Scotson v Pegg [1861]

Court: Court of Exchequer

Facts: The claimant (C) had an existing contract with a third party (X) to deliver a cargo of coal. The defendant (D) purchased the coal and agreed to unload it at a specified rate. C sued D for breach of this agreement when D failed to unload the coal as promised. D argued that since C was already under an obligation to deliver the coal to X, there was no valid consideration for the new promise to unload the coal.

Issue: Whether the performance of an existing contractual duty owed to a third party (X) could constitute valid consideration for a new promise made to the claimant by the defendant.

Held: The Court of Exchequer ruled in favor of the claimant, holding that the performance of an existing contractual duty owed to a third party can be valid consideration for a new promise made to the claimant. The court reasoned that even though C was already obliged to deliver the coal to X, D still received a benefit from the delivery, which constituted sufficient consideration for D’s promise to unload the coal. As a result, D was in breach of contract.

Key Judicial Statement: Martin B stated that the case should be treated as if no prior contract with a third party existed. Wilde B added that the performance of an existing duty under a contract with a third party is valid consideration because it confers a benefit on the other party. While the same consideration cannot be used against the same person twice, it can be used for different promises made by different people.

💡Leveluplaw: This case establishes the principle that an existing contractual duty to a third party can still serve as valid consideration for a new contract. It highlights that the law recognizes the benefit conferred on the promisor, even when the promisee is already under an obligation to perform the same act for a third party. This decision clarifies that a duty owed to one party can simultaneously support new obligations to another party in a separate contract.