Consideration and Promissory Estoppel Flashcards
The definition of consideration
‘an act or forbearance of one party, or the promise thereof, is the price for which the promise of the other is bought’ (Dunlop v Selfridge)
For there to be consideration
Both the promisor and the promisee must give consideration.
Potential issues with consideration
Not good consideration
The variation is a promise to pay more
The variation is a promise to pay less.
Rules of Consideration
- Consideration must not be past
- Consideration must move from the promisee to the promisor
- Performance of an existing obligation is not good consideration
- Part payment of a debt is not good consideration
Consideration must not be past:
Where one party has already acted, a later promise by either party to perform an act in return is not good consideration, as it is past consideration
Eastwood v Kenyon
Exception to ‘consideration must not be past’
The Doctrine of implied assumpsit:
Lampleigh v Brathwaite
Pao On v Lau Yiu Long Test
Pao On v Lau Yiu Long
- if certain conditions are met, the past consideration can still be good consideration
- Was it at the request of the promisor?
- Was payment understood to be due
- Would the contract be enforceable apart from this issue.
Past Consideration: Was it at the request of the promisor?
i.e. did the promise maker ask for the variation
Lampleigh v Braithwait.
Past consideration: Was payment understood to be due?
i. e. did both parties assume that payment would be made for the variation?
- This is more likely in a commercial context (Re Vasey’s Patents)
Past Consideration: would the contract be enforceable apart from this issue
i.e. there are no other consideration, acceptance of ICLR issues
Consideration distinguished from conditional gifts
Where the arrangement gives the promisee nothing to do except receive performance of the promise
- Dickinson v Abel
Consideration must move from the promisee to the promisor
In return for receiving the promise-maker’s promise, the promisee must have given consideration.
Essentially, both parties must provide consideration.
A claimant can only claim on a contract if he has provided consideration
Tweddle v Atkinson.
Exception to movement of consideration from promisee to the promisor
s. 1 Contract (Rights of Third Parties) Act 1999
3rd parties (people who are neither promisor nor promisee to the contract) can now enforce a contract between others which benefits that 3rd party, even though the 3rd party has not provided any consideration.
Consideration must be sufficient, but need not be adequate
Consideration must have some value in the eyes of the law (sufficient) even if it is inadequate (i.e. far less than the promise if worth)
Thomas v Thomas
Company giving away records at a discounted price to people who sent in three wrappers. The court held that the wrappers did constitute consideration.
Chappell v Nestle
- the wrappers represented Nestle’s increased sales of chocolate bars
Giving up a legal right is sufficient, but promising not to enforce one that you do not have is insufficient.
White v Bluett
- A son promising not to complain about his father’s properties was not sufficient consideration.
Being spared the trouble and expense of legal proceedings was deemed to be sufficient consideration.
Cook v Wright
Gambling chips in a casino were not good consideration for the money handed over by the client
Lipkin v Gorman v Karpnale
Performance of an existing obligation is not good consideration
An existing obligation is something that you already have to so, and so cannot be good consideration
a. duties imposed by law
b. Performance fo contractual duties already owed to a third party as consideration
Duties imposed by general law will not amount to good consideration
Collins v Godefroy
- A witness who had been subpoenaed could not enforce a promise to be paid to appear in court as it was his public duty to do so
Extra or special duties may be good consideration
Glasbrook Bros v Glamorgan CC
Duties of a parent to a child may be good consideration
Ward v Byham
Third Party contractual duties found to be sufficient consideration.
Scotson v Pegg
No consideration is required if there is a specific exclusion clause
The Eurymedon
Part payment of a debt is not good consideration
Foakes v Beer
Where part payment of a debt is made to the creditor by someone other than the debtor, this constitutes a new contract with the creditor and this releases the debtor and the creditor’s right to remainder is therefore extinguised
Hirachand Punamchand v Temple
Promise to pay more (PPM)
Performance of an existing obligation is not good consideration, in order to be good consideration, it must go over and above one’ existing duties.
The policing bill for a football match had to be paid by the club that requested it as it went beyond the ordinary policing duties.
Harris v Sheffield Utd
General Rules: a performance of an existing contractual obligation is not good consideration
Stilk v Myrick
- sailors were not paid the extra money they were promised when other sailor deserted and the remaining sailors had to run an undermanned ship, because they were employed to cover ‘all reasonable endeavours.
