Consideration

Question 1

Definition of consideration

Answer 1

One party benefitting, the other suffering loss (Currie v Misa). Must move from the offeree to the offeror (Thomas v Thomas).

Must be of sufficient but not adequate value (Chappel v Nestle)

Must not be past (Roscola v Thomas)

Question 2

What may constitute consideration?

Answer 2

Must be of sufficient value, not adequate value (Chappel v Nestle). Had to be of some value in the eyes of the law (Thomas v Thomas).
Prof smith - mere stipulation theory (link to Chappel v Nestle) - so long as requested from the promisee and promisor sustains detriment then consideration will be found.

Giving up a legal right can constitute consid (Cook v Wright), but only if the right is actually a legal one (Wade v Simeon - there was no legal right to waive in the first place) and the individual must intent to give it up (White v Bluett).

Question 3

How many bits of consideration are there in bilateral contracts?

Answer 3

2 bits. 2 promises are made - the acceptance (promise in return for promise) and something of value for the last promise

Consideration doesn’t make a contract binding, it makes a PROMISE BINDING.

Question 4

Consideration must be ____ from the promisee?

Answer 4

Requested
Combe v Combe
Wife never requested payments from husband

Shadwell v Shadwell
Marriage was consideration. Uncle had never actually requested the nephew to marry, but the court took it to mean as much.

Gifts are not enforceable.
Dickinson v Abel
Conditional gift. Here wasn’t consideration, as consideration cannot be past.

Question 5

What is the exception to the fact that consideration must not be past?

Answer 5

Where the three Lord Scarman criteria in Pao On are fulfilled:
A. Act performed at the promisor’s request (Lampleigh v Braithwaite - implied understanding that there would be some reward for the act)
B. Express/implied understanding by BOTH parties that there would be some reward for the act. This is presumed in commercial contracts (Re Casey’s Patents)
C. All other requirements for a valid contract must exist - ICLR
C.

Question 6

What is the doctrine of implied assumpsit?

Answer 6

The three Lord Scarman criteria in Pao On
Consideration can be past where the act was performed at the promisor’s request and there was express/ implied understanding by both parties that there was to be a reward for that act. (Lampleigh v Braithwaite)

Atiyah says that this doctrine shows that there is space for manoeuvre since the doctrine can be manipulated to produce a just result.

Question 7

Can performance of a pre-existing contractual obligation be valid consideration? 3 cases?

Answer 7

Yes if owed to a third party
Scotson v Pegg
C promised coal to D, C made contract with third party, third party sold to D.

The Eurymedon
Unloading contract, expressly extended to agents. The performance of a valid contract with a third party can constitute consideration
BROAD view taken as to what consid is so that it makes the complex commercial agreement make sense. Consid is a flexible doctrine.

Pao On - not with a third party, this was an existing contractual obligation through Doctrine of Implied Assumpsit.

Question 8

What is the rule of consideration for the performance of public obligations? What is the exception to this rule?

Answer 8

Performance of public obligations will not constitute consideration (Collins v Godefroy - mandatory duty to testify)

Exception: where the public duty has been exceeded (Glasbrook Bros - went beyond the duty to stop the colliery flooding, colliery refused to pay, they had to pay)

Ward v Byham
Father paid for illegitimate child beyond what was required of him by statute, so when he tried to stop he couldn’t. Here performance of a general legal duty amounted to consideration. The promise should be honoured and not avoided on a technicality.

Question 9

What are the two problem cases in consideration?

Answer 9

Lipkin Gorman
White v Bluett

Lipkin Gorman
Dishonest solicitor, defrauded 200k, gambling chips. CoA said money can’t be recovered from the club, since chips were adequate consid, they were the opportunity to gamble (chance of winning large sums)
HoL disagreed and said chips weren’t consideration for the contract - obtaining the chips and gambling was a single transaction - void by Gambling Act
HoL said there can’t be consideration when you place a bet, get nothing in return.
SO the flexibility in the consideration doctrine allowed HoL to find a convenient outcome. Note if this had been a commercial case involving a highly speculative transaction the court would prob have found consid.

White v Bluett
Father son loan. Son said father had cancelled loan in return for him agreeing not to complain any more.
Can only give up a right where it is a legal right and you genuinely intend to give it up.
Here it wasn’t a legal right! He chose to limit his freedom in return for the writing off of the loan. So the court COULD have taken the opposite view, but chose not to since they didn’t think there was a good reason (Atiyah: consid = reason to enforce a promise) for the son’s defence to succeed.

Question 10

If it is being argued that performance of an existing contract is to be consideration what must you look at?
What is payment of debt?

Answer 10

Is it a promise to pay more or a promise to pay less?
Promises to accept less are unenforceable (Foakes v Beer)
Generally performance of an existing contractual obligation is not good consid for promises to pay more (Stilk v Myrick)

Payment of debt is a duty. Discharging debt is an attempt to discharge the duty.

