Pre Existing Duty Rule

Extract 1 : Pre- existing duty rule
Extract 2 : Contract modification and the allocation of insurance
Extract 3 : Renegotiations in financial relationships
Extract 4 : Contracts for services
Extract 5 : Case for relaxing the rule further

Contracts for services

The pressures to enforce contractual renegotiations are very similar to those for enforcing a renegotiation in financial ones; essentially one party may be in financial or other difficulties that make it almost impossible for them to carry out the contract under the existing terms. This in turn effects the other party as it means the service may not be carried out.

In Roffey the contract was between the main contractor on the construction of a block of flats and a subcontractor hired to carry out the carpentry work on those flats. It transpired that the agreed fee for the work was too low and the subcontractors became involved in financial difficulties that would have prevented them from carrying out any further work. The principal contractors needed the work to be completed, as if the flats were not finished by a certain date penalty clauses in their own contract were activated reducing their level of payment. The principal contractors then offered an additional sum to the subcontractors to complete the work. The subcontractors continued the work only for the new promise to be reneged upon. Normally such a promise is not enforceable due to the absence of any fresh consideration, however the court held that if the promisor had reason to believe that promisee would not complete their obligations, offered additional payment, and as a result of the promisee's performance the promisor obtained a practical benefit or obviateed a disbenefit, then performance may be good consideration provided the agreement was not induced by economic duress or fraud. The scope of the decision has been severely limited by the case of Re Selectmove1 where it was held that the decision in Roffey only applied to contracts for the supply of goods and services and not to financial relationships.

1. [1955] 1 WLR 761[^ Return]

Extract 1 : Pre- existing duty rule
Extract 2 : Contract modification and the allocation of insurance
Extract 3 : Renegotiations in financial relationships
Extract 4 : Contracts for services
Extract 5 : Case for relaxing the rule further

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