Consideration Flashcards
What is consideration?
Consideration is the price paid by the promisee to the promisor to execute the contract. Must be some value - even if minimal
Nudum pactum
An agreement without consideration cannot be enforced
Variation
Without new or additional consideration a promise to vary a contract is unenforceable.
Three key things with consideration
- It has to come from the promisee
- It has to be prospective - not in the past
- Courts don’t care about the value of consideration given.
Illusionary promises
If one party retains all the discretion then there is no consideration - they haven’t promised or gave up anything.
Biotech - equity scheme was promised by there was no equity scheme
Barton - Removed from Koru lounge. Air NZ still giving him some benefits so there’s consideration
Performance of existing legal duties (This is uncertain in law)
Usually existing obligations are not consideration.
Stilk v Myrick - No consideration from doing what is already required
Williams v Roffey Bros exception
Found that where the performance of an existing duty gives you a further PRACTICAL BENEFIT then it can amount to consideration.
Roffey Bros didn’t have to pay the penalty fee for building too slow.
Agreement to raise the contracting price was enforceable because Roffey received the benefit of getting it done in time and the contract not being void.
Foakes v Beer (Affirmed in Re Selectmove)
Mrs Beer was owed money by Mr Foakes. New agreement that Mrs B would waive interest if F paid installments. F did then and then Mrs Beer sued for interest. She was entitled to because in the new agreement Dr Foakes gave no consideration to the deal as he was doing what he was required to do.
A creditors promise to accept a lesser sum in satisfaction of the whole debt is not enforceable unless it is supported by additional consideration.
Gloria Jeans
Followed Roffrey Bros practical benefit approach.
Court held it was an ongoing contract so there was variation. Court are more generous with ongoing contracts.
Three types of contracts and relevant consideration
- Executed contract - No time gap. Consideration must happen during the exchange
- Executory contract - Significant time gap between formation and execution. Consideration usually takes form of a promise to perform at a time in the future.
- Relational contracts - Ongoing. More easily for variation to occur.
Promissory estoppel
Allows a plaintiff to get damages even if no contract was formed. Defendant made a promise that the plaintiff detrimentally relied on and the plaintiffs reliance on that promise was reasonable.
Don’t need consideration just need a promise.
Collier v P&MJ Wright
Collier and P&MJ Wright
Mr Collier had 1/3 share paying off this debt. Other 2 people went bankrupt and Wright tried to make him pay for the whole lot.
Held - Promissory estoppel applied. W made a promise which Mr Collier relied on and it was reasonable for him to do so.
