Chapter 5: Consideration Flashcards
What is the purpose of the Doctrine of Consideration?
- It distinguishes a bare promise and a bargain
- McKendrick states consideration gives an agreement the badge of enforceability
- Traditional definition and approach based on reciprocity
- Promisee can’t enforece a promise unless they contribute something, in order to obtain something from the promisor or the promise
What are the 8 issues that may arise under consideration
- Consideration must move from the promisee, need not move from the promisor
- Consideration must be sufficient, but need not be adequate
- Past consideration is not good consideration
- Forebearance to sue
- Performance of an existing Duty under Law
- Performance of an existing Duty under Contract with a Third Party
- Performance of an existing Duty under Contract with SAME contracting party.
Subpoint under duty under same contracting party > part payment of debts; and primory estoppel
What is the traditional definition to consideration?
1 case
Currie v Misa (benefit/detriment principle)
- Lush J stated - Valuable consideration in the sense of the law, may consist either in some rights, interests, profits, or benefits accuring to one party or some forbearance, detriment loss or responsibility given suffered or undertaken by the other
What is the idea behind Currie v Misa?
Based on the concept of a ‘benefit’ to promisor, or a ‘detriment’ to the promisee
Either is sufficient to make the promise enforceable, though both are normally present in cases
What are the 2 academic views on consideration?
- Prof Treitel approach/view (Strict)
- define consideration as ‘something of value’
- Recognizes the doctrine, that a body of rules must be satisfied
- Amounts to some detriment to promisee or benefit to promisor
- Prof Atiyah appraoch/view (liberal)
- Courts never set out to create the doctrine of consideration
- Consideration is enforced when courts find a suffcient/good reason to enforce a promise
How does Treitel reject Atiyah’s appraoch?
- Treitel says there are a distinct body of rules which make up the doctrin e
- A ‘good reason’ does not tell us the circumstances when courts will find such a good reason (discretion based)
What are the 2 types of consideration?
Executed consideration
- Exchange of consideration occurs immediately
Executory consideration
- Consideration occurs in the future
- Wholly executory contracts - contracts made by exhanging promises and neither party performed their obligations yet
Dunlop Pneumatic Tyres v Selfridge (1915)
The exchange of promise itself can be capable of consideration.
This is an exception to the general rule of Benefit/Detriment principle
What are the 3 requirements that prove a valuable consideration?
- Past consideration is not good consideration
- Consideration must move from the promisee
- Consideration must be suffcient (if it suffices), but need not be adequate (the exact amount)
What is meant by ‘consideration must move from the promisee’
- Promise is only made if promisee provides consideration
- Consideration must move from promisee; but not required that it must come from promisor
- Promisee can provide consideration by conferring benefit to a third party at request of promisor
Can the third party sue to enforce a promise?
Generally not, as the third party is not invovled in the contract
What is meant by ‘past consideration is not good consideration’?
- Bargain and a bare promise - A promise to reward an act that has already been performed/concluded prior to the promise being introduced, cannot be enforced
- On the basis that, the consideration by the promisee is already in the past, and that there is nothing to offer anymore
Cases for supoprting GR for past consideration is not good consideration
- Re McArdle - promise made in consideration of you ‘carrying out’ certain work
- Roscarla v Thomas - after the horse was purchased, seller promised horse was sound and free of any vice
What is the doctrine for the exception for past consideration
Doctrine of Implied Assumpsit
- Act of the promisee was performed by the request of the promisor
Exceptional cases to past consideration is not good consideration
- Lampleigh v Braithwaite - D asked C to ride to Newark to Obtain a pardon from the King. D promised to pay him £100 after. Enforceable consideration
- Re Casey’s Patents
What are the 3 elements that the promisee must satisfy in the exception to ‘past consideration is not good consideration’ in Re Casey’s Patents
- Must have performed original act at the request of the promisor
- Must have been clearly understood or implied that the promise would be rewarded if act is done
- The eventual promise of payment after the act happend, must be a promise that if made prior would still still be enforceable
What is meant by ‘consideration must be sufficient but need not be adequate’?
Something in value in the eyes of the law must be given by the promisee (sufficient enough), must be worth economic value no matter how minimal.
Although it does not have to be the exact value (adequate) of the item.
What are the 5 reasons courts insist for consideration to be sufficient rather than adequate?
- Contract is about freedom of bargain
- role of courts is to identify the existence of a bargain
- it is to prevent floodgate of litigations
- the driving principle behind laissez-faire
- requires existence of a bargain but does not demand that it be a fair one
Chappell v Nestle
Facts
- Promotion by Nestle where they were music records were exchanged for discounted prices and three empty chocolate wrappers
Held
- Lord Somerville stated although the wrappers were very of very trivial economic value, it is still valuable consideration
- There was valid consideration, as the chocolate wrappers were a ‘good reason’ to be used as it helped increase sales of chocolate
Follows Prof Atiyah’s liberal approach
What is the requirement for the wrappers to be of significant important in Chappell v Nestle?
