Williams v Roffey Brothers & Nicholls (Contractors) Ltd [1989] EWCA Civ 5 (23 November 1989)

A carpenter agreed to carry out carpentry work for building contractors at a price that proved too low. When the carpenter encountered financial difficulties, the contractors promised to pay an additional sum to ensure completion and avoid penalties under their main contract. The court held this promise was enforceable as the contractors obtained practical benefits constituting valid consideration.

Facts

The plaintiff, a carpenter, entered into a sub-contract with the defendants, building contractors, to carry out carpentry work on 27 flats for £20,000. The price agreed was too low to enable the plaintiff to operate profitably. By March 1986, the plaintiff was in financial difficulty. The defendants, concerned about potential delays and penalty clauses in their main contract with the building owners, promised on 9th April 1986 to pay the plaintiff an additional £10,300 at the rate of £575 per completed flat. The plaintiff continued work but ceased at the end of May 1986 after receiving only one further payment of £1,500 despite substantially completing additional flats.

Issues

Primary Issue

Whether the defendants’ promise to pay the additional £10,300 was enforceable, given that the plaintiff was only promising to perform work he was already contractually obliged to perform under the original sub-contract. This raised the question of whether there was valid consideration for the promise.

Secondary Issue

Whether substantial completion of the flats entitled the plaintiff to payment, or whether full completion was required.

Judgment

The Court of Appeal dismissed the appeal, holding that the defendants’ promise to pay the additional sum was supported by valid consideration and was enforceable.

On Consideration

Lord Justice Glidewell set out the following proposition regarding the present state of the law:

(i) if A has entered into a contract with B to do work for, or to supply goods or services to, B in return for payment by B; and (ii) at some stage before A has completely performed his obligations under the contract B has reason to doubt whether A will, or will be able to, complete his side of the bargain; and (iii) B thereupon promises A an additional payment in return for A’s promise to perform his contractual obligations on time; and (iv) as a result of giving his promise, B obtains in practice a benefit, or obviates a disbenefit; and (v) B’s promise is not given as a result of economic duress or fraud on the part of A; then (vi) the benefit to B is capable of being consideration for B’s promise, so that the promise will be legally binding.

The practical benefits to the defendants included: ensuring the plaintiff continued work; avoiding penalty clauses; and avoiding the trouble and expense of engaging other contractors. These practical benefits constituted valid consideration.

Lord Justice Russell observed:

In the late twentieth century I do not believe that the rigid approach to the concept of consideration to be found in Stilk v. Myrick is either necessary or desirable. Consideration there must still be but in my judgment the courts nowadays should be more ready to find its existence so as to reflect the intention of the parties to the contract where the bargaining powers are not unequal and where the finding of consideration reflects the true intention of the parties.

Lord Justice Purchas agreed that where both parties benefit from an agreement, it is not necessary that each also suffers a detriment.

On Substantial Completion

The court held, following Hoenig v Isaacs, that substantial completion entitled the plaintiff to payment less a deduction for defects, as the contract should not be treated as an entire contract requiring complete performance before any payment was due.

Implications

This case represents a significant development in the doctrine of consideration in English contract law. It refined the traditional rule from Stilk v Myrick that performance of an existing contractual duty owed to the promisor cannot constitute consideration. The judgment established that practical benefits obtained by the promisor can constitute good consideration, provided there is no economic duress or fraud. This pragmatic approach reflects modern commercial realities and allows courts to uphold agreements that both parties genuinely intended to be binding, whilst preserving the fundamental requirement of consideration.

Verdict: Appeal dismissed. The defendants' promise to pay the additional £10,300 was supported by valid consideration and was enforceable. The plaintiff was entitled to judgment for £3,500 damages with interest and costs, and the defendants' counterclaim was dismissed.

Source: Williams v Roffey Brothers & Nicholls (Contractors) Ltd [1989] EWCA Civ 5 (23 November 1989)