Consideration

Question 1

Balfour v Balfour

Answer 1

Husband promised wife £30 per week while ill-health prevented her from returning with him to Si Lanka where he worked; difficulties in their relationship; he stopped paying; breach of contract?
CA: no. Domestic housekeeping arrangements are not binding contracts.

Question 2

Parker v Clark

Answer 2

Elderly couple (D) agreed with younger couple (C) that, if C sold their house and lived with D sharing household expenses, the husband of D couple would leave the house to the wife of C couple by will; C sold their house and went to live with D, but they did not get on; within a year, D repudiated the agreement and told C to leave. Held: contract, as indicated by causing C to sell their house.

Question 3

Merritt v Merritt

Answer 3

After leaving his wife, husband promised to transfer the matrimonial home into wife’s sole name provided she paid all outgoings on the house until mortgage paid off. Held: legally binding.

Question 4

Jones v Padavatton

Answer 4

Mother promised daughter, if she gave her job as secretary in US to read for the bar in England, she would give her a maintenance allowance of £200 per month; daughter agreed; agreement subsequently varied to provide house instead of allowance; mother fell out with daughter and gave her notice to quit.
CA: family arrangement like Balfour.

Question 5

Edwards v Skyways

Answer 5

The claimant worked for the defendant. He was to be made redundant. The defendants said that if he withdrew his contributions to the company pension fund, they would pay him the equivalent of company contributions. The claimant agreed to this and withdrew his contributions. The company then ran into further financial difficulty and went back on their promise.
Held: The agreement had been made in a business context which raised a strong presumption that the agreement is legally binding.

Question 6

Rose & Frank Co v JR Crompton & Bros

Answer 6

The claimants and defendants entered an agreement for the supply of some carbonised tissue paper. Under the agreement the claimants were to be the defendant’s sole agents in the US until March 1920. The contract contained an honourable pledge clause which stated the agreement was not a formal or legal agreement and shall not be subject to the jurisdiction of the courts in neither England nor the US. The defendants terminated the agreement early and the claimants brought an action for breach.Held: The agreement therefore had no legal affect and was not enforceable by the courts as they did not intend to be binding.

Question 7

Baird Textile Holdings Ltd v Marks & Spencer

Answer 7

M & S terminated suppliers, they use these suppliers for a 30 years. M & S without notice tried to terminate these arrangements. Suppliers said M& S were in breach of contract but M& S had never entered into long term commitment with the suppliers. The orders were not under a long term arrangement. Therefore, the suppliers had become accustomed to these orders, they wanted warning, it was not that there was a contract, but did M & S have an obligation to give warning. CA: no contract. No notice required.
♣ Uncertainty: Contracts are only implied where it is necessary. Here, any such agreement to keep up the purchase of clothes, subject to reasonable notice for termination, would be too uncertain. They ordered things on individuals orders.

Question 8

Kleinwort Benson Ltd v Malaysia Mining Corp Berhad

Answer 8

Malaysia Mining Corporation Metals Ltd (MMC Metals) was a wholly owned subsidiary of the defendant, MMC BHD. MMC Metals approached the claimant KB Bank for a loan. MMC Metals was a relatively newly formed company lacking in the size and resources of MMC BHD. The bank approached MMC BHD asking if they would act as guarantor for the loan. MMC refused to act as guarantor but stated they it was their company policy to ensure that their subsidiaries are always in a position to meet their debts. In reliance of this letter of comfort the bank advanced money to MMC Metals. MMC Metals subsequently went into administration having not paid the loan. KB brought an action against MMC BHD to recover their loss based on the assurance given in the comfort letter.

Held:

The comfort letter had no legal effect. The fact that MMC BHD had refused to act as guarantor demonstrated they did not intend to be legally bound. The comfort letter referred to company policy at that time. There was nothing to stop the company changing its policy.