Question 11

A promise to accept less is unenforceable. Case? What are the two areas of exception to this?

Answer 11

Foakes v Beer
This case approved Pinnel’s Case but without much enthusiasm. Said need some independent benefit.
Lord Blackburn nearly dissented (but didn’t) cash-flow argument. Many want prompt payment over full payment, so should allow them to accept less.
Reason Pinnel upheld: law assumes creditors do not lightly forego a debt, so stops unscrupulous debtors’ trickery.
If genuinely want to release debt then a deed will work.

Exceptions: CL and promissory estoppel.

Question 12

Outline the CL exceptions to the rule in Pinnel’s case. 3 cases to mention.

Answer 12

Rule in Pinnel’s case = part payment of debt is not capable of being satisfaction of the while, even if the accord makes it clear that the creditor receives it as such.
Consid needs to move from debtor to creditor.

Where payment takes place at a different PLACE (Van Bergen) Pinnel’s rule may be evaded.

DIFFERENT TIME
If before the due date and done by deed it will be enforceable.

DIFFERENT THING
Need a “Horse hawk or robe” to discharge the debt. This effectively creates a new agreement (since something new introduced) and so is enforceable. Deciding on what can be a replacement condition and not what will discharge the debt.
(Pinnel’s case)
Note part payment of debt will be accepted if before due date and done by deed.

MADE BY THIRD PARTY
If third party pays then they effectively make a new contract for the debt (reduced debt), so it is enforceable as payment in full satisfaction of the whole debt (Hiramund Punamchand)

Question 13

What are the 4 requirements needed for the promissory estoppel exception to the rule in Pinnel’s case to take effect? Case?

Answer 13

High Trees

1. Must be a shield and not a sword (Combe v Combe)
2. Promisor’s must make a clear and unequivocal promise
3. Promisee must alter position in reliance on that promise. (Ajayi v Briscoe)
   The reliance must not be detrimental, but if it is it will be easier to prove (The Post Chaser, per Goff LJ)
4. It must be inequitable for the promisor’s to renege on his promise (Ajayi v Briscoe)

Question 14

Outline what happened in High Trees.

Answer 14

Dispute over ground rent. Was reduced in wartime, court said post-war rent was recoverable, but if C had sued for the full ground rent they would’ve been prevented due to the rule in Hughes v Met Railway.
Denning resurrected the promissory estoppel doctrine from Hughes case. So a promise to accept less in full satisfaction of the whole is binding notwithstanding the absence of consideration.

Hughes v Met Railway
Equity’s evasion of the rule in Pinnel’s case.

Question 15

What is the end point of promissory estoppel?

Answer 15

Where the debt has been paid off, or the promisor’s gives reasonable notice (High Trees)
Reasonable notice (Ajayi v Briscoe)
This can be a court action! (Tool Metal v Tungsten)

Question 16

Which case did Denning have to get round in High Trees?

Answer 16

Jordan v Money. This case said you can’t apply the doctrine of estoppel where there is a promise (can only apply to a statement of fact).
Denning said Jordan v Money was a case where the promisor’s did not intend to be bound.
For promissory estoppel you need a clear an unequivocal promise and show intention to be bound.

Denning relied on Hughes case (equity’s evasion of the rule in Pinnel’s case). He reconciled it with Foakes v Beer by saying that the fusion of law and equity had been overlooked in this case (the fusion was fairly recent at the time of the Foakes decision)
So denning would’ve decided F v B differently- there is an intention to be bound, so would’ve applied promissory estoppel.

Question 17

Which two views would you use to contrast with Denning’s High Trees and F v B reconciliation?

Answer 17

Treitel and Prof Smith

Treitel
Said the court were unlikely to be unaware of Hughes in F v B. Hughes was only 7 years earlier and had two of the same judges.
Says rights were merely suspended in Hughes (until negotiations completed), but extinguished in F v B (right to the interest terminated). So this is how they can be reconciled.

Prof Smith
Hughes involved a breach of contract, whereas F v B does not. Hughes is about induced breach (so C can’t sue for breach since was induced by his own behaviour, hence need equity). There was no breach in F v B - the claim was for the performance of debt (duty).
Criticism: this doesn’t work as the two will often amount to the same thing.

Question 18

What is the reason High Trees is still good law?

Answer 18

It goes beyond Hughes but doesn’t flatly contradict it. It is in a place of its own, rather than just a negation of F v B. Too entrenched to be overthrown.

It doesn’t make a promise unsupported by consideration binding for all purposes.
Promissory estoppel is only available as a defence, have to show reliance, and the promisor’s may withdraw it (the promise) by giving notice.

Question 19

What must be shown of the promisee in order for promissory estoppel to be relied upon as a defence?

