Performance of an Existing Contractual Duty Should Ever be a Valid Consideration for a Promise-Law Assignment Sample

QUESTION

 

Performance of an Existing Contractual Duty Should Ever be a Valid Consideration for a Promise”

Discuss in 3000 Words

 

 

ANSWER

 

“PERFORMANCE OF AN EXISTING CONTRACTUAL DUTY SHOULD NEVER BE A VALID CONSIDERATION FOR A PROMISE”.

Introduction

The contract law is known to outline the duties which are to be performed by each of the parties in an agreement. However, at times, consideration for promises is applied to ensure the compliance to contract agreed upon. This is mainly carried out by the use of promissory estoppels in the doctrine of consideration when implementing a contract between two or more parties. The performance in the contract plays a major role which is taken under consideration when making decisions on breach of contracts in any case. However, the performance of existing duties may not be considered as a promise, leading people to freedom of contract.

This essay has dealt with this very issue, by providing arguments for the topic of concern. The essay has provided arguments for both sides of the topic, justifying the reasons for which performance of present performance should not be considered as valid consideration for a promise when applying the doctrine of consideration in promissory estoppels for application of Contract Act of 1999, in a contract.

Performance of an Existing Contractual Duty not a Consideration for a Promise

Performance of any existing contractual duty should not be considered for a promise when dealing with legal decisions in any contract. This can be explained on the basis of the doctrine of consideration. The doctrine of consideration in any contract involves three rules – consideration should be adequate, past performance cannot be taken under consideration and consideration must be from the end of promisee¹. This statement can be further justified by the Contracts (Rights of Third Parties) Act 1999 as per which the performance of present duty by the promisor plays not such aspect in the consideration of promise. It is ultimately the profit or loss incurred by the promisee or third party which is taken under consideration²

However, it was argued that consideration need not be adequate and promissory duty can be considered for promises of profits in a contract³. This was supported by the case of Chappell v Nestle [1960] in which it was found that consideration was not enough in case of a promise. The present performance of the defendant Nestle as seen in case of the sweet wrappers was a major consideration in its promise to pay the statute of 6.5% to Chappell, as agreed in the contract between both parties⁴. Regardless, the performance of duty can never be considered as a consideration for keeping a promise in a contract. This can be supported by the case of Collins v Godefroy. As per the case, promises of present duty, cannot be considered since James Godefroy made promises to pay more than what was stated in the contract to avoid being sued by the court⁵

Another aspect which needs to be considered in this aspect is the doctrine of promissory estoppels. The doctrine of promissory estoppels further supports the above statement in which any present contractual performance and unnecessary statements to support the said present performance is deemed as unnecessary. This often leads to compensation payment to be made to the promisee⁶. As per the existing duty rule promise to promise to perform an existing contractual duty is no such thing which can be considered unless it binds the party concerned in the contract within a particular time to do or refrain from the exact thing. Therefore a promise cannot be a consideration unless it is exact enough to be broken. This leads existing duty rule to be both strength and a weakness in a contract⁷.

The above argument can be supported with the help of the theory of contractual obligation. As per this theory, contractual performances should not be considered among the people to avoid any sort of illegal contractual obligations when promising something in a contract or even performing existing duty in a contract. The existing duty to be performed should be pre-agreed upon to avoid any sort of violation of a contractual obligation that may be considered over existing performance duties in a case⁸. This clearly points out that the consideration should be sufficient to support the sub-rules stated to point out time-bound regarding the for doing or refraining from a performance activity in a contract.

This can be supported by the case of Stilk v Myrick (1809) as per which a contract was signed by crew members and captain of the ship. However, the captain refused to pay the promised amount to the crew members. There were no such sub-rules which would substantiate and support the promises of the captain. Thus as per the theory of contractual obligation and doctrines of consideration and promissory estoppels, the contractual performance of the crew captain cannot be considered in such a case regarding the promise made to the crew members. This resulted in the said captain to pay the promised amount as compensation by the application of Contract (Rights of Third Parties) Act of 1999⁹.

It has been argued that promises can be considered in regard to promises. As per chapter 31, section 5 of Contracts (Rights of Third Parties) Act of 1999, a contract should be adequate and layout sub-rules to justify the action undertaken or not taken in a company. Thus, everything needs to be time bound to state conditions and reasons which can act as a means of the scope of delivery promise in the company¹⁰. However, it can be argued with the case of Drennan v Star Paving Co. that the promisor relied too much on past performance as a consideration to promise its clients regarding the services of the company¹¹. However, it is well known that both past and present performance cannot be considered when considering promises in a contract. This had led the court to overrule the existing contractual performance of the said firm in this case. Further, in case of a pre-existing contract, firms need to meet with the promises made to the client. For example, if this is applied to the case of Chappell v Nestle, no such consideration should be made for seeing to existing performance as seen in case of sweet wrappers and Nestle should have paid 6.5% statute it had promised to Chappell.

