Consideration

Question 1

Currie v Misa (1875)

Answer 1

Consideration = “some right, interest, profit, or benefit accruing to the party or some forbearance, detriment, loss or responsibility, given, suffered or undertaken by the other.”

Question 2

O’Sullivan v Management Agency [1985] Court of Appeal

Answer 2

Consideration consists of either detriment or benefit, however, both promisee-detriment and promisor-benefit do not have to coexist

Question 3

Chappell v Nestle [1960] House of Lords

Answer 3

The claimants owned the copyright in a piece of music “Rockin shoes”. Nestle arranged for copies to be made into records and would sell these for 1s6d plus 3 wrappers. S.8 Copyright Act 1956 stipulated stipulated 6.25% royalty to be given to claimants. Nestle said only 6.25% of 1s6d. Said 3 wrappers were not consideration. Lord Somervell said it was irrelevant whether wrappers were of no value to Nestle. Said they were consideration

Consideration need not be adequate but must be sufficient

Question 4

Chappell v Nestle [1960] House of Lords

Thomas v Thomas

Answer 4

Must have some economic value

Question 5

White v Bluett (1853)

Answer 5

Bluett had leant his son some money. Bluett died and executor of the estate, Mr. White, tried to enforce the obligation. The son said that the father promised he would not have to pay the debt if he stopped complaining about how Bluett had distributed property in will. Court held there was no consideration for discharge of obligation to repay. (public policy reason)

Forbearance (self-restraint) is not good consideration

Question 6

Hamer v Sidway (1891) New York Court of Appeals

Answer 6

William story promised his nephew, in March 1859, $5000 on his 21st birthday if he stopped drinking, smoking, gambling, swearing until he reached that age. His nephew agreed and performed his part of contract. The court said that the nephew was entitle to the money, as he had a legal right to do all the things he abstained from doing. This was consideration.

Forbearance may be good consideration where legal rights are given up.

Question 7

Roscorla v Thomas [1842] Queen’s Bench

Answer 7

Roscorla bought a horse from the defendant. Afterwards the D assured him the horse was ‘sound and free from vice’. This untrue. Roscorla sued. The assurance was held to be unenforceable. Roscorla’s consideration was past and thus not good for the promise.

Past consideration is not good consideration

Question 8

Lampleigh v Brathwait (1615) King’s Bench

Answer 8

Brathwait killed a man and asked Lampleigh to seek a royal pardon for him. Claimant was successful. Brathwait released and promised Lampleigh £100. Promise enforceable.

Exception to rule in Roscorla v Thomas:

Where the act was carried out at promisor’s request

Question 9

Re Casey’s Patents, Stewart v Casey [1892] Chancery Division

Answer 9

Holders of letters patent employed Casey to promote their invention in the commercial world. Promise that he would receive a one-third share of patents. Later the other patent holders tried to deny this. Court held that it must always have been assumed that Casey’s work would be paid for in some way.

Exception to rule in Roscorla v Thomas:

Parties understood from the outset that the act was to be rewarded in some way

Question 10

Stilk v Myrick (1809) Assizes

Answer 10

Stilk contracted to work for Myrick on a journey to the Baltic and back to London. At Cronstadt, 2 of 11 crewmen desert. Captain says will split wages equally if rest work the ship home. Did so, but captain refused to pay the money. Court held captain’s promise was unenforceable for want of consideration.

Performance of an existing contractual duty is not good consideration for a promise

Question 11

Hartley v Posonby (1857)

Answer 11

Most of crew deserted. Remaining sailors who carried on were going beyond what they were contractually bound to do. Conferring extra benefit.

Exception to the rule in Stilk v Myrick (1809):

Performance of existing contractual duty is good consideration if A exceeds his duties in some way, or confers extra benefit on B:

a) is a question of fact and degree
b) Is a question of public policy as well.

Question 12

Williams v Roffey Bros [1991] Court of Appeal

Answer 12

Exception to the rule in Stilk v Myrick (1809):

If Glidewell Principles satisfied:

1) There is a contract to do work for/supply goods and services in return for payment
2) B doubts whether A will complete his obligations
3) B promises additional payment if A completes his obligations on time
4) As a result of giving this promise, B obtains a practical benefit, or obviates a disbenefit
5) B’s promise to pay extra is not given as a result of economic duress or fraud

Distinguish Stilk v Myrick on basis of alternative public policy basis for the decision in Williams v Roffey Bros (need to protect against extortion). Also EXTRA BENEFIT: avoidance of having to pay compensation on the main contract was significant.