It is a perfectly good contract if a person accepts offers to supply goods if he
1. does something of value to the supplier and;
2. pays money
What is the rule stated by Patterson J, in Thomas v Thomas
‘consideration means something of value in eyes of the law’
- First parties get to decide if it is valuable or not
- But courts reserve right to conlcude alleged consideration
What case shows the exception to ‘consideration must be sufficient but not need be adequate’
White v Bluett
- Facts - Son owed father money, and this time father was making his will. Son kept nagging to put him in the list; dad said if he stopped nagging he wouldn’t sue son for not paying.
- Held - Didn’t amount to consideration as there wasn’t any ‘good reason’ to enforce it
supporting Aityah’s view that judges have discretion
Harmer v Sidway (1891) American case
Facts
1. Uncle promised to pay nephew £5000 if nephew stopped drinking liquor, using tobacco, swearing, playing cards etc. until he was 21
2. Didn’t pay back
Held
1. Promise is enforceable
2. Nephew restricted his lawful freedom of action
Aityah’s view
Ward v Byham
Facts
- Father and mother seperated. Told neighbour to take care of child for £1 a week
- Plaintiff found a house and agreed with the Defendant that she will take care of the child and that the defendant will pay her the £1 a week
- Plaintiff later remained and the defendant refused to pay her £1 per week for caring for the child
- Defendant argued his promise could not be enforced as the plaintiff did not provide satisfaction
Held
- Lord Denning - Mother has provided consideration for the deed. It benefitted the mother and father, so there was sufficient
- Other judges did not agree with L.D, she did what she did by law. Although she went over and above the normal duty. On the terms that the father agreed to pay £1 a week. There was ample consideration (majority)
Takaway
1. It is a obligation to take care of a child, there should be no need of any consideration to do a deed that is bound by law
2. Applied Atiyah’s reasoning
Can be used for sufficient consideration and duty oweing a legal duty
What is ‘consideration must move from the promisee but need not move to the promisor’
3 cases
Combined with Privity of Contract
- Traditionally, promisor provides the promise, promisee provides consideration
- This rule is an exception, that the promisor provides the promise, but the consideration conducted by the promisee, doesn’t necessarily need to go to the promisor (can confer benefit to a third party, even though they are not part of the contract)
- Currie v Misa
- Tweddle v Atkinson
- Price v Easton
What are the 3 types of performances of an existing duty
- Performance of an existing Duty under a Contract with a Third Party
- Performance of existing Duty imposed by law
- Performance of an existing duty under contract with same contracting party
What is the idea of performance under an existing duty under a contract with a third party
- Performance of an existing contractual duty owed to a Third Party is good consideration
What is are the cases that support consideration for duty owed to third party?
Shadwell v Shadwell
- Facts - C was already under a contract to marry the fiance. Uncle promised to pay C £150 after he was married.
- Held - although the C was already under a contract to marry the fiance. There is valid consideration, as he provided consideration for the uncle’s (third party) promise which is recognized as good consideration.
- The Eurymedon
- Jones v Waite
- Scotson v Pegg
- Pau On v Lau Yui Long - A promise to perform as opposed to actually performing is also good consideraion
Treitel mentioned these cases are examples of ‘invented consideration’
What is the general rule for performance of a legal duty? What is the case that supports this rule?
General rule
- Performance of duty owed by law or promise to perfrom legal duty does not amount to consideration
Seen in Collins v Godefroy
- Facts - Collins was subpoenaed to attend and give evidence as a witness and attended for 6 days. He sued for the alleged sum he had been promised attendance per day
- Held - If the duty imposed by law than a promise to provide remuneration, is not supported by consideration. (he was obligated by the law to attend, and there should not be any need for consideration)
What are the 3 cases of exceptions to the performance of legal duty
- Ward v Byham - Mother taking care of daughter. There was sufficient considerationas the mother did what the father had stated as the conditions
- William v William - There was sufficient consideration to a promise so long as there is nothing in the transaction which is contrary to public interest
- Glasbrook Bros v Glamorgan County Council - Even though police were bound to provide protection against the possibility of violence in a coal mine strike, if they provided any additional protection or they do go beyond their scope of duty, then that would be sufficient consideration
What are the 2 types of modification, what is it related to?
