*CONSIDERATION, CONTRACTUAL INTENTION AND AGENCY*

Question 1

Define consideration

Answer 1

• something essential to make a contract legally binding
• it is some right, interest, profit or benefit accruing to one party or some forbearance detriment loss or responsibility given, suffered or taken by other party
• under Currie v Misa 1875

Question 2

What must consideration be?

Answer 2

• must be of economic value
• must be sufficient but need not be adequate under Chappell & Co ltd v Nestle Co ltd

Question 3

What is the general rule for past consideration and are there any exceptions to this rule?

Answer 3

General rule:
- under Roscorla v Thomas past consideration is not consideration

Exceptions:
1) act must have been done at promisor’s request (Lampleigh v Brathwait)
- the court held that if A does something for B at their request and afterward B promises to pay A for their trouble, then that promise is good consideration.

2) must be there a mutual understanding from the outset that act would be rewarded (Re Casey’s Patents, Stewart v Casey)

3) if promise of payment/ regards made in advance then it would be legally enforceable

Question 4

What is the general rule for performance of an existing duty imposed by law as consideration?

Answer 4

• Collins v Godefroy states that a promise to perform a legal duty was not sufficient consideration and therefore unenforceable
• this is due to public policy
• Ward v Byham
• here mother exceeded legal duty by promising to keep child well looked after and happy therefore there was sufficient consideration for the father to pay her
• Williams v Williams
• Denning LJ said:
  a promise to perform an existing duty is, I think, sufficient consideration to support a promise, so long as there is nothing in the transaction which is contrary to public policy.
• Glasbrook Bros ltd v Glamorgan County Council
• police provided protection over and beyond what they reasonably considered necessary for mine workers

Question 5

White v Bluett

Question 6

Is performance of an existing duty owed to a third party good consideration?

Answer 6

• yes this is seen as an exception
• if B promises A that they will do something that B is already bound to do by contract with C, then B can rely on that promise as consideration to support promise by A
• Scotson v Pegg where promise to deliver a cargo of coal to the defendant was held to be consideration even though the claimant was already contractually bound to a third party to make such a delivery.

Question 7

Stilk v Myrick

Answer 7

• this case established the basic rule that simply performing an existing contractual duty owed to the other party will not be sufficient consideration in exchange for a promise by the other party to pay more money.

Question 8

Williams v Roffey Bros & Nicholas (Contractors ltd)

Question 9

What does Pinnel’s Case and Foakes v Beer say about part payment of a debt in terms of consideration? Any exceptions?

Answer 9

• related to this rule is the principle that part payment of a debt is not usually consideration for a promise by the creditor to forgo the balance due
• an exception is if the debtor provides, or promises to provide, goods instead of cash or if they pay early

Question 10

What is promissory estoppel?

Answer 10

• this is where an injured party can recover damages if those damages were the result of a promise made by a promisor and the promise was signifiant enough to move the promisee to act on it
• it can either suspend or extinguish rights and this is dependent on what’s fair in the situation

Question 11

Central London Property Trust ltd v High House Ltd

Answer 11

a) there must be a promise to waive a legal right (eg a promise to accept a reduced amount of rent), and the promise must be intended to be acted upon by the other party.

b) the promisee must act on the promise (it seems that simply paying the reduced amount of rent would be acting on the promise).

(c) promissory estoppel does not give rise to a cause of action; it can only be used as a defence. It has been said that the doctrine operates ‘as a shield not a sword’

Question 12

What are the conditions for promissory estoppel to apply?

Answer 12

1) there must be a promise to waive a legal right e.g reduce rent
- can be implied

2) promisee should act on the promise
- they must alter their position as a result of the promise

3) can only be used in defence not as a cause of action
- Combe v Combe

4) it must be unfair for promisor to go back on promise
- D&C Builders v Rees

Question 13

How is determined whether legal rights are suspended or extinguished?

Answer 13

• in relation to ongoing payments, the legal right is usually suspended and resume only by giving reasonable notice (sometimes notice not needed, Tool Metal Manufacturing co v Tungsten co ltd)
• however if promisee cannot be returned to original position after injury due to promise, then rights of promisor could be extinguished
• the right to past payments is usually extinguished
• one off debts are uncertain

Question 14

Compare Stilk v Myrick and Foakes v Beer

Question 15

What is the doctrine of privity of contract? What changes did Contracts (rights of third parties) Act 1999 make?

Answer 15

• only parties to a contract can acquire rights under it
• however under this act, third party can enforce a contract term if either
  the contract expressly provides that they may, or
• the term purports to confer a benefit on them (unless it appears that the parties did not intend the term to be enforceable by the third party).

Note: the third party must be identified by name, as a member of a class (eg ‘employees’) or answering to a particular description.

Question 16

Who is the principal?

Answer 16

• person or company an agency works for

Question 17

Who is the agent?

Answer 17

• a person who is acting on someone else’s behalf

Question 18

Who is the third party?

Answer 18

• the person with whom the agent contracts on behalf of principal

Question 19

What are the different types of actual authority?

Answer 19

• actual authority can be granted expressly or it can be implied
• e.g an agent may have express authority to sell particular goods, but also implied actual authority to do things usually carried out by sellers of such goods, eg to advertise them and receive payment for them

Question 20

What is apparent authority? What are the three conditions for it to be satisfied?

Answer 20

• ostensible or apparent authority arises where the principal has given the distinct but false impression that the agent has authority to enter into a particular contract.
• such authority is said to arise by estoppel, ie the principal will be estopped from denying that the agent has authority.

three conditions must be satisfied:
- at some stage the principal must have represented (by words or conduct) that the agent had authority;
- the third party must rely on this representation believing that the agent had authority; and
- the third party must alter its position, eg by entering into a contract.

Question 21

If the agent alleged to contract on principal’s behalf but had no authority then what happens?

Answer 21

• principal cannot sue third party or be sued by third party as agent ha no authority to bind principal
• third party may sue agent for deceit
• agent cannot be sued for breach of contract as they alleged to contract on another’s behalf and third party never thought there was a contract with agent

Question 22

Shacklin Pier v Detel products

Answer 22

• a third party to contract can be sued under collateral contract where there is warranty from third party
• owners of pier (A) employed painter to paint pier
• A had right to specify which paint to use
• seller of paint (B) represented to A that paint would last 7 years (WARRANTY) therefore instructing painters to but paint from B
• paint flaked off after 3 months
• B was liable for compensation for breach of contract

Question 23

Who’s capacity to enter contracts is limited by law?Are there any exceptions?

Answer 23

1) minors under age of 18 not bound by contract even if other party may be
E: contracts for necessaries and employment bind minors

2) those with mental incapacity
- drunk or suffer from mental impairment (dementia)

3) corporations