Contract; formation; consideration; practical benefit or detriment as consideration.
Facts: Musumeci leased a shop in a mall from Winnadell. Musumeci sold fruit and vegetables in his shop. Some time later, Winnadell leased another shop in the mall to a competing fruit and vegetable retailer and Musumeci's business declined. Musumeci told Winnadell that his shop was no longer viable and asked Winnadell to reduce the rent. Rather than lose Musumeci as a tenant, Winadell agreed to a 30% reduction of rent. However other issues between Musumeci and Winadell were not resolved and in the end Winadell decided that he no longer wanted Musumeci as a tenant. In an effort to evict Musumeci from the mall, Winadell argued that the new lease at a reduced rental was not legally binding.
Issue: Had Musumeci given sufficient consideration in exchange for Winadell's promise to reduce the rental, so as to create a binding agreement?
Decision: The promise to reduce the rent was properly supported by consideration and therefore legally binding. The consideration obtained by Winadell was the practical benefit of keeping Musumeci as a tenant and the mall full of operating shops.
Reason: Noting that there has been a continuing trend to side-step the artificial results of a strict doctrine of consideration, Santow J explained the present state of Australian law (at 747). He said suppose that A enters into a contract with B, to supply work, goods and services to B, in return for payment. However, before A completes the contract, B begins to doubt that A will in fact do what he has promised. To ensure performance by A of his original undertaking, B promises A some additional payment, or makes some concession to A, by means of which B obtains the benefit of being in a better practical position than if he had to bring an action against A for breach of contract. Or it may be that, by promising actual performance in exchange for B's additional promise, A puts himself in a worse practical position than if he were to breach the contract by non-performance. Either way, the practical benefit to B, or the detriment to A, is sufficient consideration to make B's promise of additional payment legally binding, as long as B's promise was not the result of any economic duress, fraud, undue influence, unconscionable conduct or unfair pressure on A's part.