Today the Court of Appeal in NSW handed down its judgment in Dome

Resources NL v Silver [2008] NSWCA 322. At para 68, Basten & Bell JJA

(Beazley JA ageeing) said:

"The conclusion reached by the trial judge that there was consideration

for the variation deed should be accepted. It is not necessary for

present purposes to consider whether the concept of “practical

benefit” involves any departure from established principles relating

to consideration or whether it is simply a new formulation of the

well-established principle requiring the Court to identify the

preconditions to a contract, as it would the proper construction of the

contract, having regard to commercial realities and the manner in which

business people have conducted their affairs: see Woodhouse AC Israel

Cocoa Ltd SA v Nigerian Produce Marketing Co Ltd [1972] AC 741 and, in

relation to expectations of the scope of loss for breach, Transfield

Shipping Inc v Mercator Shipping Inc [2008] UKHL 48, [2008] 3 WLR 345."

Maybe because it is Friday afternoon here, but I'm not sure what all

this means, but I thought I'd throw it in in relation to the current

discussion this group is having on this issue.

Peter Radan

Associate Professor Peter Radan

Department of Law

Macquarie University   NSW   2109

Australia

Tel:      +61 (0)2 9850-7091

Email:   Peter.Radan@law.mq.edu.au

>>> Andrew Robertson <a.robertson@unimelb.edu.au> 28/11/2008 9:43 am

>>>

Eoin,

I think the proposition for which you cite Hartley v Ponsonby (ie, 'It

is clear that where the background circumstances change, getting

something different is good consideration.') is too wide. A change in

background circumstances will only be relevant if they frustrate the

contract or produce a state of affairs in which, as a matter of

interpretation, the party benefiting from the variation is no longer

bound to perform. In Hartley v Ponsonby (unlike Stilk v Myrick) the

number of desertions made it dangerous to go to sea with the result

that

the remaining crew were no longer obliged to perform. Since they were

not bound to sail they were free to make a new contract unaffected by

the existing legal duty rule. In Williams v Roffey such change in

circumstances as there was did not affect the carpenter's obligation

to

perform.

Andrew

-----Original Message-----

From: Eoin O'Dell [mailto:odelle@tcd.ie]

Sent: Friday, 28 November 2008 9:16 AM

To: Obligations List

Subject: Consideration and Williams v Roffey

Dear all,

Although the Williams v Roffey thread has unravelled into various

interesting

discussions, I'd like to go back to the issue of what constituted the

consideration on the facts of that case. The Court of Appeal

identified

many

practical benefits which they said sufficed, (the carpenter's

continued

performance, a more orderly and efficient performance of the contract,

avoidance by the builder of the trouble and expense of obtaining a

substitute,

and - especially - avoiding the penalty clauses in the head-contract).

However,

the debate on the list has demonstrated that the sufficiency of these

practical

benefits is controversial. Nevertheless, in my view, these

formulations

of

benefit tell only half the story; their focus is on the simple fact of

the

promisee ultimately getting what he originally bargained for, whereas,

on the

facts of Williams v Roffey, it was not so much that the promisee would

ultimately get what he originally bargained for that was important, as

the fact

that he would get it _in different circumstances_.

The background market conditions had changed significantly; the

carpenter's

cashflow had suffered acutely as a consequence; and the renegotiations

between

the carpenter and the builder were carried out against these serious

background

changes. Absent the renegotiation, the carpenter would not have been

able to

proceed. By renegotiating, the builder now gets performance - indeed,

improved

performance - of the contract, but it is no longer the same thing as

before, it

is now something new, because it is performance _in the new

circumstances_. As

such, it constitutes good consideration.

It is clear that where the background circumstances change, getting

something

different is good consideration (see, eg, Hartley v Ponsonby  (1857) 7

El&Bl

872; 119 ER 1471). Again, it is clear that where the background

circumstances

remain the same, getting something different is good consideration: a

promisee

may provide other consideration for the new promise by doing, or

promising to

do, more than what is already set out in the original contract. But if

getting

something different in the same circumstances is good consideration,

then why

can it not be that getting the same thing _in different circumstances_

also

constitutes good consideration?  Given the new circumstances, the

contract as

originally agreed could not be performed. By negotiating to ensure

that

in the

new circumstances the contract can again be performed, the promisee

does

receive a new benefit: without the renegotiation, the promisee

receives

nothing; with it, the promisee plainly receives something, and thus

receives

good consideration. Indeed, in Williams v Roffey, the various items of

practical benefit which it is said constitute the builder's

consideration

really only make sense when viewed as that which is received in the

context of

the new background market circumstances; getting the carpenter's

performance in

the new circumstances is thus good consideration.

If this is right, then - given recent economic trends - we are likely

to

see

this issue return on these kinds of facts.

Eoin.

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