Consideration MCQs Flashcards
A woman pays a cat sitter £70 to feed her cat while she and her flatmate are on holiday. Unknown to the woman, her flatmate had already paid the cat sitter £100 to feed the same cat. The woman is demanding that the cat sitter returns the £70 she paid him, but the cat sitter is refusing to return the money. Which of the following statements is most accurate?
The cat sitter is not obliged to return the money to the woman as performance of an existing obligation owed to a third party is good consideration.
The cat sitter is not obliged to return the money to the woman as past consideration is not good consideration.
The cat sitter is obliged to return the money to the woman as performance of an existing contractual obligation is not good consideration.
The cat sitter is obliged to return the money to the woman as consideration must be sufficient.
The cat sitter is not obliged to return the money to the woman as performance of an existing obligation owed to a third party is good consideration.
Performance of the existing duty owed to Jack is good consideration for the promise by Polly.
32
q
A tenant has lost his job and he is struggling to pay his rent. Keen to help, the landlord informs the tenant that she is willing to accept half the rent due each month until he finds a new job. The tenant pays half rent for two months and uses some of the money he saved to buy new shoes to wear at interviews. The landlord is now having second thoughts. Under what circumstances can the landlord demand full rent?
The landlord cannot demand full rent as the tenant has accepted her offer therefore she is bound.
The landlord cannot demand full rent before the tenant has found a new job.
The landlord can demand full rent after the expiry of reasonable notice.
The landlord can demand that full rent is paid immediately.
The landlord can demand full rent after the expiry of reasonable notice.
A promisor may resume his full legal rights after giving reasonable notice - Tool Metal v Tungsten.
A restaurant owner owes a vegetable supplier £2500. The restaurant owner knows that the supplier is experiencing financial problems. The restaurant owner gives the supplier a cheque for £1000 in full and final satisfaction of the debt owed. The supplier accepts the cheque but later sues the restaurant owner for the balance of £1500. Which of the following statements is correct?
The supplier cannot recover the balance of £1500 as their acceptance of the cheque for £1000 discharged the debt.
The supplier can recover the balance of £1500 as it is not inequitable for them to go back on their promise.
The supplier cannot recover the balance of £1500 because their acceptance of the cheque for £1000 is binding.
The supplier cannot recover the balance of £1500 as it would be inequitable for them to go back on their word.
The supplier can recover the balance of £1500 as it is not inequitable for them to go back on their promise.
The supplier’s promise to accept less was obtained as a result of pressure on the supplier, therefore the restaurant owner is unlikely to successfully rely on the equitable doctrine of promissory estoppel as it is unlikely that it would be considered inequitable for the supplier to go back on his promise.
A gardener has carried out gardening works in return for payment for a client over a period of five years. The client asks the gardener to cut his hedge when she is carrying out other works in the local area. The gardener and client do not discuss payment before the work is carried out. When the hedge is cut the client refuses to pay the gardener’s invoice for £40. Which of the following statements best explains the gardener’s legal position?
The gardener is entitled to payment. The gardener has exceeded previous obligations owed to the client and so has provided fresh consideration to support payment.
The gardener is entitled to payment. Consideration must be sufficient. As the gardener has carried out a commercial service, the client must pay sufficient consideration.
The gardener is not entitled to payment. The court will not determine the adequacy of consideration, and so cannot decide the amount to be paid in return for services if it was not agreed by the parties in advance of the service being carried out.
The gardener is not entitled to payment as payment was not discussed prior to the service being carried and so the act of cutting the hedge is past consideration.
The gardener is entitled to payment. The client requested the work was carried out, the client and gardener must have understood that the act was to be rewarded and the payment would be legally enforceable if promised in advance.
The gardener is entitled to payment. The client requested the work was carried out, the client and gardener must have understood that the act was to be rewarded and the payment would be legally enforceable if promised in advance.
A tenant rents a warehouse from which to operate its business. The rent is £12,000 per month. The tenant is struggling financially. It is considering (lawfully) terminating the lease. It asks the landlord to accept £7,500 per month instead. The landlord agrees. This allows the tenant to carry on trading and to not terminate the lease. After 6 months, the tenant recovers from its financial difficulties. The landlord indicates that in 3 months’ time he will put the rent back up to £12,000. After the 3 months’ notice expires (so after 9 months of reduced rent), the tenant continues to pay only £7,500 per month. Which one of the following statements best describes the legal position?
The landlord is likely to be entitled to £12,000 going forward, and to recover £4,500 for each of the 9 months when the tenant only paid £7,500.
The landlord is now bound to accept £7,500 per month for as long as the lease continues, but he can recover £4,500 for each of the 9 months when the tenant only paid £7,500.
The landlord is likely to be entitled to £12,000 going forward, but not to recover £4,500 for each of the 9 months when the tenant only paid £7,500.
The landlord is likely to be entitled to £12,000 going forward, and to recover £4,500 for each of the 9 months when the tenant only paid £7,500, and to recover interest on each instalment of £4,500.
The landlord is now bound to accept £7,500 per month for as long as the lease continues, and cannot recover £4,500 for each of the 9 months when the tenant only paid £7,500.
The landlord is likely to be entitled to £12,000 going forward, but not to recover £4,500 for each of the 9 months when the tenant only paid £7,500.
Correct. This is the likely result of applying the principles of promissory estoppel to this situation. Promissory estoppel suspends the right to full payment (of £12,000), but that right is brought back to life by reasonable notice in this scenario.
