consideration - enforcability

Question 1

what is consideration?

Answer 1

consideration is essentially making a promise in exchange for something

Question 2

define consideration legally as defined in Currie v Misa (1875)

Answer 2

‘some right, interest, profit or benefit accruing to one party or some forbearance, detriment, loss or responsibility given, suffered or undertaken by the other’

Question 3

another legal definition of consideration:

Answer 3

‘an act of forbearance of the one party, or the promise thereof, is the price for which the promise of the other is bought and the promise thus given for value is enforceable’

Question 4

executed consideration:

Answer 4

when the consideration has been performed it is said to be executed.

Question 5

executory consideration:

Answer 5

if the consideration is yet to be performed, it is said to be executory i.e. paying a painter after the work who has been completed.

Question 6

The rules of consideration:

Answer 6

there are rules to be considered:
1. Consideration need not be adequate but must be sufficient.
2. Past consideration is not good consideration
3. Consideration must move from the promisee
4. Performing an existing duty cannot be consideration for a new contract
5. A promise to accept part payment of a pre-existing debt in place of the whole debt is not consideration.

Question 7

Consideration need not be adequate but must be sufficient:

Answer 7

Authority for this case is set out in Thomas v Thomas (1842)

Question 8

Thomas v Thomas (1842)

Answer 8

Consideration need only be legally not economically adequate.

Facts
Before he died, Mr Thomas said he wished for his wife to have the house they lived in for the rest of her life. However, this was not written into his will. After he died, his executors, ‘in consideration of such promise’, agreed with Mrs Thomas that she would pay a peppercorn rent of £1 per year in return for being allowed to live in the house. They later tied to dispossess her.

However, the £1 rent was recognized as good consideration.

Consideration was provided meaning it was a legally binding contract even if the house is worth more than £1 but it is sufficient, even though it is not adequate.

Question 9

Chappell and Co v Nestle Co Ltd

Answer 9

Consideration need not have economic value.

The defendants, Nestlé, contracted with a company manufacturing gramophone records to buy several recordings of music. The plaintiffs, Chappell & Co, held the copyright in these recordings. Nestlé offered to sell these records at a discount price to anyone presenting three wrappers from their chocolate bars. The wrappers themselves were worthless and were thrown away by Nestle.
Something sufficient had been exchanged and it had been of nomical value, as they may have bought extra chocolate bars in hope

Question 9

Ward v Byham

Answer 9

adequacy being services:

a maintenance agreement was made between a mother and father of a child, the exchange for payment from the father, the mother promised to keep the child well looked after and happy and also allow the child to decide whether it wanted to live with either parent.
It was held that there was consideration in this agreement, the first is a existing legal duty but the requirement to keep the child happy and healthy were enough to be valid consideration. There was a benefit to the father in these parts

Question 10

not deemed as sufficient - White v Bluett

Answer 10

A son owed his father money but the father said he did not have to pay if he stopped complaining about the way his estate was to be distributed. After his father passed, his estate tried to make him pay back his loan.

It was held that he did have to pay it back because the service was not sufficient consideration because he had no right to complain in the first place.

Sufficiency is required but must be of value. Adequacy is required and does not have to be market value.

Question 11

2. Past consideration is not good consideration

Answer 11

Past consideration occurs when the consideration has been provided before the agreement has been made and is not legally binding.

Question 12

Re Mcardle (1951)

Answer 12

A house was inherited by several children when the mother died, one if the childrens wives had undertaken repairs on the bungalow whilst the mother was still alive. After she had done the repairs did the mother say she would reimburse her from the estate. It was held that this was past consideration as the repairs took place before the agreement had come into existence.

Question 13

Lampleigh v Braitwait (1615)

Answer 13

The defendant had killed a man and was due to be hung for murder. He asked the claimant to do everything in his power to obtain a pardon from the King. The claimant went to great efforts and managed to get the pardon requested. The defendant then promised to pay him £100 for his efforts but never paid up.

Held:

Whilst the promise to make payment came after the performance and was thus past consideration, the consideration was proceeded by a request from the defendant which meant the consideration was valid. The defendant was obliged to pay the claimant £100.

Question 14

what is an implied contract?

Answer 14

if one party asks the other for a service to be provided and this is a service that one would usually paid for and the service is then provided
i.e. a hairdressers, a taxi

• an express or implied request by the promiser to the promisee to perform the task
• an implied promise inherent in the request that the promiser will pay the promisee a reasonable sum for performing the task
• the performance task and the payment of money

Question 15

3) Consideration must move from the promisee

Answer 15

Tweddle v Atkinson
this means that a person cannot sue or be sued under a contract, unless he/she provided consideration for it, in a bilateral contract each person is a promiser and promisee.
In a unilateral contract, one person makes the promise and the other does the act rather than make a promise

Question 16

Tweddle v Atkinson (1861)

Answer 16

Consideration must move from the promisee
Both fathers of a young couple who intended to marry agreed in writing to give a sum of money to the couple, the womans father died before giving over the money and the husband then sued the executors of the estate when they refused to pay the money. Even though the husband was named in the agreement, his claim had failed as he had no consideration given and was not a party to the agreement.

Question 17

4) Performing an existing duty cannot be the consideration for a new contract

Answer 17

Thomas v Thomas, in thomas v thomas the courts state that consideration is ‘something that is of value in the eyes of the law’ - therefore in this case a widower was allowed to stay in her husbands house despite it not being in the will, because she was paying £1 rent per year.

