Williams v Roffey Bros & Nicholls (Contractors) Ltd
Court of Appeal
Citations: [1991] 1 QB 1; [1990] 2 WLR 1153; [1990] 1 All ER 512; (1991) 10 Tr LR 12; (1990) 87(12) LSG 36; (1989) 139 NLJ 1712; [1990] CLY 629.
Facts
The defendant was a contractor working for a third-party to construct flats. They were liable to pay a penalty if the work was not completed on time. The defendant sub-contracted some of the work to the claimant, at a set price per flat completed. However, the claimant ran into financial difficulties and were concerned that they would be unable to complete the work without more money. The defendant, not wanting to pay the penalty, agreed to pay the claimant extra for each flat completed. The claimant was able to complete an additional 8 flats. However, the defendant later changed their mind and refused to pay, so the claimant stopped work.
The claimant sued for breach of contract. The defendant responded that they were not bound by their promise to pay more. This was because the claimant had not provided consideration for the promise. They counter-sued for damages for breach of contract, arguing that the claimant had wrongfully ceased working. They also argued that they were not obliged to pay the original contract price, because the obligation to pay was conditional on full completion of the flats.
Issue(s)
- Had the claimant provided good consideration for the defendant’s agreement to pay an additional sum per flat completed?
- Was the defendant obliged to pay the original contract sum?
- Had the claimant wrongfully ceased working?
Decision
The Court of Appeal held that the claimant was entitled to the original contract price. While the obligation to pay this was conditional on full completion, the doctrine of substantial performance applied.
The Court also held that the claimant was entitled to the extra payments. While the claimant was already bound to complete the work, their promise to continue working provided the defendant with additional ‘practical benefit’. This was sufficient consideration for the promise to pay more.
Since the defendant had breached the agreement by stopping payments, the claimant had the right to repudiate the contract and cease working.
This Case is Authority For…
Where the parties have an existing contractual relationship, a party can rely on their existing obligations as consideration if this provides the other party with a ‘practical benefit’ (or avoids a practical disadvantage).
Other
It is not strictly clear what ‘practical benefit’ means. Counsel for the claimant made three suggestions for benefits acquired by the defendant:
- The chance of avoiding liability under the third-party penalty clause;
- Ensuring that the plaintiff continued work;
- Avoiding the trouble and expense of engaging others to complete the work.
The judges accepted that there was practical benefit without specifying which of these constituted the relevant benefit.
The meaning of ‘practical benefit’ received some discussion in the Court of Appeal in Rock Advertising Ltd v MWB Business Exchange Centres Ltd [2016] EWCA Civ 553. However, they were overruled by the Supreme Court on a different point. The Supreme Court declined to discuss the consideration issue.
Purchas LJ hinted that the issue of consideration in Stilk v Myrick (1809) 2 Campbell 317 might be decided differently today, now that the defence of economic duress is better developed.