Question 13

Collins v Godefroy (1831)

Answer 13

The performance of an existing duty imposed by law is not sufficient consideration in exchange for a promise of payment.

Question 14

Ward v Byham [1956

Answer 14

Father of illegitimate child promised to pay mother if child “well looked after and happy”. Mother had legal duty to look after, so had she given any consideration in return for promise?

Denning said yes, he though a promise to perform an existing legal duty could be good consideration. However, other two judges found consideration by saying the mother had exceeded her legal duty.

Question 15

Williams v Williams [1957]

Answer 15

Exception to rule in Collins v Godefroy (1831):

Promise to perform existing legal duty is sufficient consideration as long as not contrary to public policy.

Would be contrary to public policy to allow a fireman to use extinguishing a fire as consideration.

Question 16

Glasbrook Bros v Glamorgan County Council [1925] House of Lords

Answer 16

Owner of a mine during a coal strike, sought assistance from police to protect scabs. Police reasonably suggest mobile force. Owners insist officers billet at premises. Agree to pay council for service. Later, the owners said police had merely carried out legal obligation.

Exception to rule in Collins v Godefroy (1831):

House of Lords: Police had exceeded public duty and this was consideration for an agreed sum.

Question 17

Scotson v Pegg (1861

Answer 17

Performance of an existing contractual duty to a third party is good consideration for a contract with a different party. (p.71 of book).

Question 18

Foakes v Beer (1884) House of Lords

Answer 18

Part payment of a debt is not good consideration for a promise by the creditor to forgo the balance.

Question 19

Pinnel’s Case (1602)

Answer 19

Part payment sufficient if debtor can show he gave something different for creditor’s agreement to accept the lesser sum in settlement (Coke: horse, hawk, robe)

Question 20

Facts of Central London Property v High Trees Houses [1947] KB, HC

Answer 20

Claimant let flats to defendant for ninety-nine years at 2500 p.a. in 1937. Early part of 1940, due to war, was apparent that flats could not be filled. Agreed that rent would be 1250 p.a. Landlord wrote in 1945 claiming rent at £2500 p.a. and asked for full rent for last two quarters of 1945. The claim succeeded. Denning: the agreement was for the reduced rent to operate during war years when flats could not be filled. This operated down to the early part of 1945. Comments on promissory estoppel were obiter.

Question 21

Definition of Promissory Estoppel?

Answer 21

Where a promisor has, by words or conduct, made a promise to the other party to forgo a legal right, once the other party has acted on this promise, he will have a good defence to any claim brought by the promisor which is inconsistent with the promise

Question 22

Conditions for promissory estoppel?

Answer 22

P-Promise. There must be a promise to waive a legal right, which must be intended to be acted upon by the other party (Hughes v Met)

R-Reliance. The promisee must act upon the promise. But – he need not have acted to his detriment – only have altered his behaviour (Ajayi v RT Briscoe, and, Alan v El Nasr)

I – Inequitable. It must be inequitable/unjust for the promisor to go back on his promise and insist on his full legal rights; must have “clean hands’ (D&C Builders v Rees)

D – Defence. Promissory Estoppel will not give rise to a cause of action (Combe v Combe)

E – Effect is to extinguish or suspend legal rights? (see below)

Question 23

Legal principle in Hughes v Metropolitan Railway Co. (1877) House of Lords?

Answer 23

There must be a promise to forgo a legal right, which must be intended to be acted upon by the other party. This promise can be implied, as was the case in Hughes v Metropolitan Railway

Question 24

Legal principle in Alan & Co v El Nasr [1972]

Answer 24

(Coffee Case) The promisee must act upon the promise. But – he need not have acted to his detriment – only have altered his behaviour

Question 25

Legal principle in Emanual Ajayi v RT Briscoe [1964]

Answer 25

The promisee must act upon the promise. But – he need not have acted to his detriment – only have altered his behaviour

And: In cases where the promisee cannot be restored to his original position, then promissory estoppel may act to extinguish the promisor’s rights completely.

