Introduction
This essay examines a contractual dispute between AB Ltd (ABL) and XY Ltd (XYL) concerning an additional payment of £5 million offered by ABL to ensure timely completion of an arena for the 2022 International Games in Barchester. The focus is on whether XYL can recover this payment under the English law doctrine of consideration. Consideration, a fundamental principle in contract law, requires that something of value must be exchanged for a promise to be enforceable. This analysis will explore the legal rules surrounding consideration, particularly in the context of pre-existing contractual obligations, and assess the applicability of relevant case law to XYL’s situation. The essay will argue that, under traditional rules, XYL may struggle to claim the additional payment due to a lack of fresh consideration, though exceptions and practical considerations will also be discussed.
The Doctrine of Consideration and Pre-Existing Obligations
Consideration is defined as something of value given by one party to another in exchange for a promise or performance, forming the basis of a binding contract (Currie v Misa, 1875). However, a key challenge arises when a party, such as XYL, seeks to enforce a promise for additional payment while already bound by a pre-existing contractual duty to perform the same task. In the landmark case of Stilk v Myrick (1809), the court held that performing an existing obligation does not constitute valid consideration for a new promise of payment. Applied to this scenario, XYL was already contractually obliged to complete the arena by 31 May 2022 for £60 million. Therefore, ABL’s promise of an extra £5 million, arguably, lacks fresh consideration since XYL provided nothing beyond its original duty.
Exceptions to the Rule: Practical Benefit and Duress
Despite the strict application of Stilk v Myrick, later cases have introduced exceptions that might benefit XYL. In Williams v Roffey Bros & Nicholls (Contractors) Ltd (1991), the court ruled that a promise of additional payment could be enforceable if the promisor (ABL, in this case) obtains a practical benefit or avoids a disadvantage, provided there is no economic duress or fraud. Here, ABL faced significant financial and reputational risk if the arena was not completed on time, given the sold tickets and advertising deals. By promising the additional £5 million, ABL arguably secured a practical benefit—ensuring timely completion. Thus, under Williams v Roffey, XYL might claim the payment is enforceable. However, ABL could counter that economic duress was present if it felt coerced into offering the payment due to XYL’s financial difficulties and threat of delay. This aspect weakens XYL’s position, as duress invalidates the practical benefit rule (Pao On v Lau Yiu Long, 1980).
Critical Evaluation of XYL’s Position
While Williams v Roffey offers a potential avenue for XYL, its application remains contentious, as some legal scholars argue it undermines the traditional consideration doctrine (Chen-Wishart, 2018). Moreover, ABL’s refusal to pay suggests it may not perceive the completion as providing a distinct benefit beyond the original contract terms. XYL must also consider whether the agreement for additional payment was clearly documented as a variation to the contract, as vague or informal promises are less likely to be upheld. Generally, courts are reluctant to enforce promises that appear to exploit the promisor’s vulnerability, which could be argued here given ABL’s urgent need for completion. Thus, XYL’s claim, while plausible under modern principles, is not guaranteed success.
Conclusion
In summary, XYL’s ability to recover the additional £5 million from ABL hinges on the doctrine of consideration and its evolving interpretations. Under traditional rules from Stilk v Myrick, XYL’s claim is weak due to the absence of fresh consideration for the pre-existing duty. However, the practical benefit principle in Williams v Roffey offers hope, provided no economic duress is proven. The implications for XYL are significant, as a successful claim could reinforce the flexibility of contract law in addressing real-world commercial pressures. Nevertheless, XYL should be prepared for a contested legal battle, as ABL may leverage arguments of duress or lack of consideration to resist payment. This case underscores the complexity of balancing strict legal principles with pragmatic business realities in contract disputes.
References
- Chen-Wishart, M. (2018) Contract Law. 6th edn. Oxford University Press.
- Currie v Misa (1875) LR 10 Ex 153.
- Pao On v Lau Yiu Long [1980] AC 614.
- Stilk v Myrick (1809) 2 Camp 317.
- Williams v Roffey Bros & Nicholls (Contractors) Ltd [1991] 1 QB 1.