Answer 19

That he has changed his position (Ajayi v Briscoe)

Ajayi v Briscoe
D claimed he had altered his business when he in fact hadn’t, so couldn’t show he had changed his position. No reliance so no prom estoppel defence.

Note this doesn’t need to be detrimental reliance,mouth if it is detrimental it will be easier to show reliance (The Post Chaser, per Lord Goff). Easier to show it would be inequitable to not enforce the promise.

Question 20

When can promissory estoppel NOT be extinguished?

Answer 20

The Post Chaser
The promise only becomes fixed and irrevocable if the promisee cannot resume his position.

Otherwise, the promisor can extinguish prom estoppel by giving reasonable notice.

Question 21

Which case would you use to show F v B and High Trees applying in the same decision?

Answer 21

D + C Builders v Rees
They knew the builders were in financial difficulty so would have no choice but to accept less.
So since promise to accept less had been extracted by pressure it was not inequitable to allow them (the poor builders) to resile from it.
So F v B applied as a result of High Trees, so it shows the two cases can co-exist when things are taken in a case-by-case approach. Promissory estoppel is a flexible doctrine which yields to the requirements of equity.

Question 22

What is the effect of promissory estoppel? Generally? Lump sum vs periodic payments? 3 cases to mention.

Answer 22

It extinguishes the creditor’s right to the balance of the debt (Collier v Wright) since it would be inequitable for him to go back on a promise where he had accepted part payment in return for full payment.

Estoppel doesn’t automatically apply to part-payment of debt cases. Need to satisfy the 4 requirements otherwise it couldn’t co-exist with Foakes v Beer.

Where estoppel does operate periodic payment are extinguished (Tool Metal v Tungsten) while lump-sum payments are merely suspended (Foakes v Beer).
Suspended since need to give notice to go back on promise.
So - past payments extinguished, future are not - this lump sum is just suspended until reasonable notice given.

Question 23

Can notice (of the end of promissory estoppel arrangement) be a court action? Case?

Answer 23

Yes
Tool Metal v Tungsten
The counterclaim in the previous action was the notice! So they couldn’t claim pre-1947, but could claim for 1947-1950.

Question 24

Which case is the authority on the fact that estoppel claims may only operate as a defence, a shield and not a sword?

Answer 24

Combe v Combe

Question 25

What is the Australian law case on promissory estoppel? What was the point of law? Does it apply in the UK? Case to contrast with?

Answer 25

Walton Stores v Maher
Promissory estoppel may apply to implied promises in Australia.
One party allowed the other to act on an assumption they knew to be wrong, so it was unconscionable. The Australian court didn’t think it was unreasonable to allow prom estoppel to be a cause of action in these exceptional circs, so extended the doctrine to meet the additional elements of the unconscionable conduct.

This doesn’t apply in the UK, the courts are there to enforce the law, not be moral arbiters. To allow this approach would be to inhibit freedom of contract.

In this country promissory estoppel may only apply to an existing express contract (never an implied to future one) (Mudd)

Question 27

What is the exception to the rule in Stilk v Myrick which involves the creation of a new contract?

Answer 27

Where the promisee renders performance greater than his existing contractual obligations (Hartley v Ponsonby)
This creates a NEW contract.
In this case the remaining part of the voyage was dangerous since it was so short-handed. So a new contract was formed.
It was so dangerous that it was unreasonable to expect them to undertake the voyage as part of the old contract.

Question 28

What is the exception to the rule in Stilk v Myrick which doesn’t involves a new contract?
Why is this case controversial? Who criticises it?

Answer 28

Williams v Roffey
Carpentry work in flat refurbishment project.
Glidewell’s 5 criteria for the performance of an existing contractual obligation to constitute good consideration for the promise to pay more:

1. Existing contract
2. Completion problem (so promisOR offering to pay more to get the work done on time)
3. Promise to pay more
4. Benefit to the promisee or ‘obviate a disbenefit’ - benefit usually getting the work completed on time.
5. No duress

Link this to Blackburn’s near dissent in Foakes v Beer - cashflow, business efficacy argument recognised.

Controversial since allowing the promisee to enforce the promise even though he isn’t doing anything more than he was contractually obliged to do!

Prof Coote: thinks this decision breaks the rules of consideration.

Question 29

When will the Williams v Roffey exception to the rule in Stilk v Myrick NOT apply?

Answer 29

When it is a claim for the debt owed
Re Selectmove
Promised to pay more to the IRC to avoid liquidation.
The Williams v Roffey criteria do not apply to debt cases since it would otherwise leave Foakes v Beer without application
They couldn’t overrule F v B in Selectmove due to precedent issues (only HoL or parliament can change this rule)

Question 32

What is the rule (and its authority) for cases where C agrees to pay more?

Answer 32

General rule: performance of an existing contractual obligation owed to the promisor’s is not good consideration for a promise to pay more.
Stilk v Myrick