Question 9

Consideration

Answer 9

Either a benefit to the party making to the promise (the promisor) Or a detriment incurred by the party to whom the promise is made (the promisee)

Question 10

Combe v Combe

Answer 10

Couple divorced; H promised W an allowance of £100 per year. In reliance on this promise, W forbore from applying to the court for a maintenance order. H failed to pay; W sued. CA: no contract. Although refraining from taking legal proceedings can constitute consideration, on the facts W’s forbearance was as a result of H’s promise and not in return for it. There was no bargain of W not seeking a court order in return for H’s promise; all that happened was that H made a promise and W trusted him to keep it.

Question 11

Roscorla v Thomas

Answer 11

S promises B that in consideration of B having purchased certain goods from S, the goods are possessed of a certain quality. The promise is unenforceable. The purchase had already been accomplished at the time the promise was made.

Question 12

Re Casey’s Patents

Answer 12

D owned some patents and by agreement C spent time and money in marketing, developing and improving the inventions covered by the patents. Nothing is expressed explicitly what he is going to get in return. D subsequently wrote to C stating that ‘in consideration of your services as the practical manager in working [the] patents … we hereby agree to give you one third share of the patents’. CA: promise enforceable. There was an implied promise where the individual would be given something in return for their work.

Question 13

The Eurymedon

Answer 13

Contract between cargo owner and carrier containing exemption clause that on its wording extends to third parties; stevedores seek to enforce that exemption clause as against the cargo owner. PC: collateral contract between cargo owner and stevedores concluded through carrier acting on its own behalf with respect to the contract of carriage and as agent of the stevedores with respect to the collateral contract. But what consideration did the stevedores give in return for the cargo owner’s promise of the benefit of the exemption clause? Answer: they performed their contract with the carrier.

Question 14

Brooks v Haigh

Answer 14

In return for D’s promise, C promised that he would surrender a guarantee. After surrender the guarantee was found to be unenforceable because of non-compliance with formalities. D’s promise held binding. Even surrendering the piece of paper carrying the text of the worthless guarantee was good consideration.

Question 15

Midland Bank Trust Co Ltd v Green

Answer 15

In order to frustrate option granted to son to purchase farm, father sold farm (then worth £40,000) to mother for £500; whether option binding on mother depended under legislation on whether she was ‘a purchaser’ of a legal estate in the farm, which in turn depended on whether she had given ‘valuable consideration’. HL: yes. That inadequate, irrelevant. Even if £500 could be considered as merely nominal consideration, good enough on wording of the legislation, but probably not to be so regarded.

Question 16

Alliance Bank Ltd v Broom

Answer 16

C demanded repayment of loan due from D led D to promise to provide security to C impliedly in return for C refraining from pursuing its demand for repayment. This C did. Good consideration.

Refraining from enforcing legal rights is certainly good consideration

Question 17

R v Attorney General

Answer 17

Member of the SAS told by Ministry of Defence to sign a confidentiality agreement or otherwise would be returned to his former regiment. Such forbearance was good consideration to support the confidentiality agreement.

Question 18

Cook v Wright

Answer 18

Government Commissioners charged D, an agent, with certain expenses liability for which in fact lay with D’s principal, and threatened enforcement proceedings if D did not pay. D agreed to pay in instalments. On the assumption that C acted in good faith, believing D was liable, D’s promise held to be supported by consideration in C’s forbearance from bringing enforcement proceedings.

Callischer v Bischoffsheim - similar case, with clear statement that position otherwise if C knew its claim was invalid; any contract based on refraining from suing a claim known to be invalid is itself invalidated by fraud

Question 19

Poteliakhoff v Teakle

Answer 19

At that time gaming and wagering contracts were unenforceable. D promised to pay C (bookmaker) if C would forbear from suing him in respect of gambling debts. Held: promise unenforceable. No consideration because bookmaker knew debts irrecoverable in law.

Question 20

Harris v Watson

Answer 20

Master promised to pay seaman an additional sum provided he did some extra work in navigating the ship. Held: not enforceable.