It has been further pointed out that even though the contract may not be sufficient enough, each clause of a contract needs to be met to fulfil a contract. This is the crucial element of any contract law, where a person or party is time bound by the agreements promised in the signed contract¹². This can be supported by the case of Collins v Godefroy (1831), in which Godefroy had promised to pay Collins with 6.30 GBP¹³. However, failure to meet with such promises led to a breach of the law, thereby leading Godefroy to further, be charged by the government to pay the promised sum. Therefore, performance alone cannot be considered for meeting with the promises of the contract.

It has been argued that performance shoes be considered in case of promises. It was revealed that companies provide good performance with a promise in future that the contract will be maintained between both the parties in the agreement. This is mainly carried out in the contracts signed between the promisor and the client or party with whom the contract has been signed. Despite this, it right to state it is ultimately the keeping of promises stated under the contract plays a crucial role in the contract signed and the promisor and promisee. Thus, existing contractual performance cannot be considered in at that time without any prior action on behalf of performance.¹⁴

However, this was argued with the support of the case of Williams v Roffey Bros. In the case, Williams was a subcontractor who was hired in a contract by the contractors Roffey Brothers. As per the contract signed between the two parties, Williams had to help out the contractors to build blocks of flat and was promised more money for the same. However, with time they refused to pay the extra amount to William. Further, the contractors had included a penalty clause as a sub rule in the contract. According to the doctrine of consideration in the contract law and chapter 31, section 6 of Contracts (Rights of Third Parties) Act (1999) mentioning of sufficient reason for consideration by means of a sub rule or exceptions in a contract would lead the promisor to avoid a penalty for only considering the performance of duties. This proves that the performance of contractual duties can be considered for promise resulting in said contractors to pay the penalty claim. However, the penalty clauses exempted Roffey Brothers from such considerations, hence proving that performance of existing contractual duties is not considered in promises made to the promisee.

Despite this argument, it can be said that it is still better not to taken performance as consideration for promises in the business field. This is because a promise made in a contract is a legal agreement which is signed by two or more parties and violation of the same results in a case of fraud. This violates the doctrine of promissory estoppels in the contract law and further raises questions of signing contracts in the future with such parties¹⁵. This can be supported with the help of Total Metal Manufacturing Ltd V. Tungsten Electric Co Ltd. In the case, a contract had been signed between both the parties with a time-bound clause of performance or lack of any¹⁶. The clause in the contract said that Tungsten would pay 10% royalty and 30% compensation in three months time, should there be no serious tension. TMM claimed for a penalty. However, the performance of duties was not considered for since promise could not be considered in the case due to the application of time-bound clause of war which would lead to tension in the contract.

However, it was argued that, as the doctrine of promissory estoppels in the contract law, can be applied in such a way that performance is considered for promises to maintain the morale of the firm. This maintenance of morale in the firm would ensure the provision of promised debts and amount to the promisee, thereby justifying the promise. This is supported by the case of Central London Property Trust v High Trees House¹⁷. According to this case occupancy of Central London, Property Trust could only receive the partial payment promised by High Trees House due to an increase of occupancy after the war. Therefore, the performance of contractual duties was partially considered when considering the promise made to the trust in the signed contract.

However, the aspect of considering performance in promises is only a moral obligation and not a legal obligation of the promisor. The contract would ultimately entail the third party as the ultimate right holder of the benefits of the contract. Further, as per the doctrines of consideration and promissory estoppels., a contractual obligation must be complete and justified to consider the promise made as complete before turning it up to be considered as in promises. Moreover, the elements of both the doctrines state that the promise made should be justice and that the contract sign should be subsequent enough for compliance¹⁸.

The above argument can be justified with the help Hartley v Ponsonby case¹⁹. In this case, Ponsonby argued regarding the lack of extra payment to the sailing crew. It was revealed that Ponsonby had noted not much performance from sailors and no such promise was made regarding extra payment. Therefore, performance was not considered for the promise of extra payment by Ponsonby, supporting the above statement. However, it was argued that performance should be considered in promises. This is especially noted in the case of retail organisations, in which employees are promised with an annual bonus for their performance in the company²⁰. This is maintained as well to keep the employees motivated and prevent a high attrition rate in the firm.

Regardless of such an argument, it was said still asserted that performance should not be considered as it demands fulfilment of moral promises. The contract is not a moral agreement between two or more parties but a legal agreement which is signed to avoid fraudulence in business and other team activities. The fulfilment of requirements of such documents hence does not demand any sort of moral obligation on behalf of the promisor²¹. Hence, the promisor need not consider the aspect of performance when fulfilling promises. However, such promises made should be clear and justified for the promisor and the promisee. This can be supported with a case of Glasbrook v Glamorgan CC (1925) in which Glamorgan CC had asked for security services from the police during a miners’ strike²². The security provided had resulted in the promisor, to pay the third party, with promised benefits due to performance shown during the collier event.