Positive modification - performance of an existing duty under contract with same contracting party
Negative modification - Part paryment of debts
What is the general appraoch to Performance of an existing duty under contract with the same contracting party. When the promisee asks for additional money to perform the job
Positive modification - asking for additional amount
Performance of an Existing Duty under Contract would Not amount to sufficient consideration to enforce a new promise for extra payments
What are the cases that support the general rule for contractual duty
Stilk v Myrick
- Facts - Claimants agreed with defendant to sail to Baltic and back for £5 a month. When the boat arrived, 2 seamen left and could not find any subsittute. The master said they were to share the remaining wages. Didn’t pay in the end
- Held - No valid consideration. Existing contractual obligation could never be good consideration for a fresh promise, to pay more, from the person that it was owed to
2 different reports for the reasons for the decision
- The Espinasee Report - it is contrary to Policy to allow these promises to be enforced. This can lead to Economic Duress / Pressure.
- The Campbell Report - cannot enforce due to the lack of consideration
What are the exceptional cases for performance of an existing contractural duty
Hartley v Ponsonby
- Facts - 17/36 crew abandoned ship. Only 4 or 5 able seamen. Voyage became very dangerous to continue, master of the ship promised additional wages to continue the voyage
- Held - Valid consideration. They went over and beyond their existing duty.
Hanson v Royden
- C was promoted from able seaman to second man, and therefore performed additional tasks over and beyond his contractural duty. Valid consideration for the extra pay
Williams v Roffey Brothers
How has Stilk v Myrick been distinguished by Williams v Roffey Brothers
important
Facts
- Defendants were main contractors, had sub-contractors that were carpentry works to the Claimant for £20,000. Claimant made a bad bargain, price was unreasonbaly low
- Claimant ran into financial difficulty after doing part of the work, and was important that he completed it in time, if not there would be a penalty clause fopr late delivery.
- D called for a meeting with Claimants to disccuss and agreed to pay £530 more per flat
- claimant finished 8 more flats and the D did not pay the promise
Held
- Glidewell LJ: took a pragmatic approach; the court widened the meaning of consideration. Although Stilk v Myrick was good law and unenforceable, this case showed that the promisee had provided consideration as the promisor had recevied practical benefits even though they were strcitly perfroming their existing contractual duty. And that the addtiional sum was not due to economical duress or fraud.
This case shows PRACTICAL BENEFIT
What is practical benefit, and what amounts to it?
Where parties will gain an advantage arising out of the continuing relationship with the bargain will not fail for consideration
What amounts to practical benefit
- C continued the work and did not breach the contract
- D were spared of engaging new workers/equipment
- Avoided the penalty clause for delaying
- A positive modification was formalised/made
- D were able to utilize the additional sum to complete what was not possible before
What case has used the principle in Williams v Roffey Brothers?
Re Selectmove has entrenched this rule/principle
What are cases that impose economical duress or fraud?
- Pao on v Lau Yiu Long [1979] Privy Council
- The Sibeon & The Sibotre [1976]
- The Universe Sentinel [1983] HL
- Atlas Express v Kafco - the relevance of the absence of protest
- The Atlantic Baron [1979] – lack of any other practical choices
What is Part Payment of Debts, and what is the general rule?
Part payment of debts is a negative modification, an agreement to take a lesser sum than what was supposed to receive (i.e. promise to not sue after taking the part payment)
General rule
- Payment of a smaller sum on the due date is not satisfaction for the debt of the larger amount (cannot be good consideration)
What cases support the general rule of part payment of debts?
Pinnel’s case, reafrrimed in;
Foakes v Beer
Pinnel’s Case
Facts
- Pinnel sued Cole, in an action of debt upon a bond, for the sum of £8 10s.
- The defendant, Cole, argued he had, at Pinnel’s request, tendered £5 2s 6d one month before the debt was due, and the plaintiff had accepted in full satisfaction for the debt
Held
- Lord Coke - ‘Payment of a lesser sum on the day in satisfaction of a greater sum, cannot be any satisfaction of the whole…but the gift of a horse, hawk, or robe etc. in satisfaction is good. For it shall be intended that a hawk, horse, or robe, etc. might be more beneficial to the plaintiff than the money’
- As the lesser sum was paid earlier, at the request of the promisor, it is good consideration
This case reinforces the general rule, althought the decision was good consideration.
Foakes v Beer
Facts
1. Appellant, Foakes owed the respondent, Beer, a sum of £2,090 19s after a court judgment
2. Beer agreed that she would not take any action against Foakes for the amount owed if he would sign an agreement promising to pay an initial sum of £500 and pay £150 twice yearly until the whole amount was paid back
3. Foakes was in financial difficulty and, with the help of his solicitor, drew up an agreement for Beer to waive any interest on the amount owed and she signed it. Foakes paid back the principal but not the interest
Held
- She was entitled to sue for the interest owing.
- The respondent’s promise not to enforce the judgment was not binding as Dr. Foakes had not provided any consideration.
- Payment of less than is due on or after the date for payment will never provide consideration for a promise to forgo the balance
What are 4 exceptions to part payment of debts?
