Chapter 3: formation of contract (Consideration) Flashcards
What is a consideration?
Something of value in the eyes of the law given in exchange of promise
Benefit - detriment analysis.
3 Types of consideration
- Executed Consideration: Act is performed. Money given. Things delivered.
- Executory: Act yet to perform. Promise to act in the future.
E.g. Pizza would be delivered in an hour. - Past consideration: Promise made after an act that is performed.
(Past consideration is no consideration)
2 Conditions of consideration:
- Based on Tweedle v Atkinson, Consideration must move from promisee. But don’t have to move to promisor.
E.g. Promisee must pay $50 to either 3rd party or promisor. - Based on Chappell & Co v Nestle Co Ltd, Consideration must be sufficient but need not be adequate.
So what Constitute sufficient Consideration?
3 points
- Goods, service and money
- Forbearance to sue (Refrain)
- Performance of existing contractual duty to 3rd party.
Conditions for forbearance to sue to be sufficient consideration:
- Claim must be reasonable and not silly.
- Claimant must have an honest belief in the success of a claim.
- Claimant: did not conceal any fact from other party.
What does the performance of contractual duty to 3rd party means?
Based on the Eurymedon,
when the defendant was contractually obligated to perform an act (unload goods) for a 3rd party. The plaintiff then offered to pay money if they perform the act (unload goods).
This constitutes to be sufficient considerations.
what is constitute insufficient consideration?
6 points
- When it’s too vague/insubstantial
Case: White V bluett
Court held: the promise was nothing more than to promise “Not to annoy” the father. - Moral Obligations
Case: White V Bluett - Past Consideration
- Performance of existing obligations to promisor.
- Performance of existing public duty.
- Partial payment of debt.
What about past consideration?
Based on Roscorla V Thomas, the court held that past consideration is no consideration.
Unless
it fulfils the 3 conditions that were stated in Pao On V Lau Yiu Long.
The 3 conditions are:
a) The ACT was done at the promisor’s request.
b) Parties understood that the act will be compensated.
c) Compensation would be enforceable if promised in advance of the Act.
What about performance of existing obligations to promisor?
Based on Stilk v Myrick, it states that when bound to a party, then promise to do that same job under a new arrangement, is considered insufficient.
Exceptions:
Based on Hartley V Ponsonby, if they doing ABOVE & OVER existing obligations owed to the same promisor. It is considered sufficient.
Based on William V Roffey Bros,
it states that if promisor:
1. Obtains “Practical/Factual benefit” through the promisee acts.
2. The promise was not given under economic duress/fraud.
If Yes to both, it will be sufficient.
Explain the Performance of existing public duty. Why Insufficient and what’s the exception?
Based on Collins V Godefroy, when one is performing under an existing public duty, is insufficient.
Exceptions:
Based on Glassbook brothers v Glamorgan county council, if one performs beyond his legal duty, it is sufficient.
Explain why Partial payment of debt is insufficient? What are the exceptions and shield?
Based on Pinnel Case, part payment does not discharge the entire debt.
Unless,
1. It is at the request of creditor prior to the due date or at another place.
2. Payment of smaller sum that comes with some other valuable consideration (At creditor request).
A shield that Debtor can use to prevent creditor from going back on his promise: Promissory Estopel.
What’s Promissory Estopel?
It is a shield use by promisee to prevent promisor from going back on his promise.
Effective only when satisfy all 4 Factors:
- There is an existing legal relationship (Creditor/Debtor)
- Promisor made a clear and unambiguous promise.
- Promisee relied on the promise and altered his position.
- It is unfair for the promisor to go back on his promise.