Further, as per the elements of the doctrine of promissory estoppels the promise made should not only be clear cut, it should even have the aspect of the promisee being justifiably reliant on the promissor to fulfil the promise²³. However, none of the elements of this doctrine demand for consideration of the present performance of either of the parties involved in the contract. This can be supported by the case of Shadwell v Shadwell. The case of Shadwell v Shadwell deals with contract law in which performance of duty was appealed for consideration to impose the promise from a third party. This case was more of a family situation in which the uncle had promised to pay his nephew with 150 GBP until his nephew’s income was 600 GBP, provided that the nephew married his fiancée²⁴. The payment stopped after the death of the uncle, for which the nephew appealed to the court that his performance in marriage be considered in fulfilment of the promise, else the estate be sued altogether. The government of the UK took the case in consideration along with the doctrines based on which the decision was taken. The decision went in favour of the uncle’s estate proclaiming that the nephew by getting married had brought a change in the clause of the contract and had not declared so to the court. Not only this, the judge had even declared that by getting married, he had even included his spouse in the performance, which was not in the contract signed between his uncle’s estate and himself. This led Shadwell to pay penalties to Shadwell estate for stopping to provide the monetary source with Mr Shadwell’s death. This case clearly revealed that performance is not to be considered in case of promises.

The aspect of not taking in existing contractual performance into account as valid consideration for promises has been seen in several accounts in the UK legal system. As said earlier, contracts are legal agreements which are signed between the promisor and promisee in which promises and duties are written in a clear manner. The aspect of considering performance is liable only in case of contracts in which payment to stakeholder has not been made. However, this is not applicable in case of promises made in contracts for payment of debts²⁵. This can be explained with the help of the case of Foakes v Beer [1884].

The case of Foakes v Beer deals with the contract law of the UK in which, a contract was signed between Foakes and Beer regarding payment of debts. In this case, Foakes owed Beer a debt of 2000 GBP²⁶. Foakes had to begin by paying 500 GBP immediately and 150 GBP in instalments to Beer. However, once the payment of the principal was done by Foakes, Beer claimed for interest since she was not paid off immediately, but in the form of instalments. Beer here has considered performance in the promise of paying the debt owed to her. However, the defendant, Foakses defended with the statement that, no such claim for payment of interest had been made in the contract signed between the two. However, since it was a debt contract, it was fully clear to the court that Beer’s consideration for a claim of interest is justified through the word debt used in the contract. This was justified with help of Pinnel’s’ case and Doctrine of consideration and Promissory Estoppels, resulting in the plaintiff to justify her claim for interest, which had been partially paid by Foakes in this case. Here, again the House of Lords did not consider the performance of existing contractual duties as a valid element in the promise of debt payment.

However, the performance of existing contractual duties at times is taken under consideration by the legal system when providing judgement on contracts and agreements. One such case is that of a children contract case – Ward v Byham. (1956). In this case, an unmarried father sent his daughter to the mother, with a promise of paying 1 GBP a week for keeping the child happy²⁷. However, with time, the father stopped these payments. As per the agreement, the claim for payment should have gone on behalf of the mother. This would lead performance to be considered as valid for the promise of paying 1GBP a week. However, the mother had got remarried bringing a change in the conditions of the contract, which had resulted in the father to stop the payments. Furthermore, keeping the child happy was a pre-existing duty of the mother, forming an exemptionary clause which provided a defence to the promisor in this case. Moreover, as per ‘Contracts (Rights of Third Parties) Act (1999, s 5) and the doctrine of promissory estoppels, the mother had provided no such condition in the contract that she was under statutory conditions to look after the child. Therefore, once again performance cannot be taken as a valid consideration in promises. It is the intention of the promisor and the justifiable reliance of the promisee to see the promise is upheld by the promisor which is considered as valid in a promise lay in a contract.

Conclusion

It has been concluded from the above essay that, the performance of existing contractual duties is to not be considered as a valid reason in seeing to the promises in a contract. This has been proved by several cases like Stadwell v Stadwell and Ward v Byham in the essay. Moreover, such decisions of seeing to promises are based on legal obligations lay in the contract which is fulfilled as per the conditions of Contact (Right of Third Parties) Act of 1999, along with doctrines of consideration and promissory estoppels. However, there have been arguments that performance is considered as valid in promises as seen in the case of various organisations. Despite this, consideration of the performance of existing contractual duties is more of a moral obligation as compared to a legal obligation, and hence not considered as valid in a promise.

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