Question 26

D&C Builders v Rees [1966] Court of Appeal

Answer 26

Defendants owed the claimants £482. The claimants were in financial difficulties and the defendants offered £300 in full settlement indicating that if the claimants did not accept they would not get any payment at all. The claimants accepted as they felt had no choice but then sued for the balance. Lord Denning: Defendants could not rely on promissory estoppel as it was not inequitable for the claimants to go back on promise because it was not given freely.

Must be inequitable for the promisor to go back on his promise.

Denning:

Would be happy to apply promissory estoppel to a one off debt, but only if the debtor had acted equitably.

Question 27

Facts of Combe v Combe [1951] Court of Appeal

Answer 27

Husband and wife in divorce process. Husband promised to pay wife £100 a year in maintenance. Husband did not pay and wife brought an action based on husband’s promises. Court of Appeal overturned court of first instance ruling that wife could rely on promissory estoppel.

Question 28

Legal principle from Combe v Combe [1951] Court of Appeal

Answer 28

Promissory Estoppel can only be used as a defence and cannot give rise to a cause of action.

Question 29

Facts in Tool Metal v Tungsten Electric [1955]

Answer 29

Tungsten had been infringing a patent right held by TMM. When TMM heard of this they waived all infringements in return for Tungsten paying 10% Royalty and also 30% ‘compensation’ if sales exceeded 50KG in any month. These sums were excessive but Tungsten agreed to pay them otherwise they would be faced with a claim for infringing the copyright. Tungsten struggled to make payments. They got into arrears during the war times and an agreement was reached to waive the ‘compensation’ payments during the war years

Question 30

Legal Principle from Tool Metal v Tungsten Electric [1955]

Answer 30

PE usually operates to suspend promisor’s legal rights. In such cases the promisor may resume these rights by giving promisee reasonable notice. However, reasonable notice is not always necessary. (Lord Tucker)

Question 31

Procedure for answering question where A is agreeing to accept less money from B?

Answer 31

Start with Foakes v Beer and state the general rule.

Then go through the exceptions (Pinnel’s case - different consideration)

If common law exception (pinnel’s case) does not apply, look to promissory estoppel in High Trees case. State definition of PE and the conditions (PRIDE)

Re Selectmove [1995]: the rule in William v Roffey has not been extended to the part payments of debt (partly because Re Selectmove was a Court of Appeal case and Foakes v Beer is HoL authority)

Question 32

Procedure for answering a question where A agrees to pay more money to B?

Answer 32

State the rule in Stilk v Myrick.

Is B doing anything extra in return for more money? If so - Hartley v Posonby

If B has not done something extra then consider Williams v Roffey exception.

Question 33

Privity of contract: when can a third party enforce a contract term.

Answer 33

Doctrine of privity: third parties cannot have rights or liabilities imposed by a contract. However:

Contracts (Rights of Third Parties) Act 1999 - Applies to contracts entered into on or after 1 May 2000. Section 1 of the Act allows a third party to enforce a contract term if either:
• The contract expressly provides he may, or
• The term purports to confer a benefit on him (unless it appears that the parties did not intend the term to be enforceable by the third party)

Question 34

Define Agency

Answer 34

Agency is the relationship which arises where one person (Agent) acts on behalf of another (principal) and has the power to effect the principal’s legal position with regard to a third party.

Question 35

How can agency be created?

Answer 35

Freeman and Lockyer v Buckhurst Park [1964]:

Actual Agency
Apparent Agency

Question 36

Actual authority?

Answer 36

legal relationship between principal and agent created by express appointment ie. Consensual agreement to which they alone are the parties

Question 37

Apparent authority?

Answer 37

Agency is created by one of two ways:

1) Actual authority: legal relationship between principal and agent created by express appointment ie. Consensual agreement to which they alone are the parties
2) Apparent authority: legal relationship between the principal and the contractor created when:
a. R – representation (words or conduct), made by the principal to the contractor, that the agent had authority, is
b. 3 - Relied upon by a 3rd party believing that the agent had authority;
c. A – altered their position: in reliance of the representation, the 3rd party altered their position eg. by entering the contract

Question 38

What is the effect of agency where the agent has authority?

Answer 38

There is a valid contact between the principal and 3rd party – the agent ‘drops out’

Question 39

What is the effect of agency where the agent has no authority?

Answer 39

The principal cannot sue or be sued by the 3rd party – But the 3rd party may sue the agent in:

i. Tort of deceit: if the agent knew he had no authority; or
ii. Breach of an implied warranty of authority