Consideration

Question 0

Another way to describe consideration.

Answer 0

The badge of enforceability - Professor McKendrick

Question 1

Rationale for consideration.

Answer 1

It is to enforce a promise, indicating that the promisor is intended to be bound.

Question 2

(Currie v Misa) definition of consideration. Go.

Answer 2

A valuable consideration in the eyes of the law may consist of either some right interest, profit or benefit to one party, or some forbearance, detriment, loss or responsibility given, suffered or undertaken by the other

Question 3

Combe v Combe. Facts and principle.

Answer 3

In C v C, it was held that there was no consideration given for the defendant’s promise to pay his ex-wife £100 per year even though in reliance on that promise she had not applied to the divorce court for maintenance, and in that sense she had suffered a detriment.

The reason why the detriment did not constitute consideration as that there was no request by the husband, express or implied, that he should forbear from applying for maintenance. There was no ‘exchange’

Question 4

3 rules of consideration. Shoot.

Answer 4

Consideration must move from the promisee.

Consideration must not be past.

Consideration need not be adequate.

Question 5

‘Consideration must move from the promisee’.

Definition and authority.

Answer 5

Only a person who had provided consideration in return for a promise can enforce that promise as a contract.

Tweedle v Atkinson, 1861

Question 6

Tweedle v Atkinson.

Facts and principle.

Answer 6

In T v A, Guy agreed with John Tweedle that they would pay a sum to Tweedle’s son William, who was Guy’s prospective son-in-law. Guy’s executors failed as no consideration had moved from him.

Question 7

‘Past consideration is no good consideration’.

Definition and 2 authority.

Answer 7

Something already completed before the promise is made cannot generally amount to consideration.

Roscorla v Thomas, 1842
Re McArdle, 1951

Question 8

Re McArdle.

Facts and principle.

Answer 8

In Re McArdle, a promise made ‘in consideration of your carrying out certain improvements to the property’ was held by the COA to be in enforceable as all the work had been done before the promise was made.

Question 9

3 exceptions to past consideration laid down by Lord Scarman.

Case and exceptions.

Answer 9

Pao On v Lau Yiu Long, 1980.

Exceptions:

• It was at the request of the promisor
• there is an understanding that payment will be made
• The payment, or conferment of a benefit must have been legally enforceable had it been promised in advance.

Question 10

Peppercorn rule.

Explain.

Answer 10

The peppercorn rule essentially states that the consideration provided by one part need not equal to the value that the consideration provided by the other party.

Provided that there is some value, the courts would not question it’s adequacy.

Question 11

Peppercorn rule.

2 authority and facts.

Answer 11

Chappell v Nestlé, 1960
Mountford v Scott, 1975

In Chappell, 3 wrappers from the defendant’s chocolate bars were held to be sufficient consideration.

In Mountford, £1 was held to be good consideration for an option to buy a house.

Therefore, from this 2 cases, we can see that the purpose of consideration is designed to show that the promise is intended to be legally binding and enforceable, whether it creates any economic advantage is therefore irrelevant.

Question 12

Forbearance or withdrawal of threatened legal proceedings will amount to consideration, even if the claim has no legal basis, so long as the parties themselves believe that the claim is valid.

2 authority that states this.

Answer 12

Alliance Bank v Broome, 1993

Pitt v PHH Asset Management, 1993

Question 13

Stop being a nuisance.

Case & principle.

Answer 13

White v Bluett, 1853.

The promise to stop complaining about his father’s will was held to be insufficiently tangible to amount to good consideration.

Question 14

“Well looked after and happy.” Intangible good consideration.

Case and principle.

Answer 14

Ward v Byham.

A mother’s promise to keep her illegitimate child ‘well looked after and happy’ in return for money towards the child’s upkeep from its father was held to be sufficient consideration, since there is no legal duty to keep a child happy.

Question 15

Pinnel’s Case, 1602.

Principle and rationale.

Answer 15

Part-payment is not good consideration for a promise to forgo the balance.

I.e. Payment of a smaller sum will not discharge the payment of a larger sum.

Why?
Since no consideration was moved from A to enforce the promise of B to accept part payment.

Question 16

4 instances where part payment of a debt will discharge the full debt.

Answer 16

1) Where the promise to accept a smaller sum in full settlement is made by deed or in return for a consideration.
2) where the debtor does smth different. E.g. Made payment earlier at the creditor’s request, change location, or use a different method. (Pinnel’s Case)
3) Part payment by a 3rd party. (Hiranchand Punamchand v Temple, 1911)
4) Promissory Estoppel.

Question 17

Performance of existing contractual duty may amount to good consideration.

Authority and facts.

Answer 17

The Eurymedon, 1975.

The Privy Council held that the removal of certain goods from a ship at the request of a consignee was good consideration for the promise to provide the stevedore the benefit of an exclusion clause, even though the stevedore in removing the goods was only performing his contractual duties owed to the carrier.