- Payment at an earlier date
- Payment at a different place as requested by the creditor
- Payment by a Third Party – Hirachand Punamchand v Temple: The Father paid the Son’s debt. The creditor accepted the Fathers terms and it had the effect of extinguishing the Son’s debt. The Creditors were not allowed to sue for the balance owing as it would then mean that the Creditors had committed fraud on the Father.
- Additional consideration - A gift of a horse, a hawk or a robe
Can Practical benefit (Williams v Roffey Brothers) be used in Part Payment of Debts?
No, this was shown in
Re Selectmove
- Says that practical benefit (Williams v Roffey Brothers) can’t be used in the context of negative modification, no matter how much benefit there is
And was also discussed in MWB Business Exchange Ltd v Rock Advertising Ltd [2016] CA, and MWB Business Exchange v Rock Advertising (2018) SC
- First case was given by COA that the subsequent agreement did confer practical benefit, that there was consideration.
- However, the second case, held by the UKSC, stated that they did not even look at the promise as it consideration cannot be varried orally (No oral modification). And UKSC said this was a** ‘difficult’ and important case reserved for the an enlarged panel of Justices** when it formed the ratio decidendi of a case
What is promissory estoppel
It is based on the principle of equity.
A principle that allows the plaintiff to recover damages, even if the promise was not made with formal consideration. And the promisee relied on the promise by the promisor
What are the 3 principles of PE
- The rule
- Requirements
- Consequence
What were the rules that Denning J laid out that gave depth to the rule of PE
When a representor, makes a promise to the representee. Intending that the representee will rely on the promise to their detriment . According to promissory estoppel, they can’t go back on their word even if it causes detriment/injustice to the representee
What are the 2 cases of Promissory Estoppel
Hughes v Metropolitan Railway Co. (1877)
Central London Property Trust Ltd v High Trees House Ltd, (1947) CA
Hughes v Metropolitan Railway Co. (1877)
Facts
- Landlord gave 6 months’ notice to tenant requiring him to carry out certain repairs. Landlord told Hughes that he didn’t have to fulfil the repair obligation within 6 months
- Tenant responded by asking landlord whether he wishes to purchase his interest in premises for 3000
- Negotiations followed for purchase of lease, but when negs broke down, landlord forfeited the lease as tenant had not carried out repairs within six months of original notice
Held
1. HOL held that tenant is entitled to equitable relief against forfeiture, the running of the 6 month period was suspended during negotiations to purchase lease and did not recommence until negs had broken down
Central London Property Trust Ltd v High Trees House Ltd, (1947) CA
Facts
- The Plaintiffs, Central London Property let a block of flats in London to the High Trees (the defendants) on a 99-year lease at an annual rent of £2,500
- WWII erupted and tenancy rates were reduced substantially. CLP agreed to reduce rent to £1250
- When the war ended people came back to rent
- CLP demanded that they pay the full mount
Held
- Full rental was recoverable
Obiter
- Denning J mentioned that the agreement was intended to be temporary and ceased to operate in 1945
- Therefore the plaintiffs were entitled to the full £2,500 from 1945 onwards
What are the 6 requirements for PE to apply
- There must be a clear and unequivocal or representation that the existing legal rights will not be fully enforced
- There must be reliance on the part of the promisee on the promise of the promisor. This requirement means that the promise must have in some way influenced the conduct of the party to whom it was made
- Must be inequitable for the promisor to go back on his word. The judge is not obliged to apply Promissory Estoppel automatically the moment there is a promise which modifies the existing contract which has been relied upon
- The obligations would normally arise in the context of a contractual relationship, but this is not essential - Durham Fancy Goods v Michael Jackson Fancy Goods (1968)
- This doctrine can only be used a shield and not as a sword
- The promisee must not have acted inequitably in order to rely on the doctrine. ‘He who comes to equity must come with clean hands’
What are the 2 consequences/results of raising succesful PE
Suspensory
- When there is a continuing obligation
- Then promisee has the ability to have some time to perform by suspending it temporarily
- Then when the time comes, upon given reasonable notice, then can continue the obligation afterwards
Extinctive
- If it is a one-off debt
- Then the entire right to claim is extinguished
- Ajayi v Briscoe (1964) Lord Hodson - ‘the promise only becomes final and irrevocable if the promisee cannot resume his position’
What are the cases for suspensory consequence for PE
- Tool Metal Manufacturing Co. Ltd v Tungsten Electric Co. Ltd (1955) HL
- Central London Property Trust Ltd v High Trees House Ltd
- Hughes v Metropolitan Railway (1877)
What are the cases for extinctive consequence for PE
- Collier v P & MJ Wright (Holdings) Ltd (2007)
- Evans v Amicus Healthcare Ltd. & Others [2003]
