Consideration Flashcards
What is consideration?
Something in return for a promise made by the other party.
Suffering a detriment or otherwise conferring a benefit on the other party.
What is the adequacy of consideration?
The law is not concerned whether what is provided in return is of the same value as the promise
for which it is given. It simply has to have some value.
Some economic value, albeit nominal.
What is the sufficiency of consideration?
What is provided in return must be the sort of thing the law regards as being appropriate
subject matter for a bargain.
A performance of a public duty is not sufficient consideration but exceeding a public duty would be sufficient consideration.
Is past consideration good consideration?
A gratuitous act or promise is not deemed to be consideration for a later promise of payment.
What are the conditions for past consideration to be good consideration?
The past act/ promise was done at the promisor’s request;
There was a mutual understanding between the parties that the act/ promise would be compensated for in some way; and
Had the promise been made in advance it would have been legally enforceable. This last
condition often hinges on whether, or not, there would have been the necessary intention to create legal relations
Is consideration required for contractual variation?
For a contractual variation to be binding there must be consideration.
What happens when there is a promise to perform an existing contractual duty in consideration of a promise to pay more money?
It is not good consideration but if a party exceeds a contractual obligation owed to the other party or confers a practical benefit on the other party in return for a promise of extra money, then there is good consideration.
What is the 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.
What is the common law exception to the rule in Pinnel’s case?
Provided a debtor gives the creditor something (other than just part payment) in return for the creditor’s promise to forgo the balance of the debt then that something different will be consideration. For example, the amount being paid in advance of the due date.
What is promissory estoppel?
Under this doctrine, 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.
What are the conditions for promissory estoppel?
If you have made a promise not to enforce your legal rights; and
Someone has relied on that promise, even though they have not provided anything in
return; then
If you try to enforce your legal rights you will be ‘estopped’ (prevented from going back
on your promise) if it would be inequitable (unfair) in all the circumstances to do so.
What are the limitations to the doctrine of promissory estoppel?
It can only be used as a defence when a party brings an action at common law to enforce their legal rights.
There must have been a promise to waive strict legal rights.
The promisee (usually a debtor) must have acted on the promise but not necessarily to
their detriment.
With ongoing payments such as rent, the doctrine operates to suspend the strict legal
right, which means the creditor can resume their right to full payment going forward by
giving reasonable notice. What the creditor cannot do is claim any back payments for
the concessionary period.
To use any equitable doctrine a party must have ‘clean hands’. So in a case where the
debtor sought to take advantage of the creditor’s financial difficulties, the debtor was
unable to use promissory estoppel as a defence to the creditor’s common law action for
the balance owed.