“This rule was founded on a principle of policy, for if sailors were in all events to have their wages, and in times of danger entitled to insist on an extra charge” - Lord Kenyon

Question 21

Stilk v Myrick

Answer 21

Sailors signed on for a voyage in the course of which two deserted; captain promised to divide the wages of the two deserters between the remaining crew if they would work the ship home to port, which they were already contractually bound to do. Held (Lord Ellenborough): captain’s promise not enforceable.

♣ Espinasse’s report: Harris v Watson ‘founded on just and proper policy’. Already bound to work ship home to port. No basis for claiming more money.
♣ Campbell’s report: Harris v Watson correct but doubts whether reported policy basis is true principle on which the decision is to be supported. Instead, no consideration because did no more than already obliged to do.

Question 22

Harris v Carter

Answer 22

Several crew deserted at end of outward voyage; master signed fresh contract with remaining crew for double wages for the homeward voyage. Held: circumstances did not discharge the crew’s original contracts. No consideration for promise to pay more. Lord Kenyon disagreed with Ellenborough in Stilk in discarding the policy basis for Harris v Watson.

Question 23

Hartley v Ponsonby

Answer 23

Seamen signed on for voyage round the world; in Australia, 17 out of 36 crew refused to continue and were imprisoned; some of the remaining 19 were promised additional money to continue the voyage. Held: promise enforceable. The seamen could legitimately have refused to continue with such a depleted crew. Therefore, when they agreed to do so, they were not merely performing an existing obligation. Coleridge J: ‘It may be that the [claimant] took advantage of his position to make a hard bargain; but there was no duress.’

Question 24

Scotson v Pegg

Answer 24

C agreed with B to deliver coal to B or to B’s order; B ordered C to deliver to D, and D promised C to unload the coal; D failed to unload and C sued D. Held: D liable. C’s performance of the existing contractual duty owed to B was good consideration for D’s promise.

Question 25

The Eurymedon

Answer 25

The consideration provided by the stevedores for the cargo-owner’s promise to extend the benefit of the exemption clause was their promise to perform their existing contract with the carrier: ‘the promisee obtains the benefit of a direct obligation which he can enforce.’ (Lord Wilberforce at 168.)

Question 26

Pau On v Lau Yiu Long

Answer 26

The claimant had threatened not to complete the main contract for the purchase of shares unless subsidiary agreements were met including a guarantee and an indemnity. The defendant was anxious to complete the main contract as there had been a public announcement of the aquisition of shares and did not want to undermine public confidence in the company and the consequent affect on share prices. The defendant could have sued for specific performance of the agreement but this would have delayed matters and damaged the company’s reputation. The defendant had taken legal advice on all these matters before agreeing to the guarantee and indemnity. The claimant then sought to enforce the guarantee and the defendant sought to have the agreement set aside for economic duress.

Held: There was no economic duress. The Privy Council identified 4 factors to consider in assessing whether economic duress was present:

1) Did the person claiming to be coerced protest?
2) Did that person have any other available course of action?
3) Were they independently advised?
4) After entering into the contract, did they take steps to avoid it?

In the present case the defendant did not protest at the time.
It was simply commercial pressure far short of duress.

Question 27

Williams v Roffey Bros

Answer 27

D, main contractor on project to refurbish a block of flats, sub-contracted the carpentry work in the flats and the roof to C, a carpenter, under fixed price contract for £20,000. By end March, C had completed the roof and a few flats. C in financial difficulty because agreed price too low to operate properly and profitably, and because C failed to supervise his workmen properly. D worried C would not complete on time, in turn making D late under the main contract and incur a contractual penalty. Therefore, on 9 April, D promised C an extra money. However, before C ceased work on the flats. D then engaged other carpenters to finish the work, incurring one week’s penalty under the main contract. Two issues arose.

Was there any consideration to support D’s promise to pay extra? CA: yes.
Stilk v Myrick not overruled, in that consideration still required in principle.

