Consideration (Contract formation) Flashcards
Currie v Misa
Definition - consideration must “consist either in some right, interest, profit, or benefit accruing to the one party, or some forbearance, detriment, loss, or responsibility, given, suffered, or undertaken by the other.” (p 162). Thus, there can be no legal contract unless there is consideration in the form of a benefit gained, or detriment suffered arrangement by the parties
Chappell & Co Ltd v Nestle
CONSIDERATION NEED NOT BE ADEQUATE - ‘A contracting party can stipulate what consideration he chooses. A peppercorn does not cease to be good consideration if it is established that the promisee does not like pepper and will throw away the corn.’
Pao On v Lau Yiu Long
CONSIDERATION MUST BE SUFFICIENT - that an act done before a promise was made was good consideration for that promise if it was done at the promisor’s request and the parties understood the act was to be paid for at a later date, and the payment or benefit would have been enforceable had it been promised in advance.
White v Bluett
Intangible promise - The court held that there was no consideration given by the son which would absolve him of having to repay the debt to his father’s estate. The court also believed that the son had no right to complain as the father was free to distribute his property as he wished. As a result, ceasing from complaining was not consideration and was ultimately an intangible promise
Collins v Godefroy
Performance or promised performance of existing public duty - ‘If it be a duty imposed by law upon a party regularly subpoenaed, to attend from time to time to give his evidence, then a promise to give him any remuneration for loss of time incurred in such attendance is a promise without consideration. We think that such a duty is imposed by law’.
Stilk v Myrick (1809)
Performance or promised performance of existing duty (Variation) - The formation of a valid contract requires an offer and acceptance in which “the acceptance – [must represent] a final and unqualified expression of assent to the terms of an offer”. However, underlying the offer and acceptance is consideration, without which the contract cannot be formed. This requires that each party must give something in return for the bargain they receive under the contract and without which the contract will not be valid. Stilk v Myrick determines that agreements cannot be altered without the provision of fresh consideration to underpin the promise and contractually bind the parties.
Foakes v Beer (1884)
Performance or promised performance of existing duty (Variation) - The House of Lords held that the respondent’s promise not to enforce the judgment was not binding as Dr Foakes had not provided any consideration. Their Lordships approved the rule in Pinnel’s Case. Lord Selborne said that there had to be
‘some independent benefit, actual of contingent, of a kind which might in law be a good and valuable consideration’.
This approach creates a distinction between promises to pay more and promises to accept less, the former can be binding if it confers a practical benefit on the promisor but the latter can never be binding
Atlas Express Ltd v Kafco
Performance or promised performance of existing duty (Variation) - there was no consideration for the new agreement as the variation placed Kafco in a less favourable position financially. Thus, their non-payment of the money of account resulted from the duress.
Williams v Roffey Bros & Nicholls (Contractors)
Performance or promised performance of existing duty (Variation) - a promise to make bonus payments was enforceable when the promisor obtained a benefit or obviated a disbenefit where the promise had not been obtained by fraud or duress. On the facts R had obtained a benefit and so there was consideration to support the agreement to make bonus payments to W.
Re Selectmove Ltd
Performance or promised performance of existing duty (Variation) - Williams v Roffey Bros only applied to cases where work was done or goods supplied. To extend it to debs would go against Foakes v Beer (1883) LR 9 App Cas 605, which expressly said that a practical benefit was not good consideration in law
MWB Business Exchange Centres Ltd v Rock Advertising Ltd
Performance or promised performance of existing duty (Variation) - discussed in Obiter that Foakes v Beer. May need to be reviewed, as some expectations which grant practical benefit are not of contractual entitlement, therefore under foakes v beer they are no consideration at all
Central London Property v High Trees
Promissory Estoppel - helped define the principle of promissory estoppel in English law, i.e., once a promise is made and relied upon, it cannot be reneged on without agreement (even if not supported by consideration) if this would be inequitable. However, importantly, it was also stipulated by Lord Denning that the effect of such a promissory estoppel ‘is only suspensive’ — i.e., it only temporarily varied the rent payable — and does not permanently extinguish rights.
Hughes v Metropolitan Railway
Promissory Estoppel - In equity, if parties enter into a contract but later enter into negotiation which has the effect of making one side believe that the contract will be suspended or not enforced, the other side cannot enforce the contract if it would be inequitable having regard to the dealings which have thus taken place between the parties. Promissory has a suspensions effect on a contract, (though later cases showed that it can have a extinctive effect on single payments.)
D & C Builders v Rees [1966]
Promissory Estoppel - That promissory estoppel per Lord Denning can go around foakes v beer, when a creditor and a debtor enter upon a course of negotiation, which leads the debtor to suppose that, on payment of the lesser sum, the creditor will not enforce payment of the balance, and on the faith thereof the debtor pays the lesser sum and the creditor accepts it as satisfaction: then the creditor will not be allowed to enforce payment of the balance when it would be inequitable to do so
It must be clear that this relies upon the equity of the promise. It it were made in duress then no true accord has been formed and therefore the promisee cannot be relied upon.
Combe v Combe [1951]
Promissory Estoppel - that promissory estoppel could only act as a defence, not a cause of action.
Collier v P&MJ Wright (Holdings) Ltd [2007]
Promissory Estoppel - It was arguable that there was an agreement or representation by W not to sue C for the full judgment sum. It could be sufficient reliance for the purpose of promissory estoppel if a lesser payment was made as agreed, provided there was an accord
MWB Business Exchange Centres Ltd v Rock Advertising Ltd [2016] (Estoppel)
Promissory Estoppel - would merely point out that the scope of estoppel cannot be so broad as to destroy the whole advantage of certainty for which the parties stipulated when they agreed upon terms including the No Oral Modification clause.
At the very least,
(i) there would have to be some words or conduct unequivocally representing that the variation was valid notwithstanding its informality; and
(ii) something more would be required for this purpose than the informal promise itself
Notable Statue
Rights of third parties act 1999 - Section 1 of the act overrides the old common law rule that a third party could not enforce the terms of a contract, as established in Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co Ltd, and also the rule that a third party was unable to act against the promisor, established in Tweddle v Atkinson.
It allows a third party to enforce the terms of a contract in one of two situations:
firstly if the third party is specifically mentioned in the contract as someone authorised to do so, and
secondly if the contract “purports to confer a benefit” on him. It has to do so in the immediate casual chain. A contract which happens to confer onto him into the future does not suffice. Eg where a contract between A and C for the construction of a building later confers a benefit onto C as he purchases the building from A. This gives him no right to sue B for structural faults.
Thought his right when a benefit is conferred is lost if specific language in the contract precludes him from enforcing it.
