Consideration:
something given, promised or done in exchange for ‘the contract.’
•
Essential to create a binding contract unless
–
The contract is a deed
–
It must state it is a deed and
–
It must be signed & witnessed
•
It must be of recognisable value
•
Concept revolves around benefit and
detriment: “act or forbearance..or
promise..is the price..(paid) for the promise..for value is enforceable”
•
Approved by House of Lords in Dunlop
Pneumatic Tyre Co. Ltd v Selfridge and Co. Ltd [1915]
Consideration must be
sufficient
•
Adequate consideration – parties decide, not the
courts:
–
Thomas v Thomas (1842) –
peppercorn rent sufficient. Something of value in the eye of the law
–
Chappell and Co v Nestle and Co Ltd [1960]
– no economic value but still sufficient
–
Midland Bank Trust Co Ltd v Green [1981]
– consideration ‘real’
–
Hamer v. Sidway, 124 N.Y. 538, 27 N.E. 256
(N.Y. 1891), – Consideration
provided by promise to give up drinking, smoking, swearing and gambling
–
Sufficient:
–
White v Bluett (1853) – No
consideration given by promise not to bore father with complaints
Consideration
•
May be executory or executed but not past
•
It must move from the promisee but not
necessarily to the promisor
•
It must be sufficient though not necessarily
adequate
Past consideration
Pao On v Lau Yiu Long (1980) per Lord Scarman
‘An
act done before the giving of a promise can be valid consideration for the
promise. The act must have been done at the promisor's request, the parties
must have understood that the act was to be remunerated either by payment or
conferment of a benefit, and the payment or conferment of a benefit must have
been enforceable had it been promised in advance.’
•
Executory consideration – unfulfilled, to be
completed in the future
•
Executed consideration – completed performance
of one side of the contract
•
Past consideration – something done &
complete at the time the promise was made
–
Roscorla v Thomas (1842)
–
Re
McArdle [1951]
Performance of an
existing duty
•
Suppose a person does or promises to do something
he or she was already bound to do. Can this be consideration for a promise?
•
Distinguish a duty owed (a) to the public, (b)
to a third party, (c) to the promisor
Williams v Roffey (1991) per Glidewell LJ
(i)
If A has entered into a contract with B to do
work for, or to supply goods or services to, B in return for payment by B; and
(ii)
at some stage before A has completely performed
his obligations under the contract B has reason to doubt whether A will, or
will be able to, complete his side of the bargain; and
(iii)
B thereupon promises A an additional payment in
return for A's promise to perform his contractual obligations on time; and
(iv)
as a result of giving his promise, B obtains in
practice a benefit, or obviates a disbenefit; and
(v)
B's promise is not given as a result of economic
duress or fraud on the part of A; then
(vi)
the benefit to B is capable of being
consideration for B's promise, so that the promise will be legally binding
Exceptions to past
consideration
Common Law:
•
Implied promises to pay – by conduct e.g. Lampleigh
v Braithwait (1615)
•
Understanding payment was implicit: Re
Casey’s Patents [1892]
Statutory exceptions:
•
Limitation Act 1980 s.27(5) – acknowledgement of
debt
•
Bills of Exchange – e.g. payment by cheque
Perform pre-existing duties
•
Promises to perform pre-existing duties – no
consideration – therefore insufficient
•
Distinguish between public & contractual
duties
•
Performance of existing public duty
–
Collins v Godefroy (1831) –
witness not consideration
–
Glasbrook Bros v Glamorgan CC [1925]
– public duty? Exercised with discretion
•
Generally not consideration – distinguish
between paying more or less for a service
•
Paying more (further consideration)
–
Stilk v Myrick (1809)
–
Hartley v Ponsonby (1857)
•
Practical benefit
–
Williams v Roffey Bros & Nicholls
(Contractors) Ltd [1990]
Part payment of a
debt
Pinnel’s case
Payment
of a lesser sum on the day in satisfaction of a greater cannot be satisfaction of
the whole… But the gift of a horse, hawk or robe in satisfaction is good. For
it shall be intended that a horse, hawk or robe might be more beneficial to the
plaintiff than the money in respect of some circumstance, or otherwise the
plaintiff would not have accepted it in satisfaction
In Foakes v Beer (1884), where B agreed with F that
she would accept payment of a judgment debt by instalments and that she would
not “take any proceedings whatever on the judgment”, the HL held that B could
still claim interest on the debt
In Collier
v P & MJ Wright Ltd (2008) the Court of Appeal held that where a
creditor had voluntarily accepted a debtor’s offer to pay part only of the
amount he owed, and the debtor paid that part, the creditor was estopped from claiming the whole debt.
Part payment
generally not binding
Four qualifications:
- Composition
arrangements – agreement with creditors to accept part payment
- Third
party pays debt: Hirachand
Punamchand v Temple [1911]
- Preferable
payment – Pinnel’s Case (1602) – different kind of payment = fresh
consideration
- Promissory estoppel
Promissory estoppel
•
Doctrine = exception to consideration
requirement. If one party makes a promise with the intention that the other
party acts on it and he does act on it, then the first party may be estopped
from going back on his promise
•
Promise
enforceable despite no consideration
•
Hughes v Metropolitan Railway (1877)
per Lord Cairns
•
If
parties … enter upon a course of negotiation which has the effect of leading one
of the parties to suppose that the strict rights arising under the contract
will not be enforced, … the person who otherwise might have enforced those
rights will not be allowed to enforce them where it would be inequitable having
regard to the dealings which have thus taken place between the parties
The High Trees principle
Where, by words or conduct, a
person makes an unambiguous representation as to his future conduct, intending
the representation to be relied on and to affect the legal relations between
the parties, and the representee alters his position in reliance on it, the
representor will be unable to act inconsistently with the representation if by
so doing the representee would be prejudiced.
Promissory estoppel
•
Clear and unequivocal representation
•
Reliance by promisee
•
Inequitable to go back on promise
•
Effect generally suspensory
•
A shield, not a sword
Limitations on
promissory estoppel
Promise must be clear & unequivocal not to enforce
strict legal rights
•
Cannot be a separate course of action
•
Available to both claimants & defendants if
issue arises from pre-existing contractual relationship – Combe v Combe
[1951]
•
Has to be reliance
Summary of the
doctrine of promissory estoppel:
–
Can sometimes be relied on prevent going back on
a promise
–
Consideration still required
–
Only varies or discharges rights within contract
–
Suspends rights
–
Promise relied on must be voluntary
Consideration
•
Consideration is ‘some benefit to the promisor
or detriment to the promisee’
•
Provided at creation of contract (executed) or
at a later date (executory)
•
Past consideration – generally not enough
•
Must be sufficient not necessarily adequate
•
Performance of existing duty – not valid
consideration but Williams v Roffey Bros [1990] contrary
possibility
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