Question 18

Collins v Godefroy:

Answer 18

Services can be seen as something of value, in the above case the expert witness wanted to enforce payment for his services this would have been sufficient consideration but he was already subpoenaed to appear in court therefore not upheld

Question 19

Existing legal duty example: Stilk v Myrick

Answer 19

The claimant was a seaman on a voyage from London to the Baltic and back. He was to be paid £5 per month. During the voyage two of the 12 crew deserted. The captain promised the remaining crew members that if they worked the ship undermanned as it was back to London he would divide the wages due to the deserters between them. The claimant agreed. The captain never made the extra payment promised.

Held:

The claimant was under an existing duty to work the ship back to London and undertook to submit to all the emergencies that entailed. Therefore he had not provided any consideration for the promise for extra money. Consequently he was entitled to nothing.

Question 20

5. A promise to accept part payment of a pre-existing in place of the whole debt is not consideration:

Answer 20

This rule arrives from Pinnels case, the payment of a lesser sum on the day a debt is due cannot be satisfaction of the greater debt. A creditor can claim the remainder of the debt even if he or she agreed that if will clear the debt. This is unless there is early repayment or something additional given
There is two exceptions : promissory estoppel, principle of accord and satisfaction

Question 21

Foakes v Beer (1884)

Answer 21

Dr Foakes owed Mrs Beer £2,000 after she had obtained judgment against him in an earlier case. Dr Foakes offered to pay £500 immediately and the rest by instalments, Mrs Beer agreed to this and agreed she would not seek enforcement of the payment provided he kept up the instalments. No mention was made in this agreement of interest although judgment debts generally incurred interest. Dr Foakes paid all the instalments as agreed and Mrs Beer then brought an action for the interest.

Held:

Dr Foakes was liable to pay the interest. The agreement reached amounted to part payment of a debt and under the rule in Pinnel’s case this was not good consideration for a promise not to enforce the full amount due

Question 22

Exceptions to the rule:

Answer 22

—>Principle of accord and satisfaction
—>the doctrine of promissory estoppel

Question 23

Principle of accord and satisfaction

Answer 23

When there is agreement (accord) to end a contract and satisfaction (consideration) that has been acted upon voluntarily. Thus accepting something other than the whole debt is good consideration even if it is of equal value. This must be done at the request of the creditor, not the debtor

Question 24

The doctrine of promissory estoppel:

Answer 24

if one party to an existing contract agrees to vary the contract and the other party relies on that promise, the promisor cannot go back on the agreement as he or she is estopped from breaking the promise as set out in Central London Property trust ltd v High Trees House

Question 25

Central London Property Trust Ltd v High Trees House

Answer 25

High Trees leased a block of flats from CLP at a ground rent of £2,500. It was a new block of flats at the time the lease was taken out in 1937. The defendant had difficulty in getting tenants for all the flats and the ground rent left High Trees with no profit. In 1940 many of the flats were still unoccupied and with the conditions of the war prevailing, it did not look as if there was to be any change to this situation in the near future. CLP agreed to reduce the rent to £1,250 during the war years. The agreement was put in writing and High Trees paid the reduced rent from 1941. When the war was over the flats became fully occupied and the claimant sought to return to the originally agreed rent.

Held:

The rent would be returned to the originally agreed price for the future only. CLP could not claim back the arrears accrued during the war years. This case is important as Denning J (as he then was) established the doctrine of promissory estoppel. Promissory estoppel prevented CLP going back on their promise to accept a lower rent despite the fact that the promise was unsupported by consideration.

Denning J “In my opinion, the time has now come for the validity of such a promise to be recognised. The logical consequence, no doubt is that a promise to accept a smaller sum in discharge of a larger sum, if acted upon, is binding notwithstanding the absence of consideration”

Question 26

Re Selectmove (1995)

Answer 26

The Inland Revenue petitioned the court for a winding-up order in respect of a company, Selectmove, which had accrued arrears in the tax it owed under the PAYE system of tax collection. The company appealed on the grounds that a tax collector had met with the company and agreed that the company could pay the arrears in instalments instead of being wound up.

Issues
The Inland Revenue argued that the tax collector had not authority to make an agreement which bound the Revenue. Also, it was argued that there was no consideration for this agreement as the company were only paying what they owed already. The company argued that, according to Williams v Roffey Bros & Nicholls (Contractors) Ltd [1991] 1 QB 1, where an agreement was varied there would be good consideration if the other party obtained some practical benefit from the new arrangement. The Revenue obtained a practical benefit as if the company had gone into liquidation it might not have received as much tax back.

Decision/Outcome
The tax collector lacked actual authority to bind the Revenue. Therefore, the agreement was not binding. However, the court also considered the question of consideration. Gibson LJ said that 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. As Foakes v Beer was a House of Lords case, the Court of Appeal was bound to follow it. Therefore, the agreement was not supported by consideration.

Question 27

Limitations of promissory estoppel:

Answer 27

1) it can only be used to defend an existing claim - not to found anew contract
2) the promisee must have relied on it to their detriment
3) it may only suspend rights but not extinguish the rights of the promiser
4) since it is an equitable principle, anyone seeking to rely on the principle must show that they have behaved equitably