Cases Involving Bare Contracts Between Parties

‘Nudum’ is the Latin word for nude/bare, while Pactum means a formal agreement or a contract. Thus “Nudum Pactum” stands for a bare contract.

English law will never enforce a “nudum pactum”, this is because a hefty number of promises (bare promise) are made every day and it would be incongruous if they were all to be made into a binding contract.

E.g. Daniel promises Tom that he will sell his Car to him after two weeks. But after two weeks he declines from his promise, and does not sell the car to Tom. No breach of contract has been made, as there was no consideration.

“Something given by the promisee to the promisor which usually results in a benefit for the promisor and a detriment for the promise”.

(McKendrick,E. Contract Law (Basingstoke. Macmillan, 2000 Fourth edition ISBN-0333794273 [74-94] )

E.g. Daniel promises to sell his house to Tom in November. Tom gives his pen in consideration. Thus this is a binding contract.

In many cases, the gain/detriment is uncertain. Thus J.C Smith defines consideration as:”The price-tag on the promise without which it will not be enforced.”

As in the case of Dunlop Pneumatic Tyre Co v Selfridge (1915) HL, the House of Lords ruled in terms of sale and purchase. Viscount Haldane says, “If a person with whom a contract not under seal has been made is to be able to enforce it, consideration must have been given by him to the promisor or to some other person at the promisor’s request”

Question 3:

“Consideration must be sufficient but need not be adequate”, this rule might sound incongruous but it simply means that whenever there is a promise, to there has to be a consideration to turn it into a binding contract, but the value of consideration, whether economic or real is not taken into measure.

In context to this, I would like to refer to the cases of:

Chappell & Co Ltd v Nestle Co Ltd [1960] AC 87, in this case Nestle was giving away the music album ‘Rockin brothers’ by the ‘King Brothers, the copyright to which were owned by the Chappell & Co, to anyone who sent in three wrappers of “6D” Chocolate bars, it was alleged that three chocolate wrappers were held as a good consideration for contract worth of large amount of money. Here the monetary value of the chocolate wrappers wasn’t regarded. But as it was agreed upon that five chocolate wrappers could be held as good consideration, it was a binding contract.

Thomas v Thomas (1842), in this case action was brought by a widow against her husband executor. The husband had in front of witnesses; before his death expressed that he wanted his wife to have one of the houses for life. Later on the executors refused to complete the conveyance, as “in consideration of John’s desires”. But the moral feeling which motivated the agreement is not enough. So it was agreed upon that a rent of £1 a year was good consideration for a farm which was valued at £500.

This means that something must move from the promisee to the promisor, in the form of consideration, disregarding it value.

Question 4:

“Past consideration is no consideration”, this statement means that if a promise is given after the consideration has been given, then it is a gratuitous (unjustified) promise and cannot be enforced.

If reward is promised for an act that has already been performed prior to the promise, the promise cannot be enforced, because the promise is past. It means that the promise had already been completed before the consideration was made, so nothing is to be given in return for the promise.

It is generally assumed that if two parties enter into a binding agreement, and one of them afterwards promises an additional gain to the other party, the promise cannot be enforces, as the consideration for the original promise/contract has already been past.

In the case of Roscarla V. Thomas (1842), Roscarla agreed to sell a horse to Thomas, later on Roscarla warranted that horse be of sound health. But the promise about the soundness of the horse’s health could not be enforced because the consideration for the original contract for the sale of the horse had already been past.

In Eastwood V. Kenyon (1840), the warden of a young girl raised a loan to educate her, so as to improve her marriage prospects. After her marriage, the husband of the girl promised to pay-off the loans. But the promise could not be enforced because, the loan raised to educate her, was past consideration. However the husband may pay off the loan if he desires to do so, but it could not be enforced upon him.

Question 5:

Exceptions to the rule of “Past consideration is no consideration” are there; in rare cases the courts have altered the general rule. Here the classic case of Lampleigh V. Braithuait(1615) can be referred. The defendant who was under a death sentence requested the claimant to ride to King James I to ask for pardon, the claimant did so. The defendant then promised to pay the claimant an amount of £1000. Here it was decided that the claimant could enforce the Contract. But certain circumstances had to be present:

The promisee must have done something which he otherwise would not have done.

This must involve some detriment/loss to the promisee.

The promisee must have taken the action at the request of the promisor.

The promisor must have gained some benefit/advantage from the promisee’s action.

The reasoning in the case of Lampleigh V. Braithuait (1615) even after 350 years of its ruling, is held good and sound.

Question 6:

A). an empty can of Coca-Cola can constitute good consideration because the value of the consideration is not regarded. Almost anything can count as good consideration as long as the promisor accepts it.

As per Lord Mansfield, “A robe; a hawk; a goblet; a tom-ti, if he chooses to regard it as good consideration” More recent examples of Chappell V. Nestle & Thomas V. Thomas, suggest toward the fact that almost anything can count as good consideration, as long as the promisor accepts it. Thus an empty can of Coca-Cola can be well regarded as good consideration.

However, carrying out a public duty, such as testifying at a trial does not constitute good consideration. So it is justified in the case of Collins V. Godfrey a promise to pay £100 to testify at a murder trial was not held enforceable because the claimant was under a public duty to testify either ways.

