Consideration, intention to create legal relations and privity

Question 1

Four requirements for a contract in English law

Answer 1

(1) Offer (2) Acceptance (3) Consideration (4) Intention to create legal relations

Question 2

Five rules of consideration:

Answer 2

(1) Consideration must be something specific, but need not be a ‘fair’ price
(2) Paying for something that’s already done isn’t consideration
(3) Consideration must move from the promisee
(4) Doing something you’re already under a duty to do isn’t consideration
(5) Paying only part of an existing debt isn’t consideration

Question 3

Case showing that even paying a £1/year rent can be consideration

Answer 3

Thomas v Thomas (1842)

Question 4

Case showing that even providing something as trivial as chocolate wrappers can be consideration

Answer 4

Chappell v Nestle (1960)

Question 5

Case in which a vague promise was not specific enough to be good consideration

Answer 5

White v Bluett (1853)

A son promised his father he would “stop complaining” in return for writing off a debt - this was not tangible enough to be good consideration

Question 6

Case in which a promise to keep a child “happy” was good consideration

Answer 6

Ward v Byham (1956)

It was good consideration because there is no legal duty to keep a child “happy”

Question 7

Case showing that a promise to pay for work which has already been undertaken is not good consideration

Answer 7

Re McArdle (1951)

Bungalow repairs for £488 were completed - a promise to pay for them was only made afterwards - but past consideration is not good consideration

Question 8

Case showing that even when a fee is not agreed in advance, there can be consideration when it is implied there will be payment, because work has been undertaken at a person’s request and would generally be paid for

Answer 8

Lampleigh v Braithwait (1615)

A man secures a pardon for another man from the King - they hadn’t agreed a fee, so the accused man says there was no consideration, but held it was implied there would be payment

Question 9

Case showing that in a commercial context, it can be implied that payment will be made, so even if the amount is not agreed there is still consideration

Answer 9

Re Casey’s Patent (1892)

Question 10

Case showing that doing something you’re already under a statutory duty to do can’t be consideration

Answer 10

Collins v Godfrey (1831)

Question 11

Case showing that doing something you’re already under a contractual duty to do (e.g., because it’s your job) can’t be consideration

Answer 11

Stilk v Myrick (1809)

Crew on a ship in the Baltic Sea - when some crew abandon the ship, the others say they’ll only continue for an additional sum - but they were under a duty to continue crewing the ship anyway so continuing the voyage can’t be consideration for that sum

Question 12

Case showing that when you take on extra duties in an employment context, this can be good consideration

Answer 12

Hartley v Ponsonby (1857)

Ship - many crew desert - the remaining crew say they’ll only continue for an additional sum - their agreement to continue is acceptable consideration for this sum because the nature of their duties has become harder and more risky

Question 13

Case showing that when you take on extra duties than you were statutorily obliged to, this can be good consideration

Answer 13

Glasbrook Bros v Glamorgan County Council (1925)

Police agree to provide extra policemen during a strike on payment of fee - although they were obliged to provide police anyway, they had done more than necessary so this was good consideration

Question 14

Case showing that doing something you’re already obliged to do can sometimes be good consideration, so long as the promisor receives a practical benefit (e.g. avoiding a late payment fee)

Answer 14

Williams v Roffey (1990)

Question 15

Case showing that part-paying a debt is not good consideration for discharging the rest of the debt, when you end up paying less overall (and there is no practical benefit to the creditor) - even when you’re acting on the creditor’s agreement

Answer 15

Foakes v Beer (1884)

Question 16

Case showing you can’t sue someone who is not privy to the original contract

Answer 16

Dunlop v Selfridge (1915)

Tyres are sold, with a promise not to re-sell below a certain value - then they are re-sold to someone who does sell them below this value. But the initial seller cannot sue this new party

Question 17

Case showing an exception to the rule on privity in the case of family bookings

Answer 17

Jackson v Horizon Holidays Ltd (1975)

Damages can be awarded to a family for a family holiday, even though only the father made the contract

Question 18

Case showing that consideration must move from the promisee

Answer 18

Tweddle v Atkinson (1861)

Two fathers-in-law of a couple agree with each other to pay the couple some money. The son - the husband in this couple - cannot sue his father-in-law for the money, because he is not privy to the contract, and so has not provided consideration

Question 19

Case showing the concept of a collatoral contract

Answer 19

Shanklin Pier v Detel (1951)

Case about painting a pier
Shanklin instructs a painter to buy Detel paint for the pier, on the basis of Detel’s promise of long-lasting durability. The paint is not of good quality. Although Shanklin is not privy to contract, there is a collatoral contract, because they have relied on Detel’s promise in instructing painter to buy it

Question 20

Contracts (Rights of Third Parties) Act 1999: a third party can enforce a contract when…

Answer 20

(1) They are expressly mentioned in it (by name or as a class), and either
(2a) the contract says they can enforce it, or
(2b) the contract was made to benefit them

Question 21

A problem with the Contracts (Rights of Third Parties) Act 1999 is that…

Answer 21

…a company can exclude enforcement under the Act in its terms

Question 22

What are the rules on intention to create legal relations?

Answer 22

Business contexts: intention to create legal relations is presumed to apply (though this can be rebutted)

Social and domestic contexts: intention to create legal relations is presumed NOT to apply (though this can be rebutted)

Question 23

Case in which a contract had a clause saying it was “binding in honour only”, showing there was no intention to create legal relations

Answer 23

Jones v Vernons Pools (1938)

Football pools contract

Question 24

Case showing that social and domestic arrangements are presumed not to be legally binding

Answer 24

Balfour v Balfour (1919)

Question 25

Case showing that social and domestic agreements can sometimes create legal relations

Answer 25

Merritt v Merritt (1971)

Presumption that husband-wife agreements do not create legal relations can be rebutted - e.g., because they have created a formal written deed, or are separated

Question 26

Case showing that when money has changed hands, even in a domestic context, it’s more likely to be a business arrangement and hence involve intention to create legal relations

Answer 26

Simpkins v Pays (1955)

A lodger and two members of the household agree make entries into competitions together - they pay money, and there is an understanding winnings will be shared

Question 27

Case showing that, with an agreement in a domestic context, if a party puts their financial security at risk, it’s more likely there is intention to create legal relations

Answer 27

Parker v Clarke (1960)

Younger couple are persuaded by older couple to give up their home and move in with them, on understanding they will inherit the house. Later, they fall out. There is intention to create legal relations here, as younger couple have given up their financial security

Question 28

What situations make it likely that there is the intention to create legal relations in a social/domestic context?

Answer 28

(1) A couple or family have fallen out at the time of the agreement
(2) There is a written contract
(3) There is the exchange of money
(4) One party has given up their financial security for the agreement