The Musumeci’s leased a shop in a shopping centre run by Winadell. Winadell subsequently leased another shop in the centre to a competing business. Musumeci’s asked for a rent reduction to compensate for this and Winadell agreed. When a dispute later arose Winadell sought to terminate the lease and Musumeci sought damages for breach, relying in part on Winadell’s promise to charge a reduced rent.
Noted parties relied on the decision in Williams v Roffey Bros(he noted that unless the Musumeci’s could rely on this exception, the Stilk v Myrick decision would apply and prevent the establishment of ‘consideration’ here – although he also notes the similarity of that case with Roffey – in that it might have been argued that not deserting obviated a disbenefit!); here it was argued that Winadell obviated a disbenefit by reducing rent, even though not obliged to do so.
Santow J then considered whether Williams v Roffey should be followed in Australia. He noted there are three reasons why a contract to perform existing obligations should not be enforced:
(1) To protect the promisor from extortion (threatening breach to extract promise)
Santow J considered duress was sufficient protection (combined with fraud, undue influence and unconscionable conduct) against this sort of extortion
(2) Because the promisee suffers no legal detriment in performing what was already due and promisor receives no legal benefit in receiving what was already due
Here Santow J considered that the fact that a concession is given to P without extortion supports an inference that real and practical consideration has been provided for that concession.
(3) Because a ‘benefit which is merely the hoped-for end result of the performance cannot constitute consideration.
Santow J did not accept that – as it would be an argument against consideration in any form.
Santow J then indicated that he would add an element to Glidewell’s criteria in Roffey Bros. The fourth element should make it a requirement that as a result of giving this promise, A suffers a practical detriment (or obviates a benefit) ‘provided that A is thereby foregoing the opportunity of not performing the original contract in circumstances where such non performance, taking into account B’s likely remedy against A (and allowing for any defences or cross-claims) is being capable of being viewed by A as worth more to A than performing that contract, in the absence of B’s promised payment or concession to A.’ With those clarifications, Williams v Roffey ‘should be followed in allowing a practical benefit or detriment to suffice as consideration’.
In this case, applying Roffey, the practical benefit Winadell gained by promising lower rent was said to be the ‘enhanced capacity of [the Musumeci’s] to stay in occupation, able to carry out their future reduced lease obligations’ notwithstanding the new competition. This enhanced the capacity of Winadell to keep a full shopping centre. Santow J concluded that there was a practical benefit; there was valid consideration for varying the lease.