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Facts[]

Gilbert Steel entered into a written contract on September 4, 1968 to deliver fabricated steel for three separate apartment buildings at particular prices. The steel was delivered for two of the projects after which the steel mill owner increased the price of the steel unilaterally. The appellant approached the defendant and a new written contract was entered for the supply of steel for the first building. On March 1, 1970 the mill owner again increased the price and Gilbert and the Tenebaums (representing the defendant) worked out what the appellant alleged is a binding oral agreement to pay the new increased price. The defendant subsequently accepted deliveries of steel where the invoices showed the new prices. The lower court found there was an oral agreement to pay the increased prices, but that there was insufficient consideration for the agreement to be binding.

Issue[]

  1. Is there sufficient consideration to find a binding agreement?

Decision[]

Appeal dismissed, finding for the respondent upheld.

Reasons[]

The court dealt with four issues raised on the issue of consideration.

  1. The appellant contends that the promise of a 'good price' for the second building constituted consideration for price variation, however the court held that this was too vague to be considered consideration.
  2. The court dismissed the idea that there was 'mutual abandonment' of the first contract and a new contract was formed; rather this was simply an agreement of a new price. Rescission requires a total reversal of a contract, "unwinding of all factors" and would return both parties to where they were at the time the contract was made. This did not happen here, as the steel was already ordered, and the defendant was still invested in the project at the establishment of new terms. Therefore, new terms (a vague price change) were added to the pre-existing contract.
  3. The appellant contends that the increased price afforded greater credit to the respondent and as the court should only assess sufficiency, not adequacy, the increase of the 60 day credit window in the contract was sufficient.
  4. Finally, the appellant contends that as the respondent kept accepting invoices they are estopped from denying liability. The court finds no argument here in the maxim that estoppel should be used as a shield not a sword, and furthermore they have not demonstrated detrimental reliance.

Ratio[]

A prior duty owed to the promissor is not legally sufficient consideration.

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