Pre-existing duties 171

further cautioned about the seriousness of their agreement at the modification stage.
There seem to be great dangers which may attend the use of consideration as a 'signal'
to the courts. It has been observed that.72
the consideration signal produced by a party of superior bargaining power can be a
smokescreen for overreaching, often accepted by the courts as conclusive proof that the
agreement should be enforced.

The law relating to contractual modifications comprises several legal doctrines of which
the pre-existing duty doctrine of consideration is only one. The proper policies to be
pursued by the law of contractual modifications are developed in Chapter 12. This
discussion is intended only to emphasise the point that the doctrine of consideration
functions very differently in different contexts.
We will now examine two of the sources of pre-existing obligations. The third source
of pre-existing duty is a contract with the subsequent promisor which raises issues of
contractual modification rather than formation and so is examined in Chapter 12. When
considering pre-existing duties it is useful to bear in mind a further distinction between
factual and legal definitions of consideration. A factual definition of consideration
emphasises the fact of benefit or detriment that may result from the mere performance
of the pre-existing duty. A legal definition of consideration requires something in excess
of the pre-existing legal duty.

The pre-existing duty arises from a contract with a third party

Three cases decided in the 1860s are said to support the proposition that the act of
performing a contractual duty owed to a third party can constitute good
consideration.
The cases are not wholly satisfactory74 and a flavour of this can be obtained by looking
at one: Shadwell v Shadwell. This involved an uncle's promise to his nephew to 'make
up' his earnings to a given level in view of his intended marriage. At the time a promise
to marry was legally enforceable75 and so the consideration provided by the nephew
was the performance of an act he was already obliged to do under the terms of a
contract with a third party (his fiancée). Erle CJ and Keating J held that the nephew
provided good consideration but did so without reference to the pre-existing duty.
Byles J who did refer to the pre-existing obligation held that the promise was not
binding. 76 However, the matter can now be said to be clarified by the Privy Council in
The Eurymedon77 where it was held

See Restatement Contracts 2d 1981, s 89(a), comment

Crocker, 'Contracts. Modification Agreements; Need for New Consideration. Economic Duress: Note' (1975) 50
wash L Rev 960 at 964-5.
73
Shadwell v Shadwell (1860) 9 CB (NS) 159; Scotson v Pegg (1861) 30 LJ Ex225; Chichesterv Cobb (1866) 14 LT
433. In the first two the promisor might have in fact done acts in excess of the duty owed to the third party. In
Pfizer Corp v Ministry of Health [19651 AC 512 at 536 Lord Reid may be taken to suggest the contrary when he
says that the supply of NHS drugs to a patient does not create a contract between the recipient and the chemist
 because the latter is already under a contractual obligation to supply them. However, it is likely that at the time
Lord Reid was not thinking about consideration but rather about contractual intention.
And surprisingly remained so until Law Reform (Miscellaneous Provisions) Act 1970 s 1(1). As a contract of
'personal service', it could not be specifically performed. See generally Chapter 16.
On the basis that there was no contractual intention. This was approved in Jones v Padavatton [1969]
1 WLR 328 at 333 per Salmon LJ. 77 [19751 AC 154.
172 Chapter 4 The enforceability of agreements: consideration and its alternatives
that the stevedores' act of unloading goods was a sufficient consideration to support an
exemption of liability from damage even though the unloading was something that the
stevedores were already contractually obliged to do by their contract with the carrier.78
In The Eurymedon Lord Wilberforce did not distinguish between the performance of
a pre-existing contractual duty owed to a third party and the promise to perform one.
However, the collateral contract under which the goods owners extended to the
stevedores an exemption from liability for damage to the goods was described as a
unilateral one. A unilateral contract involves the exchange of a promise (here the
exemption) for an act (here the unloading). Therefore, the ratio decidendi of the case
only strictly extends to the proposition that the performance, as opposed to the promise
of performance, of a contractual duty owed to a third party can constitute consideration.
However, the ratio decidendi of a further Privy Council decision addressed this
circumstance.
The exchange contemplated in Pao On v Lau Yiu Lone9 was a very simple one. An
individual, LY, wanted to obtain a property. Unfortunately, the way the transaction was
effected, by an exchange of shares, makes it seem complicated. A property was owned
by a private company (SO) all of whose shares were in turn owned by an individual
(PO). A contract (the main agreement) was entered between PO, SO and a public
company (FC) the majority of whose shares were owned by LY, who was not personally
a party to this contract. The main agreement provided that all the shares in SO (and so
the property) would be transferred to FC in exchange for a number of FC shares. PO
further promised to retain a certain number of these shares for a stipulated period. PO
sought to protect himself against a fall in the value of FC shares during the retention
period by entering a separate agreement with LY under which LY agreed to buy back
the shares at the end of the retention period for the original transfer price. This
arrangement would have been effective to protect PO against any fall in the value of FC
shares but would also have forced him to give up any increase. When he realised this,
PO refused to proceed with the main agreement unless the 'buy-back' arrangement with
LY was replaced with a true indemnity (i.e. which protected PO against a decline in FC
shares but left him with any gains). To protect public confidence In FC, LY agreed to
the indemnity. The main agreement was performed. FC shares fell in value during the
retention period and PO sought to enforce the indemnity.
LY took three objections to the enforcement of the indemnity: the consideration for it
was past,80 the only consideration was the promise to perform a pre-existing contractual
duty owed to a third party (FC) and the agreement was obtained by economic duress. 8
The Privy Council held that the second objection failed because the prormse to perform
a pre-existing contractual duty owed to a third party does constitute good
consideration.82
78
The Eurymedon has been approved in The New York Star [1981] 1 WLR 138 and The Mahkutai [1996] AC 650.
79
[1980] AC 614. This case does not fit easily in the category of pre-existing contractual duties owed to third parties.
Three parties were involved only because of the separate legal personalities of LY and the public company of which
he was a majority shareholder. If the corporate veil is lifted, the case becomes analogous to the cases considered
later involving a modification of an existing contract. See generally the discussion of economic duress in this case
and in Chapter 12.
That is, entering the main agreement which had already occurred. This argument failed because the facts fell
within the exception to past consideration. See above, p. 166.
This argument failed because the pressure was not sufficiently compelling to amount to compulsion. See further
Chapter 12.

