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Review Your SQE 1 Practice Records

Examination Timing: 00H03M36S

Midway through a refurbishment contract, Residential Renovators contracted with Pinewood Carpenters to refurbish 20 flats at a rate of £5,000 per flat. In order to avoid paying a penalty clause in the main contract, Residential Renovators offered to pay Pinewood Carpenters an increased rate of £5,750 for each remaining non-refurbished flat. Pinewood Carpenters completed the refurbishment on the remaining flats, but Residential Renovators defaulted on their promise of additional payments. 

Which option best states the legal position?

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The promise to pay the additional sum was binding because the consideration for the increased payment was the timely and efficient completion of the remaining flats, which allowed Residential Renovators to avoid the penalty clause in their main contract. In Williams v Roffey Bros & Nicholls (Contractors) Ltd [1991] 1 QB 1, it was established that a promise to perform existing obligations can amount to consideration if it results in a practical benefit to the promisor, such as avoiding penalties or ensuring project completion. As long as the promise was not induced by economic duress or fraud, it is enforceable. 

Key Point: In English contract law, consideration must involve a mutual exchange of value. Even the performance of an existing contractual obligation can constitute valid consideration if it confers a practical benefit on the promisor. This principle ensures that additional promises made in the course of a contract, which prevent loss or provide tangible benefits, are legally binding.

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