THEME 13: PRE-EXISTING DUTIES

Generally, the law will see that which must be done as a result of legal obligations is something that simply ought to be done (A is giving up nothing for B because the law already requires A to do X). From the law’s point of view, a promise to do what one is already bound to do should be indistinguishable from a promise to do what someone has already done. Given that A must do X, the law sees this as non-optional and a necessary act. A is giving up nothing in exchange for B’s promise. This concept has slowly lost its strength in the courts today.

RECISION: This is an equitable remedy. If awarded, the judge is going to attempt to give back to both sides so that they are back in their initial positions.

PART 1: ORIGIN OF PRE-EXISTING DUTIES (PROMISE)

PRE-EXISTING PRIVATE LAW

Contract that has been struck between two parties gave rise to a duty that I owe you

PRE EXISTING PUBLIC DUTY

Such as a statutory duty or a duty created by common law (ex. Reasonable care)
Courts say that a pre-existing public duty is not sufficient consideration (I already have a public duty
- I promise to do something for you within the same scope, then my agreement doesn’t give rise to consideration
- only way prior public duty is consideration is if something is done over and above the duty

PRE-EXISTING DUTY TO A THIRD PARTY

Entering into a contract with you and your neighbor
Could amount to sufficient consideration – depends on whether you could have enforced the duty without a contract

Stilk v Myrick (1809)

SAILORS + CAP

I: Was there consideration in captain’s promise?

D: Judgment in favour of CAP

A voluntary gratuitous promise is of no force or effect unless under seal. If extra money is offered for pre-existing obligation, agreement is not enforceable.

- pre existing duty given from captain to crew to give them wages of 2 members that were deserted if he didn’t find anyone between London and Baltic

- he found crew and dint’ pay them

- action against captain

- courts trying to avoid economic duress for policy reasons such that mutiny will not threaten ships in the future

- for a contract to be enforceable, fresh consideration must be provided

- the captain’s promise carried no consideration – the crew had pre-existing duty to get the ship home

Gilbert Steel Ltd v University Cont Ltd (1976)

STEEL PRICES

I: Was there consideration that supported the promise to the varied agreement?

D: oral agreement not consideration

William v Roffey Bros & Nicholls Contractors Ltd (1990)

CARPENTERS + $

I: Was there consideration when DF offered more $?

D: appeal dismissed

Carries Stilk ratio.

Gratuitous promise in a post contractual situation is unenforceable. Fresh consideration needed at T2.

*Narrow conception of consideration to achieve social justice. If you allow consideration, you’d be allowing one party to assert financial power

If both parties receive a practical benefit from a new promise after pre-existing duty and there is no economic duress, benefits could give rise to sufficient consideration.

*major policy shift in consideration

- PL entered into contract w DF for steel delivery for 3 different projects; pre-existing duty owed to promisor on fixed price

- prior to commencement of 3rd project, PL announces steel price so oral agreement happens

- prices again; new agreement with provisions that were unilaterally imported by PL – contract not executed

- DF kept accepting steel and against invoices with different prices; left balance owing on cheque

- DF subcontracted PL for carpentry

- PL bargained badly and hurt themselves in the contract (didn’t have enough money to finish)

- DF worried PL wouldn’t complete job due to financial difficulties so they made promise to pay more $ to speed up work (after pre-existing contractual duty was made) – had penalties if the building didn’t finish at a certain time

- when they failed to make more payments, PL sued for damages (of remaining $ in promise)

WILSON J: the oral agreement later drafted did not give rise to new consideration (Wasn’t a new contract)

- just because PL said it’d give ‘good price’ to DF, that is not consideration

- there is no need for recision in this case (wipe out the obligations and start from scratch with new consideration) – Wilson says that doesn’t benefit party who needs $ for steel

- does not necessarily uphold Stilk because Stilk does not allow for promise conferring benefits after a pre-existing duty was decided to give rise to consideration

- if there is no hint of duress, so long as there’s a practical benefit arguable by both sides, we can find sufficient consideration

- slight relaxation of Stilk

Greater Fredericton Airport Authority Inc v Nav Canada (2008) NBCA

I: Was there duress that did not give rise to consideration?

D: appeal by NAV dismissed due to duress

* Adopts same ratio from Gilbert and Williams. Brought this principle to Canada. Stilk still applies, but when there is no duress, consideration may exist.

- NAV indicated to airport that it ought to install equipment that was more economical, but that airport would have to pay – refused to install unless the airport paid

-when Nav installed, airport refused to pay

- Nav’s pre existing obligation was to pay once it exercised its contractual right to insist on purchasing new equipment

- Nav didn’t promise anything in return for airport’s promise to pay for equipment (it was not bound by agreement)

- Nav cannot use detrimental reliance defence because it put airport under duress

In all of these cases, there is one party that is forbearing their right to sue for partial performance. Forbearing to sue is considered a benefit in some form because money is still coming in.

PART II OF PRE-EXISTING DUTY: PARTIAL PAYMENT

0 debt accord satisfaction litigation

T1 T2 T3 T4 T5

Original K

There are pre-existing duties dealing with an according that happens at T3 because of one of the parties’ debts. The question is, if the accord allows partial payment, is that a benefit for both parties, and does it give rise to consideration?

Foakes v Beer (1884) HL

FULL PAYMENT MADE BUT SUING FOR INTEREST

I: Does the PL keep forbearing when the DF was paying lower cost?

D: judgment in favour of Beer; appeal dismissed

Partial payments of debt do not make for consideration because the full sum has not yet been accrued.

Precedent: Pinnel (1602): payment of lessor sum in satisfaction of greater some cannot be satisfaction of whole – this is not upheld today because it depends on legislation in jurisdiction

- PL owed DF 2090

- she agreed to give him time to pay on the condition that he pays 150 p twice a year on first day of month + 500 dollars immediately (partial payment with no interest)

- after he pays it all she sues for interest

- agreement not under seal so there is no consideration on face value

- DF had pre-existing duty (Antecedent obligation) to pay full amount

- no consideration when future installments remain

- DF owes interest; if not then creditor would be left with possibility of being insolvent

Re SelectMove Ltd (1995) (CA)

INCOME TAX NOT PAID TO GOV

I: Did the accord make any forbearance enforceable?

D: No; no accord here and no consideration

Upheld Folks. Good consideration can only be provisioned by way of statute.

- company failed to pay income taxes to Gov from employees – suggested to tax collector they’d pay less until they get whole some (no real agreement from tax agency on this)

- company pays in accordance with this agreement anyway but Crown eventually sold company, dismissed employees and asked for arrears (amount owing)

- gov’t doesn’t really have to show consideration because there is a...

#9049 - Pre Existing Duties - Contracts Law

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