Williams vs Roffey Bros
[1991] 1 QB 1
Case Summary
[Consideration]
FACTS:
· Plaintiff enters into a subcontract with defendants to carry out carpentry work. The agreed price for the same was too low for the plaintiff to work satisfactorily and profitably, and the plaintiff (carpenter) entered into financial difficulty.
· The defendant was worried that the work would not be completed on time and agreed to pay the plaintiff an additional sum at a certain rate for each flat on which the job would be completed. Had the work not been done on time, the defendant would have to penalties.
· The plaintiff substantially completed 8 more flats and the defendants made only one further payment that did not cover 8x pounds.
· The plaintiff ceased work on the flats and sued the defendants for the additional sum promised.
ISSUES:
1. Does substantial performance entitle the plaintiff to payment?
2. Was there consideration for the defendant’s promise to pay an additional price?
ARGUMENTS BY PLAINTIFF:
1. When a new price was agreed upon, in the absence of duress, the promise to pay the new price was enforceable.
2. There was termination of the earlier agreement by mutual consent, and the parties entered into a new agreement
3. Alternatively, the earlier judgement should have held that there was an implied term in the first agreement that if both parties agreed that the contract price was too low, a higher price would be agreed upon in the interest of commercial reality.
ARGUMENTS BY DEFENDANT:
1. The new agreement should fail for lack of consideration. The benefit of increasing the price was to ensure that the plaintiff could complete his work, avoid a penalty for his delay, and avoid the trouble of engaging new people to complete work. This was a practical benefit and not a benefit in law towards the defendant.
2. If the plaintiff was contractually entitled to the sum by sufficient consideration, they are not entitled since they did not complete even one flat.
JUDGEMENT:
· When an entire contract provides for a specific sum to be paid for specific work, the courts lean against the construction of a contract which would deprive the contractor of any payment simply because there are some defects or omissions.
· It is not only every breach of that term which absolves the employer from his promise to pay the price, but only a breach which goes to the root of a contract.
· The contractor is entitled to payment pro rata as the work proceeds, but he is not entitled to retention money until the work is entirely finished. If the balance of the funds to be paid after the completion of the work is taken as retention money, this cannot be regarded as retention money since it is usually only a small percentage.
· When a man fully performs his contract but what he supplied has defects that are minor, (de minimus rule) – substantial performance
· Should use Dakin v. Lee rule – pay the price minus the amount it would take to repair defects.
· Economic duress – if a subcontractor has agreed to undertake work at a fixed price, and declines to continue unless the price is increased, he is taking unfair advantage and increased price is voidable because of the duress. Public policy invalidates consideration is there is unfair use of dominating bargaining position but this is unnecessary since people who have negotiated at arms length should hold their bargain and would render the law uncertain.
· There is consideration. Chitty on contracts – there is consideration not only when there is detriment on the part of the promise but when there is also benefit on the part of the promisor alone. E.g. the Newspaper invites readers to apply for financial advice on the terms that the defendants would be entitled to publish the reader's letters and replies.
· The true intention of the parties, when they arrived at the agreement, was that the work would be completed without the need to employ another subcontractor. Here the promisor gains an advantage from the relationship with the promise. Even though a pre-existing duty is performed, the practical benefit of timely completion constitutes good consideration.
-Ishika Tanwar
Comments