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

A main contractor, Roffey, agreed to pay a sub-contractor, Williams, an extra sum to complete work on time. The court held this promise was enforceable as Roffey gained a 'practical benefit', refining the traditional doctrine of consideration.

Facts

The defendants, Roffey Bros & Nicholls (Contractors) Ltd, were main contractors for a project to refurbish a block of 27 flats. Their own contract contained a penalty clause for late completion. They subcontracted the carpentry work to the plaintiff, Lester Williams, for a price of £20,000. Part-way through the work, the plaintiff realised he had underestimated the cost and was in financial difficulty, making it unlikely he could complete the work on time. This would have caused the defendants to be liable under the penalty clause in the main contract. The defendants therefore initiated a meeting on 9th April 1986 and promised to pay the plaintiff an additional sum of £10,300, to be paid at a rate of £575 for each flat completed. The plaintiff continued to work on this basis, but after completing a further eight flats, the defendants had only made one further small payment. The plaintiff ceased work and sued for the outstanding additional amount promised.

Issues

The central legal issue was whether the plaintiff had provided legally sufficient consideration for the defendants’ promise of additional payment. Under the established precedent in Stilk v Myrick (1809), the performance of an existing contractual duty was not considered good consideration for a new promise from the other party. The defendants argued that since the plaintiff was already contractually bound to complete the carpentry work, his promise to continue was not fresh consideration, and therefore their promise to pay extra was unenforceable.

Judgment

The Court of Appeal unanimously found in favour of the plaintiff, holding that his continuation of the work constituted good consideration for the promise of additional payment. The court distinguished the case from Stilk v Myrick, refining the doctrine of consideration.

Lord Justice Glidewell’s Reasoning

Lord Justice Glidewell reviewed the existing law and proposed a modernised test for situations involving the variation of a contract. He concluded that the old rule was not sufficient where the promisor obtains a ‘practical benefit’ from the other party’s promise to perform their existing obligations. He set out a six-point framework:

(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.

In this case, the practical benefits to Roffey were clear: they avoided the penalty clause in their main contract, avoided the expense and trouble of engaging another subcontractor, and secured a more orderly working arrangement. These benefits were sufficient consideration.

Lord Justice Russell’s Reasoning

Lord Justice Russell concurred, emphasising a need for the law to reflect commercial reality. He argued against a rigid application of Stilk v Myrick, particularly where there is no element of duress or coercion. He stated:

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 reflect the true intention of the parties.

He saw the defendants’ promise not as a concession granted under pressure, but as a pragmatic commercial decision from which they derived a benefit.

Implications

The decision in Williams v Roffey significantly developed the doctrine of consideration. It did not overrule Stilk v Myrick but rather refined its application. The key implication is the establishment of the ‘practical benefit’ principle: where a promisor agrees to pay more for the performance of an existing contractual duty, and in doing so gains a factual or practical benefit (or avoids a ‘disbenefit’), this can be regarded as good consideration, provided the promise was not extracted by economic duress or fraud. This marks a shift from a strict legal definition of consideration towards a more pragmatic approach that recognises commercial realities, with the modern doctrine of economic duress acting as the primary safeguard against extortionate demands.

Verdict: The appeal by the defendants (Roffey) was dismissed. The court upheld the trial judge’s decision that the promise for additional payment was enforceable.

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