Question 28

The Pinnel Case

Answer 28

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

Question 29

Hirachand Punamchand v Temple

Answer 29

The claimants lent money to the defendant Lieutenant Temple. The claimants sought return of the money from the claimant but were unable to get any response so they contacted his father. Some correspondence went between the claimant and the father’s solicitors. The claimants asked how much the father would be prepared to pay to settle the son’s accounts. An amount was agreed which was a substantial, amount although not the full amount due. The claimant promised to send the promissory note relating to the son’s debt to the father once they received payment. The father paid, but the claimant retained the promissory note and sued the son to enforce the balance.Held: The payment made by the father was sufficient to discharge the full balance.

Question 30

Foakes v Beer

Answer 30

The rule in Pinnel’s Case was affirmed by the House of Lords in Foakes v Beer.

Question 31

Re Selectmove

Answer 31

The Crown demanded £25,000 in tax from Selectmove Ltd as they had underpaid
Selectmove agreed with a tax collector that payment could occur in £1000 monthly instalments
After accepting 7 monthly instalments, the Crown sought a winding up order of Selectmove as they owed ~£18,000 in tax
Was there consideration in the agreement to pay in mothly instalments, as the Crown obtained a practical benefit in that they would get paid

Held: No consideration, Although a practical benefit may be found as consideration where there is a promise of extra money for existing duties, as per Williams v Roffey [1990], such a benefit cannot be found in the case of a part payment of a debt

Question 32

Hughes v Metropolitan Railway Co

Answer 32

Landlord gave tenant notice to repair within six months; T responded saying would commence repairs but suggesting L might like to buy out the lease and that proposed to defer commencing repairs until heard from L regarding buy-out; L responded indicating possible interest; T responded quoting a price of £3000; L responded in a way that HL prepared to consider a rejection terminating the negotiation; repairs completed within six months from that date; L sought to eject T for failure to comply within six months from date when notice originally served. HL: in equity, notice to repair must considered as suspended until negotiations terminated; therefore repairs in time.

Question 33

Collier v P & MJ Wright

Answer 33

W had obtained a judgment by consent against three partners of whom C was one. The partners’ liability was joint. The consent order provided for the three partners to pay the judgment debt by monthly instalments. C had paid a third of the debt by instalments. His partners had become bankrupt. W served a statutory demand on C for the balance of the judgment debt. C applied to set aside the demand relying on an alleged agreement by W that if C continued to pay his share of the judgment W would not look to him but only to his partners for the balance.

Court: held that promissory estoppel could aid Mr Collie

Question 34

Central London Property Trust Ltd v High Trees House

Answer 34

A new block of flats let to tenant (D) at rent of £2500 per year; by outbreak of war in 1939, he sublet the block of flats. As the war occured, the tenant was unable to derive the income that he had anticipated. The landlord agreed a rent reduction, the promise to forego a financial entitlement. In 1944 the flats are being let out to more people. The landlord says that the circumstance in which the reduced financial position is no longer there so go back to original financial terms. CLP said no it was a promise for future. Court - landlord won.

Held (Denning J): L won. As a matter of interpretation, the rent reduction was ‘intended simply as a temporary expedient to deal with the exceptional conditions then prevailing, under which the block of flats was only partially let. Denning said - had the Landlord claimed the balance of the original rent for the period before the block fully let, that claim would have failed. Why not, since no consideration for promise to forgo that sum? If you have a promise that is “intended to be binding, intended to be acted on and in fact acted on, is binding so far as its terms properly allow”. He is putting forward the idea a promise that there can be no consideration considering as the promise has been relied upon. This is an application from Hughes v Metropolitan Railway. Denning says this is a form of a more general idea of estoppel.

Net effect: L’s promise not to enforce right to full rent for the time being binding and once L exercised right to end the suspension, full rent payable only for the future. Right to balance of rent in the interim period extinguished. Probably goes no further than Hughes in terms of suspension/extinction of rights but, because it is concerned with a promise to forgo part of a contractual payment entitlement, it raises the question of the relationship with the rule in Pinnel’s Case, solidified by Foakes v Beer, where existing contractual relationship, part payment is not acceptable.

