ‘beause there was no consideration’ – the property of the slave becomes the property of the master.
•    The law was becoming more theoretical.
o    The sailors who remained with the ship were already legally bound to do so.
o    Those who remained were bound by the terms of their original contract to do their utmost to bring the ship safely to its destination.
o    Therefore, the sailors were only promising to do their pre-existent legal duty – this does not make up new consideration for a new bargain.
o    A promise to do that which is already one’s legal duty is not sufficient to form consideration.

Gilbert Steel Ltd. v. University Construction Ltd.
o    The promise being sued on is the promise to pay an increased rate for the steel beams.
o    What consideration did Gilbert Steel give to University Construction Ltd. in exchange for this promise?
o    G.S. alleged that they agreed to give a good price on the second building in exchange for this agreement to pay an increased rate now.
•    2 problems:  i) too vague;  ii) doubt that it was agreed up (even if it was mentioned)
•    Does not work as consideration
o    The delivery of the steel is the obvious consideration.
•    Why is it not?
•    They were already obliged to provide this steel, as part of the original agreement.
•    There is not detriment here.
•    This is why they switched to the “good price” arguument.
o    Pl.’s lawyer argued that the consideration of the oral contract was the mutual abandonment of the prior agreement.
•    Variation scenario – does not work unless one has a mini-contract to change an already existing contract, which in itself requires consideration.
•    If they had decided to call the whole thing off, leaving them (at least for a millisecond) contractless, and entered into a new contract, then that would be binding.
•    Why is it binding to agree to call a contract off?
•    Each side is sustaining the bargained-for detriment of releasing the other side from their obligation.
•    Releasing another from an obligation is a detriment.  Here it is also a bargained-for detriment.
•    It is binding.
•    “Recision + new contract” analysis – this would work.
•    “variation” will never work, unless it is that mini-contract to vary.
o    Recision + new contract is the argument that Mr. Morphy makes here.
•    Wilson J.A. says that this is perfectly legitimate, but that there is no evidence to support the idea that this is what the parties believed they were doing.
•    How does one know whether a particular action is variation or recision?
•    very difficult.
o    This is why the correcting-and-initialing is likely not legal.
o    The editors of our text portray this case as one of the worst decisions ever made.
o    The article on page 297 is by one of the editors – Barry J. Reiter.

Williams v. Roffey Bros and Nicholls (Contractors) Ltd.
o    Very similar case
o    Another contract case.
o    Another case where the project was half-finished.  Promised more to finish the project – how could this be binding?
o    Very rare in English C.A. for all three judges to write (as in Canada).
o    In this case, all three write.
o    Ever rarer for all three to write when they agree – they do in this case.
o    This is something different about this case…
o    Agree that this is enforceable, but are obviously so uncomfortable with enforcing it that they take a stab at explaining it.
o    Each of the three say that they are not overturning Stilk v. Myrick.
o    Say that it still stands for something.
o    Facts:  Roffey Bros have a contract with the municipality whereby they need to have the repairs completed by a certain date.
o    The pl. was a carpenter.  Def. was supposed to make progress payments to the plaintiff.
o    By april 9 1986, Pl. had completed the work on the roof, and first repairs to all 17 flats, and the second repairs on 9 flats.
•    Defendants had made interim payments of £16,200
o    By end of March, pl had run out of money
•    Roffey Bros. approach them and offer more money
•    Williams still went insolvent – had the audacity to sue Roffey Bros.
•    The fault was of Williams for putting in an unrealistic bid.
•    Had Roffey bros. over a barrel, due to the time restrictions on the other contract.
•    Under orthodox analysis, the plaintiffs already had a duty to finish the flats.
•    By promising again to do so for more money, they have insufficient consideration.
o    Where is the consideration that the judges find?
o    What the court has always required is that the pl. promisee exhange a legal detriment to the promiser.
o    In Hamer v. Sidway, in the real world, the kid was benefitting from not smoking, drinking, gambling but in the eyes of the law, giving up ones rights to do something is a detriment.
o    This case acknowledges the diff between a practical benefit and a legal benefit.
o     A practical benefit is not one that the law would normally recognize
o    at the end of this case, the practical benefit turns out to be the legal benefit.

Para 15 – page 303
o    Judge says that Roffy Bros was in fact deriving practical benefits from Williams completing the project at the new price.
o    Keeping Williams on the job should have been to the Roffy Bros benefit, as they did not have to try to find new contractors if that were even possible.
o    Says that the underpining of the rule in Stilk v. Myrick was to save masters from economic duress.
o    P 305 – para 22
o    Propositions
o    The obvious objection to these propositions is that consideration is a bargained-for  detriment
•    What new detriment did Williams sustain?  None.  They are already bound.
•    This judge ignores this.  Says that it is enough that it is a practical benefit to the promisor.
•    Bell thinks the judge is responsible for an enormously significant improvement in the law that is not based on sound theory.
o    Judge #2 – Russell L.J.
o    Says that it does not overturn stilk and myrick.
•    Sure…
o    S v M is not about a promised gift, despite what he says.
o    What he says it stands for bears no relation to what was in the case.  This is a trick.  It is a manipulation of the common law.
o    Judge #3 – Purchas L.J.”
o    Also says not overturning Stilk v. Myrick
•    Takes a different approach – changes the def’n of consideration away from detriment
•    Calls this the modern approach (para 33)
•    Note “Economic Duress”

While this case may be a good decision, it cannot possible be commensurate with contract theory.

For Friday:  finish cases on this page of syllabus