Consideration

Question 1

What is consideration?

Answer 1

“Something in return”, either a promise (executory consideration) or an act (executed consideration)

“may be a benefit to one party to the contract or a detriment to the other” Currie v Misa

Question 2

What is a bilateral contract?

Answer 2

The exchange of promises

Question 3

Does consideration need to be adequate?

Answer 3

No, but must be of value

Question 4

In what way must consideration be sufficient?

Answer 4

Must be sufficient in type not value

Question 5

Can consideration be past?

Answer 5

No

UNLESS

Was done at promisor’s request OR there was a mutual understanding that the act / promise would be compensated in some way

Question 6

What is the general rule regarding what constitutes consideration for a promise to pay more?

Answer 6

Simply performing an existing contractual duty is not consideration for a promise to pay more

Question 7

When could performance of an existing contractual duty be consideration for a promise to pay more?

Answer 7

1. Party exceeds the contractual obligation in return for promise of extra money
2. Promisee confers a practical benefit (not under duress) - the benefit can be just finishing contract to avoid delays

Question 8

What is the rule in Pinnel’s Case in relation to an alteration promise to accept less?

Answer 8

In the case of an undisputed debt, 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

Question 9

What is the common law exception to the rule in Pinnel’s Case?

Answer 9

If debtor gives the creditor something other than just part payment in return of promise to forgo balance, then that counts as consideration

Question 10

When can promissory estoppel be used?

Answer 10

To prevent a creditor from going back on promise to accept part payment

Question 11

What are the restrictions on the use of promissory estoppel?

Answer 11

Can only be used when party brings an action at common law to enforce their legal rights

Must have been a promise to waive strict legal rights

Promisee must have acted on the promise but NOT necessarily to their detriment

With ongoing payments (e.g. rent, salary), doctrine suspends the strict legal right, so creditor can resume their right to full payment going forward by giving REASONABLE NOTICE; cannot claim any back payments for the concessionary period

Party must have “clean hands”

Question 12

Can estoppel be used enforce a contract?

Answer 12

No, it can only be used as a defence - e.g. an employee cannot use estoppel as the basis of bringing a claim to secure the overtime money