Scotson v Pegg [1861] 6 H & N 295; 158 ER 121

KEY POINTS

• The performance of an act mutually agreed upon by two parties can hold as a legitimate consideration to enforce a contract involving a third party, provided that the third party derives a benefit from said performance.

• The third party, benefits from the act of delivery, the contract may indeed be upheld, underscoring the importance of mutual obligations and benefits in contractual agreements.

FACTS

• The plaintiffs agreed to deliver coals to the defendant, who promised to unload them at a specific rate. Despite the plaintiffs fulfilling their obligations, the defendant delayed unloading, resulting in extra expenses.

• Before this, the plaintiffs had a contract with others to transport and deliver the same coals, which the defendant later bought. The plaintiffs were instructed to deliver to the defendant as per their contract.

• The defendant argues that his promise was based on the plaintiffs' prior obligation to deliver, with no additional consideration.

JUDGEMENT

• The court made a decisive ruling regarding a plea put forth by the defendants. The defendants claimed that the plaintiffs had previously engaged in a contractual agreement with other individuals for the delivery of coal, which they allegedly carried out in a comparable manner. The defendants contended that the plaintiffs' subsequent order for coal delivery from them was not valid, essentially implying that the plaintiffs were breaching the terms of the prior contract by seeking coal from another source.

• The court reviewed this defense and ultimately deemed it invalid. The ruling clarified that the existence of a prior contract with different parties did not absolve the defendants from their obligation to fulfill the plaintiffs' order. The court held that the defendants were still bound to deliver the coal as per the plaintiffs' request, irrespective of any prior agreements the plaintiffs might have had with others.

• The court underscored the principle of honoring current agreements, regardless of past arrangements with third parties.

• It established a precedent that parties entering into contracts cannot evade their contractual duties by pointing to previous agreements with different entities. The decision reaffirmed the importance of upholding the integrity of contracts and ensuring that parties fulfill their obligations as outlined in the agreements they enter into.

COMMENTARY

• In a contractual agreement entailing the delivery and unloading of coal the plaintiffs had willingly committed to transporting and delivering the coal to the defendant, who, in reciprocity, had assured them of unloading it at a specified rate. However, the defendant failed to honor this commitment, resulting in unforeseen and significant additional expenses incurred by the plaintiffs.

• Prior to entering into this particular contract, the plaintiffs had engaged in a separate agreement with entirely different parties for the transportation and delivery of the same batch of coal. In an intricate turn of events, the defendant acquired the coal from these other parties, who subsequently instructed the plaintiffs to carry out the delivery to the defendant based on their pre-existing contract.

• In defense of his actions, the defendant contended that his promise to unload the coal was essentially an extension of the plaintiffs' pre-existing obligation, thereby asserting that there was no distinct consideration for his promise. However, the court resolutely rejected the defendant's argument. They held that the assertion of a prior contract between the plaintiffs and different parties for coal delivery, coupled with the subsequent transfer of delivery to the defendant, did not constitute a valid defense, underscoring the importance of contractual clarity and separate consideration in such legal matters.

ORIGINAL ANALYSIS

• A had a contract to sell coal to B, and C made a contract to guarantee that A would sell the coal to B in compliance with that contract.

• The court established that an agreement to do an act which the party was already bound by a third party to do was valid. This was on the grounds that consideration given to a third party (since A risked being sued if he failed to comply) was valid.