Question 18

Part payment by a 3rd party can discharge the full debt.

Authority and facts.

Answer 18

Hiranchand Punamchand v Temple, 1911.

In HP v T, the defendant was indebted to the plaintiff. The plaintiff agreed with the defendant’s father to accept part-payment by the father in full satisfaction of his son’s debt.

The money have been paid, but the plaintiff sought to recover to the rest. It was held that the plaintiff could not recover the balance from the defendant, as by suing the defendant, the plaintiff would be committing fraud on the father.

Question 19

Doctrine of Promissory Estoppel.

Establishing authority and root authority.

Answer 19

Central London Property Trust Ltd v High Trees House Ltd, 1947.

He drew the principle from the case of Hughes v Metropolitan Railway, 1877

Question 20

The 2 HOL cases that are seen to be in conflict with the doctrine of PE.

Answer 20

1) Jordan v Money, 1854

HOL stated that estoppel only applies to statements of fact and not to promises.

2) Foakes v Beer, 1884

HOL confirmed that payment of a smaller sum will not discharge the liability for a larger sum.

Question 21

The irony in Lord Denning drawing the principle from Hughes.

Answer 21

Hughes states that it only applies to representation of existing fact and not from a promise as to future conduct or intention, confirming the earlier case of Jordan v Money, 1854.

Question 22

The doctrine of PE.

Explain.

Answer 22

The DOPE operates where there has been a representation by one party (the promisor) that he/she does not intend to enforce his/her strict legal rights, made with the intention that the other party (the promisee) will rely on the representation, and the other party does in fact rely upon the representation without providing consideration. The party making the representation will be estoppel from enforcing his or her strict legal rights, in so far as it is equitable to do so.

Or in essence, the DOPE provides a means of making a promise binding, in the absence of consideration.

Question 23

Scope of PE.

Hint: Dr. Pres.

Answer 23

DR. PRES

Duration. Reliance.

Promise. Relationship. Equitable. Sword.

(Remember:
when you think of dope, think of Dr. Pres)

Question 24

Original case establishing the doctrine of PE.

Case and facts.

Answer 24

Hughes v Metropolitan Railway.

In H v MR, the actions of the plaintiff had led the defendant to reasonably believe that a period of notice to quit that had been issues had been waived. The defendant had relied on this, and the HOL took the view that the plaintiff could not simply bring the waiver to an end and impose the notice to quit without more ado.

This idea of ‘equitable waiver’ has developed into the modern doctrine of PE following the decision of Denning J in Central London Property Trust v High Trees House, 1947.

In essence, the doctrine is that ‘a promise intended to be binding, intended to be acted upon, and in fact acted upon, is binding insofar ad it’s terms properly apply.’

Question 25

The doctrine of PE requires there to be an existing legal relationship between the parties.

Rationale.

Answer 25

The doctrine is concerned with the variation of legal obligations, rather than their creation.

Question 26

PE can only be used ‘As a shield, not a sword.’

Case, facts and principle.

Answer 26

This famous phrase comes from Combe v Combe, 1951.

A husband who was divorcing his wife made a promise to pay her £100 per annum. When he failed to do so, she sued.

The judge at first instance allowed her to succeed, although she had provided no consideration for the promise, on the basis of PE.

The COA held that this was a misuse of the doctrine, which could not create new legal rights.

Question 27

The doctrine of PE requires that it must not be inequitable to allow the promisor to go back on the promise.

2 authorities and facts.

Answer 27

D&C Builders v Rees
The Post Chaser

In D&C Builders, Lord Denning said that the doctrine should not be afforded if the promise had been extracted by [improper pressure]. The defendants had persuaded the plaintiffs to accept less than they were owed by a threat that if they did not accept, they would get nothing.

Similarly in The Post Chaser, although there was no impropriety on the part of the promisee, Lord Goff considered this requirement but held that it was not inequitable to allow the promisor to escape from its promise given that there was such a short period of time between the making of the promise and its withdrawal (a matter of days).

Question 28

Effects of PE on contracts.

Answer 28

Only suspends rights, rather than extinguishing them. Demonstrated in all 3 cases - Hughes, High Trees, and Tool Metal V Tungsten.

Not clear whether this is a GR or something that depends on the individual circumstances of each case.

However it seems that the suspensory nature would likely be regarded which means it is only applicable for a limited period of time.

This was what L.D meant by referring to the promise being binding ‘as far as its terms properly apply’.

Question 29

PE is only suspensory. 3 authorities.

Possibly extinguish a single debt.

Answer 29

• Hughes v Metropolitan Railway
• Central London Property v High Trees House
• Tool Metal v Tungsten

“Once these conditions ceased to exist, the original terms automatically revived. If no limit is placed on the promise when it was made, it may still be terminable by giving reasonable notice (Ajayi v Briscoe)

However the COA in (Collier v P & MJ Wright) the court seemed to accept that PE could extinguish a single debt, rather than simply suspend the obligation to pay.