Consideration and Intention to Create Legal Relations Flashcards
Ingredients of a legally enforceable contract
- Offer and acceptance
- Consideration
- Intention to create legal relations
- Certainty and completeness of terms
- If contract is incomplete in some way then the court may say it is uninforceable - Capacity
- Someone does not have mental capacity - may find that the agreement is unenforceable - Compliance with formalities
Definition of consideration
The doctrine of consideration limits those agreements that the law will enforce. It is the primary test of enforceability in English Law. The orthodox view of consideration is that it represents the idea of reciprocity. English law does not enforce gratuitous promises.
Rules of consideration:
- Consideration must not be in the past
- Consideration must move from the promise
- Consideration must be sufficient in the eyes of the law but need not be adequate for the promise given
- Performance of duty imposed by law
- Performance of contractual duty owed to a third party
- Alteration promises to pay more money
- Alteration promises to pay less money
- Promissory estoppel as an equitable exception to Rule 7
Currue v Misa (1875)
Consideration must not be in the past
- Eastwood v Kenyon [1840]
- Re McArdle [1951]
Exception to the general rule - Lampleigh v Brathwaite [1615]
- Re Casey’s Patents [1892]
- Pau On v Lau Yiu Long [1979]
Pau On v Lau Yiu Long [1979]
- The service must have been rendered at the promisor’s request (Comes from Lampleigh)
- The parties must have understood that the act would be paid for, or that the other party would derive some benefit (Comes from caseys patents)
- Payment would be legally enforceable had the promise been made before the act
Lampleigh v Brathwaite [1615]
Re Casey’s Patents [1892]
Consideration must move from the promisee
- Tweddle v Atkinson [1861]
- Consideration must move from the promisee BUT need not move to the promisor
Consideration must be sufficient in the eyes of the law but need not be adequate for the promise given
Adequacy: consideration provided is of the same value as the promise given
- Thomas v Thomas [1842]
Sufficiency: has some value in the eyes of the law
- Chappell & Co Ltd v Nestle [1960]
- White v Bluett [1853]
- Ward v Byham [1956]
Performance of a duty imposed by law
General rule: performance of a duty imposed by law is not good consideration - Collins v Godefroy [1813]
- But if you exceed a duty imposed by law it will amount to good consideration - Glasbrook Bros v Glamorgan County Council [1925]
Performance of a contractual duty owed to a third party
New Zealand Shipping Co Ltd v A M Satterthwaite & Co Ltd [1974]
New Zealand Shipping Co Ltd v A M Satterthwaite & Co Ltd [1974]
Performance of an existing contractual duty owed to the promisor
General rule: performance of an existing contractual duty owed to the promisor is NOT good consideration for a promisor is NOT good consideration for a promise to pay more money: Stilk v Myrick [1809]
- Unless there is a fresh bargain…
- Hartley v Ponsonby [1857]
- North Ocean Shipping Co Ltd v Hyundai Construction Co Ltd [1979]
Williams v Roffey Bros Ltd [1990]
Williams v Roffey Bros Ltd [1990]
Performance of an existing contractual duty owed to the promisor CAN be good consideration for a promise to pay more money if:
1. There is an absence of economic duress, and
2. A practical benefit accrued to the promisor as a result of their promise to pay more money
Part payment of debt***
General rule: part payment of debt is NOT good consideration for a promise to forgo the remainder of the debt
- Pinnel’s Case (1602)
- Foakes v Beer (1883)
- D&D Builders v Rees (1966)
- missed some notes here
Promissory estoppel
If a creditor promises to accept a smaller sum in full settlement, and in accepting that he intends the debtor to rely on his promise to forgo the remainder, and the debtor does in fact rely on his promise, then the creditor may be estopped from demanding full payment
- Central London Property Trust Ltd v High Trees House Ltd [1947]
The development of promissory estoppel…
- Any statement relied on must be clear and unequivocal: Woodhouse v Nigerian Products [1972]
- There must be an existing legal relationship between the parties: Combe v Combe
- There must be some reliance/action on the promise (but no need for detrimental reliance): Ajayi v Brisco [1964]; WJ Alan & Co v El Nasr [1972]; Brikom Investments Ltd v Carr [1979]
Intention to create legal relations
- Domestic agreements: presumption of the court - there is no intention to create legal relations
- Commercial agreements: presumption of the court - there is an intention to create legal relations
There was not an intention to create legal relation - Burden of proof is on the party that wishes to displace the presumption…
- Social and domestic agreements
- Balfour v Balfour [1919]:
Balfour v Balfour [1919]
- Husband went to work in shrilanka and left his wife at home in england
- Before he left he promised to pay her 30 a month as maintenance
- Divorce happened
She sought out to get those 30 pounds - Court found in favour of the husband - just a domestic agreement not where the court will give its sanction
- Court sending a messaging saying these sorts of agreements will not be enforceable
Jones v Padavatton [1969]
- Agreement between mother and daughter
- Daughter was living in america - mother was in england
- Mother wanted her to come to england to study for the bar
If she came the mom would pay for the education - They fall out after daughter has already moved
- Mother wants to evict her
- Daughter said that there was an agreement
- Said there was intention but that a reasonable amount of time had passed so it is no longer available
Social and domestic agreements…rebutting the presumption
- Majority followed Balfour: no intention to create legal relations
- Minority: reached the same conclusion, but different reasoning. First promise may well have given rise to an intention to create legal relations, but only for a reasonable amount of time
- Parker v Clarke [1969]: on the facts there was seriousness, certainty of terms, and reliance
Parker v Clarke [1969]
Elderly couple and their niece
Niece sold house and moved in with aunt and uncle
She shared household expenses
Once they are gone she could have the house
Now tried to evict her
Court said we need to look for seriousness of agreement
Court said it was legally binding - intended to make legal relations
