BC Court of Appeal Creates Exception to Doctrine of Consideration

The Court of Appeal for British Columbia made headlines last week for its decision in Rosas v. Toca, where the Court started its decision by quoting from Oliver Twist: "If the law supposes that…the law is an ass". In its decision, the Court of Appeal changed the law on the enforceability of contractual modifications to protect against an unjust result.

In the case, the plaintiff won the lottery and loaned $600,000 of her winnings to her friend (the original contract). Her friend continued to ask for more time to pay back the loan, and the plaintiff agreed on each occasion (the contractual modifications). At trial, the Court found that the contractual modifications were not themselves enforceable as there was no consideration (i.e. the plaintiff received nothing in return for her "voluntary abstention" from exercising her rights to enforce repayment of the loan). The Court went on to find that the plaintiff was barred from recovery as she had waited too long to sue for repayment and the limitation period had lapsed.

The Court of Appeal found this result to be an injustice, and has reformed the requirement for consideration with respect to the enforcement of contractual modifications. Now, when parties to a contract agree to vary its terms, variation should be enforceable without fresh consideration, absent duress, unconscionability or other public policy concerns which would render an otherwise valid term unenforceable.