Wigan v Edwards
(1974) 1 ALR 497
Edwards purchased a new house from Wigan. The contract did not contain any promise that the house was in a good condition etc. The house was defective in certain ways and E said that they would not finalise the contract unless these were attended to. As a result of this pressure, Wigan promised:
(a) to remedy minor defects set out within one week of finance being approved.
(b) to correct an major defects occurring within five years.
Wigan did none of these things. E sought to recover the cost of the work.
1. First question is – was there consideration for the promise made by Wigan?
General rule: a promise to perform an existing contractual duty is not consideration.
2. But this is qualified - when the promise to do what the promisor is contractually bound to do is given by way of a benefit / compromise of a legal claim, the promisor having asserted that he is not obliged to perform his side of the pre existing contract or that he has a cause of action under it.
3. But the claim must be honestly made. This prevents unfair advantage being obtained by unscrupulous threats to withhold performance under a contract.
4. However, it does not matter that the court considers that the promisor’s claim would have failed had it been litigated.
Here Edwards honestly belied that they did not have to complete the contract and although they may have been wrong regarding this, their claim cannot be described as frivolous or vexatious.
If one party has a bona fide belief (which is not frivolous) that he is excused from performing a pre existing contractual obligation, then performing or promising to perform this obligation will be good consideration for a new promise by the other party.