Question 7:

The general tradition is that if someone was under a pre-existing contractual duty to do something, then simply doing it was not good consideration for a further promise. (Stilk V. Myrick [1809])

In the case of Stilk V. Myrick [1809], Stilk was to be paid £5 per month on his voyage at the sea. While during the voyage, two shipmen deserted the ship, so the Captain agreed to equally divide the wages of those two sailors among the remaining shipmen. At the end of the voyage Myrick refused to honour the agreement, and Stilk sued him.

So the question arose that could a contract be modified, without consideration, or could pre-existing contract duty be counted as good consideration for the change in consideration.

The court ruled in favour of Myrick and stated that the changed circumstances were not sufficient to change the contract. Thus pre-existing contract duty was not held good in this case, and Stilk had to accept the contract that was originally agreed upon.

E.g. Daniel agrees to sell his farm to Tom for £7000 after one month, but after one week Daniel asks Tom to pay £8000 for the same farm, and Tom agrees. However at the time of purchase, Tom pays £7000 to Daniel and refuses to pay the extra money because Daniel had done only what he had promised to do anyway.

In the case of Williams V. Roffey [1990], The rule that pre-existing contract duty was not good for a further consideration was challenged by a controversial court appeal.

Facts of the Case:

Roffey Bros. Entered into a contract with X for building some flats for X on his property.

According to a penalty clause in the contract, the fees of Roffey Bros. Was to be reduced for each day they were late in building the flats.

Roffie Bros. Sub contracts Williams to fit in the doors and windows, for which a date was agreed and the fee was decided.

A few months later Roffey was informed by William that, he could not complete his work on time.

Later Williams was offered a bonus to complete the work on time, Williams accepted the bonus and completed the work on time.

However at the time of collecting the payment, Roffie Bros. Paid Williams, the original sum of money that was agreed upon and denied from paying the bonus, while justifying that he had only done what he promised to do anyway (Stilk V. Myrick [1809]).

The Court of Appeal Decision:

Roffey Bros. were sued by Williams for a breach of contract. The case went to the Court of Appeal. And in a noteworthy decision, the Court of appeal declared that they were “Updating” (Stilk V. Myrick [1809]) and they ruled in favour of Williams.

The case was argued by Glidewell L.J in the following manner:

The original contract between Roffey Bros. And X contained a penalty clause.

In a situation where Williams would not have completed his work on time, the penalty clause would be applicable and Roffey Bros. Might have incurred loss.

Because Williams completed his work on time, Roffey Bros. Had “avoided a disbenefit” (presumably lost money).

“Avoiding a disbenefit” is the same as gaining the beneifit.

Thus due to Williams completing his work on time, Roffey Bros. Had gained more money. And hence had provided good consideration.

It has always been an argument that consideration must be something of value in the eyes of law – something that provides or brings about a legal benefit. But in the case of Williams V. Roffey the good consideration is regarded in terms of “Practical benefit”.

Criticisms of Williams V. Roffey:

The judgement in the case of William V. Roffey has been a topic under severe academic criticisms and speculation, especially by Ewan McKendrick and Janet O’Sullivan. They include:

There is the practical criticism that the Court of Appeal cannot take precedence over Stilk V. Myrick [1809] because that is a Lord’s decision and it cannot be over-ruled by any other court other than the Lords itself. The Court of Appeal tried to circumcise this fact by asserting that they were just, “Updating” Stilk V. Myrick [1809] . This is unpersuasive, as the two cases do not support each other.

Consequently the concept of “avoidance of disbenefit” seems apprehensive. Williams did nothing vital except doing what he had originally promised to do. Williams was unaware of the fact that there was a penalty clause in the contract between X and Roffey Bros. This sets up a situation where Williams is getting a reward for something which he has no idea about.

Also, the verdict in Williams V. Roffey Bros. Questions the time-honoured rule that part-payment is not good consideration to bring an action for the rest of the debt. This rule was established in the rule in Pinnel’s Case[1601] and was reaffirmed by the Lords in Foakes V. Beer[1884]. These cases were not referred clearly in William V. Roffey, but if it is right; then these long-established decisions have effectively been taken precedence over by the Court of Appeal, which it cannot do.

Also the setback is that the concept is very uncertain and potentially unreasonably wide: one of the points mentioned, ‘not having to sue to enforce your rights’ applies to every possible case, and if this were sufficient on its own, there would be no meaning in having a consideration prerequisite at all since it would always be fulfilled. This just cannot be the case, so precisely what counts as a ‘practical benefit’ is very unclear.

Further Developments since Williams V. Roffey

The case of William V. Roffey has long remained a topic for discussion, and is inclined towards extensive academic criticism.

Thus in Re: Select Move Peter Gibson LJ denied to follow reasoning in William V. Roffey because if he did so he claimed that it would over-rule the long standing approach in the rule and in Pinnels’s Case and effectively take precedence over the Lords’ decision in Foakes V. Beer.

In recent times, for the verdict on South Caribbean Trading Ltd v Trafigura Beheer [2004], Justice Colman has also sharply criticised, the reasoning in Williams V. Roffey. And Ewan McKendrick, whilst possibly agreeing that Roffey was wrong suggested towards the fact that Justice Colman’s own reasoning was wrong as well.