Going above and beyond your existing obligations is good consideration
Hartley v Ponsonby
- so many of the sailors deserted that the work of the remaining sailors became much more onerous
If the claimant is not going above and beyond.
Consider the exceptions in Williams v Roffey Bros
Exceptions in Williams v Roffey Bros if the claimant is not going above and beyond
- Where A already has a contract with B to supply goods or services; and
- B has reason to doubt that A will complete; and
- B approaches A and promises to pay A extra to complete on time; and
- B obtains a ‘practical benefit’ or ‘obviates a dis-benefit’
- B’s Promise was not given as a result of duress or fraud, then
- The benefit to B is capable of being consideration, so B’s promise to pay more the the same will be binding
Promises to Pay Less
Part payment of debt is not good consideration (Foakes v Beer)
Three Exceptions to part payment with promises to pay less
- Pinnels Case
- Welby v Drake
- Promissory Estoppel
Pinnels Case: a debt can be part paid with either
- a different thing (hawk, horse or robe)
- in a different place (vanbergen)
- earlier
Welby v Drake
Part payment of a debt by a 3rd party is good consideration
Promissory estoppel
The claimant may be obliged to stand by what he has said even where he is not contractual bound to do so.
The claimant cannot go back on his word when it would be unjust or inequitable for his to do so.
Central London Property Trust v High Trees House
Denning established Promissory Estoppel
- promised to reduce the agreed rent for ‘the duration of the war’.
- the landlord therefore could not claim for normal rent during the wartime period.
Promissory Estoppel (PE)
Has 5 elements
- a promise
- a change in position
- reliance
- must be inequitable
- Limits to PE
PE: A clear and unequivocal promise to suspend or waive existing contractual rights.
Can be words or conduct (Hughes v Metropolitan Railway)
- it was not clear how payment was affected by currency and market changes
If persons who have contractual rights against another do not believe they will be enforced then they will not be able to enforce such rights in a court of equity
Birmingham and District Land Co v London and North Western Railway
A promise intended to be binding, intended to be acted on in fact acted, is binding so far as its terms properly apply
CLP Trust v High Trees House
PE: a change in position by the promisee in reliance on the promise.
There was no change of position because the defendant had just carried on his business regardless when the lorries were faulty.
Ajayi v Briscoe
PE: The reliance need not be detrimental
The Post Chaser
PE: It must be inequitable for a promisor to go back on the promise
Detriment, arises from the acceptance of the promise.
Inequity, is found at a point later in time - upon the reaction of the promise. (D and C Builders v Rees)
She could not use the equitable remedy of promissory estoppel because she had not come to equity with clean hands
D and C Builders v Rees
- she had known that the builders were in financial trouble and so would have no choice but to accept her offer to pay them less for their work
The limits of Promissory Estoppel
It is a shield, not a sword
i.e. a defence not as a cause of action
Combe v Combe
Effects of Estoppel
Generally suspension of rights
CLP Trust v High Trees
Suspended rights can be resumed later on
- Following reasonable notice
Tool Metal v Tungston Electric - When the circumstances giving rise to estoppel cease
CLP v High Trees
PE: if money is due in instalments, the claimant cannot recover the money that was waived
He can only resume future payments. Any past periodic payments are extinguished.
PE: money due as a lump sum
The payment is merely suspended for the period that the estoppel lasts - afterwards the claimant can resume his rights for the whole sum.
When one party to a contract in the absence of fresh consideration agrees not to enforce his rights, an equity will be raised in favour of the other party.
Ajayi v Briscoe. The equity is subject to the qualifications
- that the other party has altered his position
- that the promisor can resile from his promise on giving reasonable notice, which need not be a formal notice, giving the promisee reasonable opportunity of resuming his position.
- The promise only becomes final and irrevocable if the promisee cannot resume his position.
MWB v Rock Advertising
- a potential fourth exception
Accepting less rent and so ensuring occupation of the premises could be a ‘practical benefit’
The giving up of a claim brought in bad faith did not amount to consideration
Wade v Simeon
A witness who had been subpoenaed could not enforce a promise to be paid to appear in court as it was his duty
Collins v Godfroy
