Consideration 2 Flashcards
what does the law presume in commercial agreements
that the parties intended to create legal relations
what does the law presume in domestic/social agreements
that the parties did not intend to create legal relations
Balfour v Balfour
general position that there is no intention to create legal relations in domestic/social situations.
Merritt v Merritt
in domestic/social situations, the person who wishes to enforce the contract must prove that there was an intention to create legal relations.
They can do this by using the objective test ‘ would reasonable people regard the agreement as intended to be binding?’
Parker v Clark - legal relations in social situations
where one party has acted to their detriment by relying on the arrangements made between them, then this may be sufficient evidence that they intended to create legal relations
when is a contract enforced
a contract is enforced when there is legally sufficient consideration
legally sufficient consideration
a valuable consideration consists of some right, interest, profit or benefit accruing to one party, or some forbearance, detriments loss or responsibility given, suffered or undertaken by the other - Currie v Misa
Chappel & Co Ltd v Nestle Co
As part of an ad promotion, nestle promised to give a record to anyone who sent in a postal order accompanied by three wrappers.
this was good enough consideration because ‘ A CONTRACTING PARTY CAN STIPULATE FOR WHAT CONSIDERATION HE CHOOSES’ - LORD SOMERVEL
The people sending the wrappers had to go through some troubles and nestle benefitted from it as it promoted their sale of chocolate
Economic value
consideration must be of some economic value
Sufficient but not adequate
Consideration must be legally sufficient, courts will not look into whether it was a fair bargain
White v Bluett
A father promised to free his son from a debt if he stopped complaining, but this was not good consideration as the soon didn’t give anything up
Hamer v Sidway
An uncle promised to pay his nephew $5,000 in return fo him giving up tobacco, drink and gambling. This was legally sufficient consideration
executory contract
an exchange of promises to do things in the future. the consideration here is in the future so it is executory and still valid consideration
consideration
something offered or given in exchange for something else.
Coombe v Coombe
Wife promised not to sue for maintenance , husband promised his wife some money. However he did not make the promise in return of the promise made by his wife, the two promises were independent - NO CONSIDERATION
Who need to provide consideration
the promisee ( the person to whom the promise is made) provides consideration
past consideration
When the promise comes after the act.
PAST CONSIDERATION IS NOT LEGALLY SUFFICIENT
Re Mcardle
Mrs Mcardle carried out improvement works to a house, after all the improvement had been done, the owners of the house promised to pay her £488. This promise was unenforceable because the consideration was wholly past and the act had been done at the time that the promise to pay was made.
There was also no bargain has the works had not been requested
unexpressed bargain
- Act is requested by one party but no payment is discussed
- circumstances where there would not normally be a gift e.g. interior decorator that you don’t know painting your house
- acts that carry the implication that payment would be made for the act
LEGAL CONSEQUENCE IS THAT IT IS ENFORCEABLE
Re Casey’s Patent
Casey owned some patents and Stewart worked to obtain some rights for him. Casey promised S a payment.
Casey later argued that this was past consideration.
Court upheld that the bargain was clear as the parties understood that Stewart would be paid for his work on the patents and the promise merely verbalised this unexpressed understanding
Lampleigh v Braithwait
B killed a man, and he request that L would get the Kings pardon. L did this.
B was so pleased that he promised to give him £100 but he then refused to pay.
Courts held that the promise was enforceable as L obtained the pardon at the request of B, which was carried out at the understanding, even though they were unspoken that a payment would be made for the service.
Pao On v Lau Yiu Long - PAST CONSIDERATION
The act must have been done at the promisors request, the parties must have understood that the act was to be remunerated further
performance of existing duties and consideration
performance of existing duties is not good consideration, unless the perfomance offers somethign extra or goes beyond the existing public duty. - Collins v Godefrou
Stilk v Myrick
Two sailors deserted a ship mid-voyage. Captain promised to divide the wages of deserting sailors amongst the rest of the crew if they got the ship home safely (were already under contractual agreement to do this)
When they got home they tried to sue for the money but it didn’t work because they already had a duty to get the ship home
Hartley v Ponsonby
Ship was sailing to Bombay, half of the crew deserted. Captain promised the rest of the crew extra if they continued.
it was held that this was good consideration as they suffered and had to work more, and they went above and beyond their existing contractual duty
third party consideration
third party promises are enforceable - Shadwell v Shadwell
Williams v Roffey Bros
Williams was a carpenter who was sub contracted by a head contractor. Roffey was the head contractor, and he was subject to a penalty by the client if the works were not finished on time.
Williams showed signs he wouldn’t be able to finish the works and they renegotiated an extra amount per flat to finish the works on time.
Williams was under a duty to finish the work by the completion date, but Roffey received a practical benefit which was avoiding the penalty fee.
considerations in part payment of debt
part payment of debt can be good consideration if there is a benefit like getting the money on time rather than not getting it
The rule in Pinnel’s Case
Part payment of a lesser sum is not good consideration
exceptions of the rule in pinnel’s case
- paying a smaller sum on an earlier date or in a different place from that specified
- giving a piece of personal property as satisfaction of the debt
- if a third party pays a smaller sum in satisfaction of the debt
MWB v Rock Advertising
Rock had a license to occupy offices owned by MWB. Rock wanted to expand his business and agreed to pay a larger fee for larger offices for 12 months.
they agreed a sum of money(£3.5k for the first 3 months and £4.5k for the rest).
After the 4th month Rock were £12k in arrears and MWB sough to sue. Orally they agreed to vary the contract, so that they’d be less initially but more at the end of the contract.
If the rule in Pinnels case was used then it would not be sufficient consideration. However it went to CA and SC
CA: by keeping rock in the offices, it meant offices wouldn’t be empty which would be a further loss for MWB- PRACTICAL COMMERCIAL BENEFIT like in Williams v Roffey
Promissory estoppel
Stops people from going back on their promises that led to a course of action by the other party. Estops people from going back on their word - Central London Property Trust Ltd v High Trees House
How to apply the doctrine of promissory estoppel
- it must be inequitable for the party to go back on their promise (D&C Builders Ltd v Reeves)
- it can only be used as a defence if one party tries to sue (Combe v Combe)
Criteria for promissory estoppel
- The promise relied upon must be clear and unequivocal, not ambigous: Woodhouse AC Israel Cocoa SA v Nigerian Produce Marketing Co
- The promisor intends that the promisee act in reliance on that promise
- The promisee does rely on the promise, altering their position as a result
- Detriment? There was some doubt as to whether it was necessary for the promisee to act to their detriment in reliance.
