Contract law Essay Example | Topics and Well Written Essays - 1500 words - 3

Contract law - Essay Example This is the principle of promissory estoppel and in its modern form it is based on the dicta of Denning J in the Central London Property case (Central London Property Trust Ltd V. High Trees House Ltd) and the decision of the House of Lords in the Tool Metal case (Tool Metal Manufacturing Co Ltd V. Tungsten Electric Co Ltd ). In Williams v. Roffey, Roffey had a contract to refurbish a block of flats. He sub-contracted the carpentry work to Williams, who after the commencement of the work came to realize that he had underestimated its cost and as a result, he was placed in financial difficulties. Roffey, realizing that the work would not be completed on time and that this would result in the breach of a penalty clause in their main contract with the owner, agreed to pay Williams an extra payment per flat (Williams v Roffey Bros & Nicholls (Contractors) Limited). Williams completed the work on these flats but did not receive full payment. He stopped work and brought in an action for damages. In the Court of Appeal, Roffey argued that Williams was only doing what he was contractually bound to do and had therefore not provided any consideration. It was held by the Court of Appeal that where a party to an existing contract later agrees to pay an extra "bonus" in order to ensure that the other party performs his obligations under the contract, then that agreement is binding if the party agreeing to pay the bonus has thereby obtained some new practical advantage or has avoided a disadvantage. In the present case, there were benefits to Roffey such as: (a) making sure Williams continued his work, (b) avoiding payment under a damages clause of the main contract if Williams was late, and (c) avoiding the expense and trouble of sub contracting the work to someone else. Therefore, Williams was entitled to payment (Williams v Roffey Bros & Nicholls (Co ntractors) Limited). In the CTN Cash case it was