Why's it nonsense that a contractual variation is enforceable if the other side’s obligations are altered trivially, but not otherwise?

Question

What exactly does otherwise mean? What are the other wises? wise means manner/extent.

O'Sullivan & Hilliard's The Law of Contract (2018 8 ed). p 106.

5.55 Furthermore, there are several more general problems with the decision in [Roffey]:

• Fear of duress might not be the only reason for the rule in Stilk v Myrick: it may also operate to encourage parties to price their contracts properly in advance. As O’Sullivan (1996) points out: ‘Why should any contractor bother to estimate his price accurately or supervise his staff, now that the law is willing to treat his

p 107.

difficulties in performing his contractual obligations as a sufficient “reason” for enforcing a subsequent promise to pay him more than the contract price?’

• Those who criticise a consideration requirement in this context point out that many contracts, rather than embodying a one-off transaction, are in fact long-term relational arrangements, which must be allowed to develop with the parties’ relationship over time. In such cases, the requirement of consideration for each variation is unrealistic and, it is said, should be modified to meet commercial reality. One response is to say that, if properly drafted, such relational contracts can contain their own mechanism for alteration over time (like a rent review clause in a long commercial lease). But more fundamentally, of course, the point is that Roffey was not such a contract anyway—it was a one-off job for a price.

• Commercial parties need certainty. Supporters of the Roffey approach say that it is nonsense that a contractual variation is enforceable if the other side’s obligations are altered in a trivial way, but not otherwise. But that is at least a fairly straightforward way of making the variation work, allowing for clear legal advice at the time and thus avoiding litigation later.

• Finally, it should be noted that those who advocate the abolition of consideration for contractual variation do not necessarily agree with the approach in Roffey that practical benefit suffices for consideration. For example, the New Zealand Court of Appeal has since gone further and decided that contractual variations, once relied on, do not need consideration at all (see Antons Trawling Co Ltd v Smith (2003), noted by Coote (2004)).

Answer 1

Why this is nonsense: The “nonsense” comes from applying the legal doctrine of consideration. Contract law requires the parties to a contract to exchange something of real value. The something that is exchanged is called the consideration. If there is no consideration, there is no contract, just promises and gifts, which courts will not enforce.

The nonsense is the claim that even the most trivial consideration, such as a peppercorn, is enough to form a contract. Critics say this is nonsense because contract law requires an exchange of valuable consideration. If something as worthless as a peppercorn can serve as consideration, then requiring consideration is merely a formality. (Literally a formality, in that giving a peppercorn has the form, but not the substance, of “giving something of value.”)

(This is the “otherwise” you asked about: If there is consideration, no matter how trivial, there is a contract. Otherwise, (ie, if there is no consideration) there is no contract.)

What about “the other side’s obligations?” The section you quote is about contract variations, changes to the contract after it has been signed. The case discussed, Roffey, involves a builder who, after getting fairly deep into a job, realized his bid was so low he could not afford to finish the job. He talked to the developer, who promised to pay more, in return for Roffey’s promise to finish the job.

From the perspective of contract law, this revision is troublesome because the builder has offered no new consideration. Instead, he has simply promised to finish the job he promised to finish in the original contract. He seems to be getting something for nothing here. To get around the lack of consideration, the court held that the builder’s new promise to finish the job was his new consideration. Because the builder would not finish the job without a new contract, the new contract made the developer better off. The Court said this “better off” was the builder’s consideration.

Critics agree this is a good outcome. They simply complain that, as is often the case in contract cases, the judges played verbal games. To satisfy a purely formal requirement, they turned an old promise into new consideration. Critics want contract law to stop worrying about old formalisms, and start dealing directly with the real issues at stake, such as when it makes sense to allow one-sided contract revisions.

An Old Argument: This is hardly a new argument. Critics have long claimed that reducing contract law to mere formalities is unjust, especially since the common law’s reliance on precedent means these are often old formalities. As (US Supreme Court) Justice Oliver Wendell Holmes said long ago in, The Path of the Law:

It is revolting to have no better reason for a rule of law than that so it was laid down in the time of Henry IV. It is still more revolting if the grounds upon which it was laid down have vanished long since, and the rule simply persists from blind imitation of the past.

Answer 2

If the rule is that a contract variation (like "the price changes from £100,000 to £200,000") is enforceable if there is a corresponding variation on the other side (like "the deliverables change from '10 widgets' to '10 widgets and a peppercorn") but not if they don't, then that appears to be a nonsense to me too.

If you forget to specify the "and a peppercorn" then you can't enforce the doubling of the price; that is the sort of legal "gotcha" that brings the law into disrepute.