Williams v Roffey Bros Case Analysis

Williams v Roffey Bros & Nicholls (Contractors) Ltd [1991] 1 QB 1

 

Overview

Where A and B are in and existing contract and A promises to give more to B this promise will be binding if A receives a practical benefit even though B is only doing what they promised to do under the original contract. This rule applies to variations to existing contracts only. In short, if A receives any sort of factual benefit in return for promising to give more to B, a court will find consideration for that promise and A must give the extra to B. You might bee thinking ‘Why do the courts apply a test that is so easy to satisfy?’. One answer is that the courts will try and uphold changes to a contract and do not want to interfere with any variation. When covering this case, and this topic, remember that the courts will strive to find practical benefit because they do not want to invalidate the agreement to give more.

Facts

• Roffey Bros contracted with a housing association to refurbish flats.
• Roffey Bros contracted with Williams for Williams to complete carpentry work on 27 flats as part of the housing refurbishment project.
• Roffey Bros would pay £20,000 in instalments to Williams as the work progressed.
• Williams completing some of the refurbishment but encountered financial difficulties as Williams had undervalued how much the refurbishment work would cost.
• Roffey Bros met with Williams. Roffey Bros agreed to pay Williams an extra £575 per flat completed.
• All Williams had to do was complete to the original schedule.
• Roffey Bros agreed to this extra payment as they needed the work completed on time – if the work was completed late, they would incur a financial penalty as part of the main contract with the housing association.

Be careful: we are focused on the contract between Williams and Roffey Bros. The case focused on a variation of the contract between these two parties.

 

Issue

Was Roffey Bros agreement to pay an extra £575 per completed flat binding?

 

Outcome

• Up until this case, agreements by A to give more in exchange for nothing new or extra in return from B would fail as B had not provided consideration.
• The only way that such agreements could be upheld was if B had exceeded their contractual duty. In simple terms, if B had gone over and above what B had originally agreed to do.
• In this case, Williams (B) had not gone over and above what he originally agreed to do in the initial contract.
• Despite this, the Court held that Roffey Bros (A) promise to pay more was binding and the extra payment was due to Williams (B).
• The Court held that a promise by A to give more could be binding where the following requirements are satisfied:
  • A and B must be in an existing agreement to perform a service or supply goods – this just means the test only applies to contracts being varied/changed.
  • Before B completes his obligation under the contract, A has reason to doubt that B will be able to complete his end of the bargain
  • A promises to give more to B
  • A obtains a practical benefit or avoids a disadvantage
  • A’s promise to pay has not been made as a result of economic duress – we need evidence that A gives more freely and voluntarily. A might be reluctant to give more. This is not economic duress. You must show that A gave more as he had absolutely no other practical alternative but to pay more. If A is left with absolutely no alternative but to pay extra to B, then there certainly is an arguable case that this is economic duress. If economic duress is shown, then the test fails and the agreement to give more is vitiated/invalidated.
• If the elements of the test are satisfied = A’s agreement to pay more to B is binding. If A fails to give more then A is in breach of contract.
• In this case the Court found that Roffey Bros had received several practical benefits in agreeing to give more to Williams.
• These included:
  • Avoiding having to pay a penalty clause to the housing association if the refurbishment work was not completed on time
  • Roffey Bros avoided having to find another contractor to complete the work.
  • Thinking point: these factual/practical benefits show how easy the test is to satisfy. The first practical benefit was a benefit Roffey Bros had under the initial contract anyway. The second benefit is also a benefit they received from the first contract – if Williams performed the contract then there was no need to hire someone else. Practical benefit is pitched at a very low threshold.
• As Roffey Bros received practical benefits and the other requirements of the test (above) were satisfied, Roffey Bros’s agreement to pay more to Williams was binding.

 

How do I use this case in a problem question?

 

 

Common Mistakes

X – the practical benefit test involves looking at the benefit that is received by the party promising more (A). You do not focus on whether the party receiving more has provided something of value (B). This test requires that you examine the benefit that the party giving extra receives only.

X – we judge the practical benefit received at the time the promise to give more is made. If this benefit actually, in fact, does not occur that is irrelevant to whether the test is passed. For example, imagine A promises B more money to complete a house refurbishment on time. A does this as they want to have a party at their home for Christmas. Imagine then that the Christmas party is cancelled. A must still pay the extra money to B as there was a practical benefit to A at the time the promise was made.

 

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