Practical - William’s v Roffey Bros & Nicholls (Contractors) Ltd PDF

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William’s v Roffey Bros & Nicholls (Contractors) Ltd [1991] 1 QB 1
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William’s v Roffey Bros & Nicholls (Contractors) Ltd [1991] 1 QB 1 The Facts The claimant, Williams, entered into a subcontract with the defendants, Roffey Bros & Nicholls who held the main building contract to carry out carpentry work in a block of 27 flats for an agreed price of £20,000. The claimant got into financial difficulties because the agreed price was too low for him to operate satisfactorily and at a profit. The main contract contained a time penalty clause and the claimant didn’t complete the carpentry work on time and made an oral agreement to pay the claimant an additional sum of £10,300 at the rate of £575 per flat on which the carpentry work had been completed. Approximately 7 weeks later when the claimant had substantially completed 8 more flats, the defendants had made only one further payment of £1,500 whereupon the claimant ceased work on the flats and sued the defendants for the additional sum promised. The judge held that the agreement for payment of the additional sum was enforceable and didn’t fail for lack of consideration, and gave judgement for the claimant. – Case appealed by the defendants and dismissed1. The decision Williams won the case as consideration was said to have been provided by him for conferring a benefit on the defendant by helping them to avoid the penalty clause and it is because of this that the defendants were liable to make the extra payments promised. It is trite law that a party cannot sue on a contract unless he has given consideration and that merely to perform the duty owed will not provide consideration for a further promise2. Therefore, it came as some surprise to find the subcontractor succeeded in his claim against the contractors3. The decision was upheld on the grounds that the contractors had received a benefit from the performance of the sub-contractor, in that the contractors had avoided a penalty clause of the main contract4. On the facts of the present case the consideration, even if otherwise good, did not move from the promisee and this rule was laid down in the case of Tweddle v Atkinson5. The controversial question which arises in this case is whether the additional sum promised should be released to the claimant at the rate of £575 per flat as and when the carpentry work on each flat had been completed in its entirety. Note, the case refers to the conditions of the flats as “substantially completed”. The ratio It is essential to understand why the court came to the consensus it did and the first judgement for this case was provided by Glidewell L.J in which he boldly stated that “there was no express term providing for the payment to be made in stages” - this would therefore support the argument provided by Evans that the additional payments should be released to the plaintiff as and when the carpentry work on each flat was completed in its entirety. Williams and his work men completed the 1st fix on 27 flats and substantially completed 9 of the flats for the 2nd fix with interim payments totaling £16,200 leaving £3,800 remaining. The judge found that the plaintiff was in financial difficulty for 2 reasons, firstly, the agreed price of £20,000 was too low and that they had in fact been aware of this as a surveyor who was employed by the defendants said in evidence, that a reasonable price for the works would 1 William’s v Roffey Bros & Nicholls (Contractors) Ltd [1991] 1 QB 1 2 Noble M, 'For your consideration' (1991) 141(6527) New Law Journal 1–3 3 Ibid 4 Ibid 5 Tweddle v Atkinson [1861] 121 E.R. 762

William’s v Roffey Bros & Nicholls (Contractors) Ltd [1991] 1 QB 1 have been £23,783. It is arguably a careless move by the plaintiff’s having been informed prior that the agreed price was low and then continuing with the contract regardless. The judge also found that the plaintiffs were in financial difficulty due to the poor supervision of the workmen. The fact the plaintiff did not complete the carpentry work on time was the main concern as this posed a risk in regards to the penalty clause. The plaintiff and his men continued to work on the flats and the defendants had only made one further payment of £1,500 which resulted in the plaintiff ceasing work. Glidewell L.J found that the plaintiff was mistaken and preferred the evidence of the defendants, specifically the denial on behalf of the plaintiff in regards to the promise to pay him an additional £10,300. There was an agreement which showed that the defendants would pay the plaintiff an extra £10,300 over and above the £20,000 and then the defence alleged neither the balance of the original contract sum nor the £10,300 were payable until work was completed. To conclude Glidewell L.J opinion on the case at hand, we see that the judge finds that the defendants promise to pay an additional £10,300 at the rate of £575 per completed flat was part of an oral agreement made between the 2 parties. Moreover, before the plaintiff ceased work, carpentry in 17 flats was substantially completed. Meaning, that between the creation of the agreement and the plaintiff ceasing work 8 more flats were substantially completed. So the judge found that Williams was entitled to receive £4,600 for the 8 further completed flats at the rate of £575 each, as well as a further sum of £2,300 which was outstanding from the original contract. So sums totaling £5,000 against which he had only received £1,500 of and the defendants were therefore in breach of contract and the plaintiff was entitled to cease work. Russell L.J. provides the second judgement to this case, he agrees with the previous judgement in that the plaintiff was not entitled to any part of the £10,300 because none of the 8 flats were completed. The topic of economic duress is introduced and challenged by him in that there was no obvious pleading that the defendants were subjected to any duress to make the agreement, or, that their promise to pay the extra £10,300 was lacking in consideration. The judge found that the plaintiff must have continued work in belief that he would be paid £575 as he finished each of the 18 uncompleted flats. To conclude this judgement it is clear that Russell L.J has not based his judgement on previous case law such as the case of Stilk v Myrick6. Where a party undertakes to make a payment because by so doing it will gain an advantage arising out of the continuing relationship with the promisee, the new bargain will not fail for want of consideration. Purchas L.J. provides the final judgement in this case, he states that the evidence provided by Mr. Cottrell, the defendant’s surveyor established to their knowledge, that the original contract price was low to enable the plaintiff to operate satisfactorily and the lack of supervision was reiterated in this judgement which therefore resulted in the financial issues. A further concern expressed by the judge was that the plaintiff had been paid for more than 80% of the work but did not complete anything like this percentage. The implications The main implication to be gathered from this case is the principle of traditional consideration, the case has been very famously contrasted with Stilk v Myrick. In many respects Roffey does not comply with the traditional principles of consideration but academics 6 Stilk v Myrick [1809] 2 Campbell 317

