Contract Modification Case Study Example | Topics and Well Written Essays - 1500 words

Contract Modification - Case Study Example The defendant promised to pay an additional sum of money for each flats timely construction fearing he would face liquated damages for delay under the original contract. After finishing about eight more completed flats, the plaintiff refused to work any more and also refused to return the remaining 460, which was the amount owing from the subsequent promise or the eight completed flats. The defendant tried to argue that following Stilk v Myrick3, they were not liable to the plaintiff because the subsequent promise was not legally enforceable due to the fact that no consideration had been paid for it .The plaintiff had offered no consideration because, in exchange, the plaintiff was only offering to do what he was already bound to do.4 The Court held that there was indeed a benefit for the defendant in that he would avoid the penalty liquidated damages and have the convenience of continuing with the same carpenter At the time this case was decided, it was widely expected that that this new notion of a "practical benefit analysis" would be applied to future cases concerning part payment of debts. 5If thoroughly applied the previous cases of Foakes v Beer and Pinnel's case would be rendered as not good precedent.6 Therefore, where the creditor accepts less than the full amount owed to him and promises to waive the rest of the money it would not be difficult for him to prove that there have been any practical benefits received. 7Lord Blackburn who gave the dissenting judgement in Foakes v Beer acknowledged this, as follows:8 "All men of business ... do everyday recognise and act on the ground that prompt payment of a part of their demand may be more beneficial to them than it would be to insist on their rights and enforce payment of the whole. Even where the debtor is perfectly solvent, and sure to pay at last, this is often so. Where the credit of the debtor is doubtful it must be more so."9 The case of Re Selectmove Ltd.10 involved an appeal by a company from an order arising from the request of the IRC to recover a large amount of taxes and to wind up the defaulting company. The company pleaded that the IRC had promised through an agreement that they could pay the arrears in a monthly scheme and pay the new taxes promptly. The court held in line with Williams v Roffey brothers that this arrangement amounted to a practical benefit to the IRC. However the case was decided in the favour of IRC and Peter Gibson L J made it very clear that if the Court of Appeal were to accept the practical benefits analysis, "It would in effect leave the principle in Foakes v Beer without any application". He also said that the creditor will almost always look at the practical benefits of any bargain but they cannot be classified as new consideration and this has been the view in Foakes v Beer. This view of the Court of Appeal has been subjected to much criticism. 11It is often said that it overlooked the incompatibility between the decisions of the Williams v Roffey and Foakes v Beer and that it is not possible to restrict this case merely to a restriction or expansion of the practical benefits doctrine but a clear line needed to be drawn between a promise to pay additional sums of money under the Williams v Roffey Case and a promise to accept a lesser amount of money in lieu of the full payment under the rule in Foakes v