LAW AND COMMERCE
Reconsidering Consideration Justin Tan & Eliza Chee, University of Oxford Introduction The recent case of MWB Business Exchange Centres Ltd v Rock Advertising Ltd (“MWB Business”)1 reviewed, inter alia, fundamental aspects of consideration—a doctrine that has been subject to significant criticism2 and described by some judges and academics as ‘unnecessary’3 and ‘inconsistent’.4 In particular, the Court of Appeal paid detailed attention to the earlier Court of Appeal ruling in In Re Selectmove Ltd,5 where a legal reconciliation was attempted between Williams v Roffey Bros & Nicholls (Contractors) Ltd (“Williams v Roffey”)6 and Foakes v Beer.7 The aim of this article is to re-clarify the doctrine of consideration in light of the decisions in MWB Business, as well as explore potential scope for future development. This article will also embark on a comparative analysis with Singapore’s legal jurisdiction, in order to draw useful insight for how the doctrine of consideration in English law could be improved.
The Clash Between Williams v Roffey and Foakes v Beer The significance of MWB Business to the doctrine of consideration rests squarely on the background dispute between Foakes v Beer and Williams v Roffey about whether part payment of an existing debt (or performance of a service already owed) can constitute good consideration. It is helpful to briefly consider these cases. Foakes v Beer is a leading case that reaffirmed the orthodox view of consideration - that performance of a pre-existing contractual duty owed to the other contracting party cannot suffice as consideration. However, more than a century later, this view came under attack in the case of Williams v Roffey. 1
[2016] EWCA Civ 553, [2018] UKSC 24.
2 The Law Revision Committee, Sixth Interim Report (Cmd 5449, 1937). 3 See for example Lord Goff’s comments in White v Jones [1995] UKHL 5, [1995] 2 AC 207: ‘our law of contract is widely seen as deficient in the sense that it is perceived to be hampered by the presence of an unnecessary doctrine of consideration’.
20
4
Mindy Chen-Wishart, Contract Law (6th edn, OUP 2018).
5
[1995] 1 WLR 474.
6
[1989] EWCA Civ 5.
7
[1884] UKHL 1.
Williams v Roffey was remarkable in suggesting that a promise to perform a pre-existing contractual obligation might constitute good consideration where there is ‘practical benefit’ to the promisee. This seemed to contravene the principle in Foakes v Beer, because it suggested that even part payment of a debt, or part performance of a service, could be valid consideration so long as there was ‘practical benefit’.8 This came to a head in In Re Selectmove Ltd, where the Court of Appeal held that the Williams v Roffey principle could not be extended to an obligation to make payment because it would leave the Foakes v Beer principle ‘without any application’9. This left the Court of Appeal no choice but to maintain an uneasy distinction: Foakes v Beer would be applied to scenarios involving part-payment of debts, while Williams v Roffey would be applied to all other scenarios, primarily the supply of services. Gibson LJ admitted that he saw the force of extending the principle, as has been supported by legal academics like Adams and Brownsworth10, but was also bound by precedent. If an extension were to be made, he declared, that would be the role of the House of Lords, or more appropriately, by Parliament after consideration by the Law Commission.
MWB Business: Facts and Rulings of the Case MWB Business Exchange Centres Ltd (“MWB”) operated serviced offices in London, and they allowed Rock Advertising Limited (“Rock”) to occupy this space as a licensee. In August 2011, Rock decided to expand its business and thus entered into a new written contract with MWB for a larger space, paying an increased license fee. Unfortunately, the expansion of Rock’s business was not as successful as it had hoped, and by February 2012, it had incurred various arrears and charges of more than £12,000. As a result, MWB locked Rock out of the premises in March 2012 and gave notice purporting to terminate the agreement. MWB also brought claims 8
Williams v Roffey (n 6) [13].
9
(n 5) 481.
10 John Adams and Roger Brownsword, Consideration and the Critical Path’ (1990) 53 MLR 536.
‘Contract,