Question 35

The Post Chaser case

Answer 35

He could change his mind because he did it quickly, there had been no time for the promisee to rely on the promise.

Therefore there was no reliance so no estoppel

Question 36

Tool Metal Manufacturing Co Ltd v Tungsten Electric

Answer 36

C owned patents covering certain materials; granted D licence to deal in some protected materials, D paying royalties and ‘compensation’ if quantity of materials used exceeded specified quota. On outbreak of WWII, C voluntarily agreed to forgo compensation right. 1945: C revoked waiver and claimed compensation as from 1 June 1945, but held revocation invalid because reasonable notice not given. Therefore, claimed compensation as from 1 January 1947.

HL: notice reasonable, suspension over, and rights under original agreement once more enforceable.

Question 37

Collier v Wright

Answer 37

Liability for partnership debts. 3 partners in this case, claimant is one of them, the defendant is the creditor of which the partnerships owes those debts. Each partner is each reliable jointly (for the whole lots) of the debts. The creditor said to him, if you pay your one-third shire of debts, I will let you off your liability to the rest. Therefore, there is a promise to reduce the claimants financial obligations. The claimant paid the one-third. Unfortunately, the other two partners became bankrupt, the creditor then turned round and requested the 2/3rd money. Said - you promise one-third, I relied on this and paid, you cannot make me pay the rest = this is promissory estoppel. Court held there is no consideration, Foakes v Beer and Pinnel case stands in the way so need to find something else. The court said that it is possible that promissory estoppel serves a vehicle for supporting the case. However, there is another argument that why would any creditor let the partner off the money. The basis on which hightrees was decided was what the individual promised. The landlord actually won the case because his version of what was actually promised had been found to be correct. Therefore, before one gets lost in promissory estoppel always ask, “was such a promise made in the first place?”. So as far as promissory estoppel is concerned is where there is a clear promise and does promissory estoppel work, they will say yes. But we don’t have those cases yet.
A major restriction of promissory estoppel is where one person says I have rights against you and I will give them up. What promissory estoppel clearly cannot do is to support promises which create new rights or increase obligations. Why cant you apply this to consideration, why worry about consideration. YOU CAN NOT DO THIS. Promissory estoppel can not be substituted in the creation of an original contract. Moreover, in the promise to vary a contract which you are seeking to enforce, increases an obligation, William v Roffey (pay carpenter more money), could you use promissory estoppel here? NO YOU CAN NOT. It is in this sense, that promissory estoppel is a shield and not a sword. Can not use promissory estoppel to enforce new rights, it is only used to give up rights. Post Williams v Roffey where there is a promise to give up a right is normally given by consideration, i.e. a practical benefit which is good consideration so the territory for promissory estoppel is confined to where there is no consideration. We just need it to get round the rule of the Pinnels case, estoppel is a substitute for consideration, the promise which is being supported MUST be a promise to REDUCE or GIVE UP a right.

Question 38

Combe v Combe

Answer 38

Wife’s forbearance from applying for court maintenance order not consideration for husband’s promise to pay certain sum as maintenance because as a result of the promise and not in return for it (see above). Was husband estopped from going back of promise? CA: no. Denning

Question 39

Collins v Godefroy

Answer 39

A party promises to pay a witness if the witness gives testament, the witness is under a legal obligation to appear. If they don’t appear then the police will knock on their door. The witness gives evidence and then seeks to enforce the promise made in doing so. Court held no, as there is no consideration. Therefore, if you promise to do something that the law requires you to do, that is not good consideration.

Question 40

Glasbrook Bros v Glamorgan County Council

Answer 40

Request to police to guard colliery during strike and promise to pay.
Held: enforceable. Police under duty to protect property but guard provided went beyond that duty.

Question 41

Ward v Byham

Answer 41

Promise by father of illegitimate child to mother of weekly allowance if she proved child well looked after and happy; mother under legal duty to look after child. CA: enforceable because in addition look after well she made the child happy. In promising to look after child AND make them happy this was going beyond her existing duty.