Departing from the earlier contrary decision in Jones v Waite (1839) 5 Bing NC 341 at 351.
Pre-existing 1duties 173
The position now seems to be that it is good consideration either to perform
(Eurymedon) or to promise to perform (Pao On) a contractual duty owed to a third party.
Both propositions emerge from cases where practical good sense demands that the
doctrine of consideration should not operate to frustrate an arm's length commercial
agreement. Both decisions categorically reject the application of a legal definition of
consideration described earlier.
Because both are broad-based policy decisions which admit no counter-argument,84 the
principles laid down do not even seem to require the presence of a factual benefit or
detriment. In both cases lip service is paid to the need for consideration but its 'discovery'
does appear to be little more than assertion.

The pre-existing duty arises from the law generally

This is a residual category for pre-existing duties that do not arise from either a contract
with a third party or a contract with the subsequent promisor. The general approach of
the cases is to apply a legal definition of consideration. On this approach the promise or
performance of a contractual duty owed to a third party will not itself amount to good
consideration. Therefore, a witness who was required under a subpoenas5 to attend to
give evidence at a hearing could not enforce a promise to pay a fee. 2 However, it is true
to say that this old case is out of line with modern practice where expert witnesses are
paid an agreed fee and even other witnesses required to attend are paid compensation.
A further illustration is provided by Glasbrook Bros Ltd v Glamorgan CC 87 where
during a strike of mineworkers the mine owners agreed to pay a sum of money to have
a force of police officers stationed at the mine. This promise was held to be enforceable.
Although the police are under a general duty to protect people and property, the House
of Lords thought that this duty could have been adequately discharged by having a
modest mobile force ready to go to the mine at short notice if trouble was anticipated.
The provision of a larger force billeted at the mine was in excess ofthe police authority's
pre-existing duty and so amounted to legal consideration sufficient to support the mine
owner's promise of payment. The provision of police services IS now regulated by statute
in a way that reflects the common law rule: police authorities are allowed to charge for
'special police services' . 3 In Reading Festival Ltd v West Yorkshire Police Authority84
the Court of Appeal held that the festival organisers who had expressed a hope that, as

1
See, in particular, the hostility of the courts to 'technical' arguments, which might subvert the broad principle
of third-party immunity, established in The Eurymedon. Now called a witness summons.
2
Collinsv Godefroy (1831) I B & Ad 950. [1925]
AC 270.
3
Police Act 1996, s 25(1).
4
[20061 EWCA Civ 524, [20061 1 WLR 2005.
in previous years, police would be deployed at the festival site were not bound to pay for
police stationed in surrounding communities when most on site cpolicing' was carried
out by a private security firm engaged by the organisers. An obligation to pay for 'special
police services' will generally arise either when services are requested and provided
which are beyond what the police would properly consider necessary or they are services
which, if not provided by the police, would need to be paid for by the requestor. No
obligation arises to pay for services which are not requested. On this basis a newly

That is, one which requires something in excess of the pre-existing duty.