3. Consideration Flashcards
DEF: Executory consideration
‘doing something in return’ where that something in return is a promise
DEF: executed consideration
When consideration is an Act
General rule wrt Consideration
Consideration need not be adequate but must be sufficient
What does it mean that consideration need not be adequate?
Has to do with ‘amount’ or ‘value’ of the ‘something in return
- it simply has to have ‘some kind of value’
Consideration must be sufficient
Consideration must be the ‘right type of thing’ that the law considers as appropriate subject matter for a bargain
- eg. a promise in return for ‘love and affection’ is not sufficient
Is ‘past consideration’ good consideration?
Generally, no. Performance of an act is not deemed to be consideration for a later promise of payment.
Exception to the rule that past consideration is not good consideration
a. past act/ promise was done at the promisor’s request
b. mutual understanding between parties that act/promise would be compensated in some way; and
c. had promise been made in advance it would have been legally enforceable (generally depends on whether there is the necessary intention to create legal relations)
Requirements for contractual variation to be binding:
Agreement, consideration and intention to create legal relations
Can performing an existing contractual duty ever be consideration?
Generally, no, this cannot be consideration in exchange for a promise by the other party to pay more money. But will be if promisee confers a practical benefit on the promisor.
BUT, if party exceeds contractual obligation (in return for this promise). There is a detriment to promisee and benefit to promisor (WILL BE CONSIDERATION)
DEF: Rule in ‘Pinnel’s Case’
In the case of an undisputed debt, at common law, an agreement between a creditor and a debtor that the creditor will simply accept part payment in full and final settlement of the full amount is not binding on the creditor.
Exception to Pinnel’s Case Rule
If the debtor gives the creditor something (other than part payment) in return for creditor’s promise to forgo the balance of the debt this ‘something’ will be consideration. (ie. paying in advance of the due date) but can be anything
What happens if a creditor promises to accept part payment of a debt but the debtor does not provide any consideration?
The creditor could change their mind as a valid contract was not formed.
DEF: Promissory Estoppel
a creditor may be prevented (‘estopped’) from going back on a promise to accept part payment (even if the promise is not supported by consideration) if in all the
circumstances it would be unfair for the creditor to do so.
- creditor is ‘estopped’ from going ack on their promise
Limitations to promissory estoppel doctrine:
- Only ever a defence (not a cause of action)
- must have been a promise to waive strict legal rights
- promisee (debtor) must have acted on the promise but NOT necessarily to their detriment (ie. still paying half rent)
- Suspends strict legal right to collect ongoing payments until the creditor resumes their right by giving ‘reasonable notice’
- must have clean hands
