Chapter 8: Conisderation And Privity Flashcards
Gratuitous promise
Party A gives Party B a good without receiving anything of legal value in exchange
- Party B entitled good if they receive it but cannot force Party A to give it
- party A can change their mind because there is no contract
Consideration
A party gives (or promises to give) a benefit to someone else’s or suffers (/promises to suffer) a detriment
Sufficient consideration
Almost anything of value
Exception: love and affection
Adequate consideration
Same value as consideration for which it is exchanged
Consideration does NOT have to be adequate, but just be sufficient
Forebearance to sue
Promise not to pursue legal action in court, settle via contract
Mutuality of consideration
Each party must provide consideration in exchange for the other party’s consideration
Past consideration
Consideration for something a party did prior to contemplation of a contract
Pre-existing obligation
An obligation that existed but not performed before a contract was contemplated
3 types, pre-existing-:
- public duty
- contractual obligation owed to 3rd party
- contractual obligation owed to same party
Pre-existing public duty
Cannot rely on obligation as consideration for a new contract
Ex.) firefighter cannot sell services to you when your house is on fire
Pre-existing contractual obligation owed to a 3rd party
One action to be used as consideration for two contracts
Pre-existing contractual obligation owed to the same party
Ex.) party a sells steel to party b. Party A’s supplier raises prices partway through delivery process. Party A persuades Party B to increase price they’re paying for the remaining shipment. Once rest of shipment delivered Party B refuses to pay increased price
-party A gave nothing new for the increased price, therefore did not form a new contract so Party B did not have to pay increase prices
Novation
Discharge initial contract band enter new agreement
Fresh consideration
Party provides new consideration
Seals
Mark put on document to indicate a party’s intention to be bound by the terms therein, with or without consideration
Loose rule of seals
Seal can take many forms from stamps to wax seal
Strict rule of seals
Seal must be applied when both parties sign the document
Promissory estoppel
Prevents a party fro retracting a promise that another party relies on
4 requirements for promissory estoppel
- Representation
- representor must clearly indicate that it will not enforce its legal rights against representee - Reliance
- representee must rely on promise to an extent that it would be unfair for representor to retract promise - ## Inequitable behaviour
- Existing legal relationship
Privity of contract
People who will enforce the contract (the parties) that can sue or be sued on grounds of the contract
Third party beneficiary
Person expected to benefit a contract but not be party to the contract
Assignment
Process in which a contractual party transfers its rights to a third party
Assignor
Contractual party that assigns rights
Assignee
Party to which rights are assigned
Debtor
Original party that rights can be enforced against
Subject to equities
Debtor can use same defence against assignee that it would use against assignor
Statutory assignments
Assignments subject to a statute
Requirements of a statutory assignment
- Written
- Notice: give written notice to debtor
- Absolute: absolute at the time of creation
Vicarious performance
Contractual party arranged to have someone else perform obligations
-contractual party still liable
Trusts
Person hold property on behalf of another
Trustee
Person whom holds property
Beneficiary
Person for whom the property is held
Statute exceptions to privity
- Life insurance
Usually made with a third party in mind - Automobile insurance
If you buy auto insurance for you and another party insurance company cannot refuse
Employment and privity
Employees can rely on exclusion clauses meant to protect company
Himalaya clause
Protect third party beneficiary from liability