William’s v Roffey Bros & Nicholls (Contractors) Ltd [1991] 1 QB 1 have criticized that the decision held in Stilk v Myrick does not possess great significance in regards to the doctrine of consideration. A further implication is the concept of a practical benefit, the avoidance of disbenefit obtained by the promisor from performance of the promisees existing contractual obligation could be consideration for the promisors promise to pay more than the original contract price and it is here where Stilk v Myrick was reinterpreted as an early example of economic duress7. Practical benefit was considered to be sufficient for 5 reasons, the avoidance of the penalty clause, the defendant being spared the onerous task of finding someone else, the subcontract itself not being in breach, formal method of payment replaced by a haphazard option and finally, the change in how the job was done enabled how all people on the site worked effectively8. The subsequent developments The decision in Roffey has been influential throughout Britain and the principles were followed in England and Wales. It has also been approved by the Courts of Appeal in New Zealand by recently delivered a ruling which appeared to dispense consideration altogether, rather than attempting to marry Roffey with existing case law9. Note, although the case of Foakes v Beer10 has not been referred to in Roffey the two cases are usually challenged and the fact that Roffey was decided by the Court of Appeal leaves the controversial statement that the case is not worthy of being official binding precedent until the House of Lords agree. The case of Re Selectmove11 was distinguished to Roffey. The concern in this case was whether sufficient consideration in the form of a partial payment of the debt amounted to a binding contract – Roffey was argued in the sense that the case was an appropriate precedent case considering the case largely consists of the concept of ‘Practical benefit’. Evaluation How does performance of one party’s existing contractual duty provide a practical benefit to another? As we see in this rather long-winded case the promisor hoped to escape the hassle of potentially hiring others to complete the carpentry work and in particular, the fear of a penalty clause in the main contract should the flat work be completed late. Of all the judgements presented I understood many of Russell LJ views but I ultimately found myself gravitating towards the arguments raised by Purchas LJ as many of the points raised by him I subconsciously asked myself whilst reading through the case. The surveyor employed by the plaintiff had reiterated on numerous occasions that the price subcontracted was low, surely this was a strong indicator that the price negotiated was an issue? However we see that the plaintiff did not take on board the point raised and this arguably was a potential reason for falling into financial difficulties – a rather careless action on their behalf. The further failure to supervise the staff sufficiently was also a major concern however the case raises the following question: why should any contractor bother to estimate their prices accurately or supervise the staff? 7 O’Sullivan J, 'In Defence of Foakes v. Beer' (1996) 55(02) The Cambridge Law Journal 219–228 8 Knight C, 'A plea for (re)consideration' [2006] Cambridge Student Law Review 9 Ibid 10 Foakes v Beer [1884] 9 App. Cas. 605 11Re Selectmove Ltd [1995] 1 WLR 474

William’s v Roffey Bros & Nicholls (Contractors) Ltd [1991] 1 QB 1 Substantial completion – 2 words consistently mentioned throughout this case and perhaps the largest controversial topic of discussion when it comes to Roffey. How can it be defined and applied accurately? it was described in the case to be ‘something less than completion’ If we take a literal/objective view then the sum of £575 should be released as and when each flat is completed wholly however this is not the case at all as the trial judge stated, not a single flat had been completed so technically speaking there was no contractual entitlement to the money awarded. On the other hand, a rather gentle interpretation for the outcome of this case is that disputes of such nature occur all the time in the commercial world of dealings. What essentially happened in Roffey is not uncommon, rather more common and the solution is rather simple. If 2 parties come to a joint consensus that the price contracted is low then the freedom should be there to re-negotiate – as evidenced in the case of North Ocean Shipping by Mocatta LJ12. Moreover, in policy terms, the law of contract should surely encourage parties to price their contracts properly13. My personal views regarding the case is that Williams was paid a large sum of money for work he quite frankly did not do and that he should only have been paid for the flats that were completed to their entirety. Before all the rules of consideration are consigned to the dustbin of history in favour of a tortured appeal to “practical benefit” and the “true intentions of the parties”, it is perhaps worth pausing to consider whether the old doctrine has anything of relevant to commend it at the end of the twentieth century14

12 North Ocean Shipping Co. Ltd v Hyundai Construction Co. Ltd [1979] Q.B. 705 13O’Sullivan J, 'In Defence of Foakes v. Beer' (1996) 55(02) The Cambridge Law Journal 219–228 14Ibid

William’s v Roffey Bros & Nicholls (Contractors) Ltd [1991] 1 QB 1 Table of cases Williams Bros v Agius (E.T). Ltd. [1914] A.C. 510. North Ocean Shipping Co. Ltd v Hyundi Construction Co. Ltd [1979] Pao On v. Lau Yiu Long [1980] A.C. 614 Stilk v Myrick (1809) 2 Camp. 317 Tweedle v. Atkinson (1861) 1 B & S. 393 Ward v Byham [1956] 1 W.L.R 496 Legislation National Assistance Act 1948 (c.29) s.42 Sale of Goods Act 1893 (c.71)...