The owner of a holiday park agrees to pay a contractor £20,000 to cover the ground and trees in the holiday village with fake snow. When the contractor is half way through laying the snow, he realises he has made an error in his calculations and he will need double the amount of snow than he allowed for under the terms of the fixed price contract. The holiday park owner agrees to pay the £10,000 extra requested by the contractor as he has promised hundreds of guests a ‘snow covered magical village’. The contractor also recognises that the original contract had been under-priced. Which one of the following statements best explains the legal position?
The contractor is entitled to the extra £10,000 as it has provided consideration by going over and above its existing contractual obligations by laying the additional snow.
The contractor will not be entitled to the extra £10,000 as he has simply performed his existing contractual obligations.
The contractor will be entitled to the extra £10,000 if the contractor’s ability to honour his promise to his guests amounts to factual consideration.
The contractor will not be entitled to the extra £10,000 as the £20,000 in the original contract is adequate consideration.
The contractor will be able to rely on promissory estoppel as a defence if the holiday park owner sues him for the additional £10,000.
The contractor will be entitled to the extra £10,000 if the contractor’s ability to honour his promise to his guests amounts to factual consideration.
Correct. This is the likely result of applying the case of Williams v Roffey Bros & Nicholls Contractors Ltd [1989] EWCA Civ 5 to this situation.
A 16-year-old girl agrees to hire some gardening equipment, with a view to providing gardening services to local residents over the summer holidays. She later refuses to pay for the equipment, despite having started to use it. Can the supplier of the equipment enforce the contract against the girl?
No, the contract is not enforceable against the girl as it is in her best interests not to be bound by the agreement.
No, the contract is not enforceable because contracts are never enforceable against minors.
Yes, the contract is enforceable against the girl as the gardening equipment can be regarded as a ‘necessary’.
Yes, because the contract is for her benefit.
No, the contract is not enforceable against the girl as she is a minor and none of the exceptions to the general rule apply.
No, the contract is not enforceable against the girl as she is a minor and none of the exceptions to the general rule apply.
On Monday, A man emails his friend and says, ‘Are you still interested in buying my car? I will sell it to you for £5,000. Let me know by end of day Friday.’ On Friday morning the friend emails the man and says, ‘I will buy your car for £5,000.’ The man responds, ‘Sorry, I sold it to a garage yesterday.’ The man and the friend are no longer friends. Which one of the following statements best describes the legal position?
As the man and the friend are no longer friends this will be treated as a commercial transaction and will be legally binding as the presumption that the parties intended to create legal relations would be applied.
The friend’s acceptance of the man’s offer was not legally binding as the car has been sold to a third party.
As the man and the friend are no longer friends this will rebut the presumption usually applied to social agreements and this promise will be binding as there is an intention to create legal relations.
As the friend accepted the man’s offer when they were friends this will not be legally binding as there is no intention to create legal relations.
As the friend accepted the man’s offer when they were friends there is a presumption that the parties did not intend to create legal relations. However, this presumption is rebutted by the parties’ conduct.
As the friend accepted the man’s offer when they were friends there is a presumption that the parties did not intend to create legal relations. However, this presumption is rebutted by the parties’ conduct.
q
Question 1
A client decided to set up his own wine bar. He employed a builder to fit out the kitchen
for £10,000.
The builder did most of the work, but then told the client he had seriously underestimated
the cost of materials and could not afford to complete the job. The client told him not to
worry and offered an extra £700 if it would help. The builder said it would, and went on to
complete the work. As a result the client was able to open the wine bar on schedule.
Which of the following statements best describes the client’s legal position in relation to
the builder?
A The client is obliged to pay the builder £10,700 as the promise to pay more conferred a
practical benefit.
B The client is not obliged to pay the builder the extra £700 as the builder gave no
consideration for it.
C The client is not obliged to honour the alteration promise to pay more as it was the
builder’s responsibility to properly cost the work in the first place.
D The client is obliged to pay the builder £10,700 as all contractual variations are binding
in the absence of extortion.
E The client is obliged to pay the builder only £10,000 because as a matter of public policy
the builder should not be allowed to demand extra money for what he contracted to do.
Answer
The correct statement is A.
The problem lies with the attempted variation. For a variation the general rule is that there
must be the same elements present as for making a contract. So D is wrong. C is wrong too
because if all essential elements are present the variation will be binding.
Question here is what consideration has the builder provided?
Here the builder has just performed his existing contractual duty, which generally is not
regarded as sufficient. If he had done something extra that would have been consideration.
Performance of an existing duty may be sufficient if it confers a practical/ commercial benefit
and there was no duress.
The client offered the money and arguably got a practical benefit by getting work finished
so that the wine bar could open on time (Williams v Roffey Bros.). There was no evidence of
duress (which you will look at in Chapter 12). Hence B is wrong.
No duress and so the client would most likely have to pay the extra £700.
E is wrong as it is not a public policy issue.
Question 2
A client has been running a business for a while but it has been making a steady loss.
Two months ago with a view to making financial savings the client approached his landlord
and asked if he would reduce the rent ‘until things picked up’.
As a gesture of goodwill, the landlord agreed to reduce the rent by 25% (ie to £1,500
per month). So when the last two rent payments fell due the client only paid £1,500. Then
yesterday the landlord told the client he had changed his mind and would be expecting
the client to pay full rent in the future plus the arrears.
Which of the following statements best describes the legal position of the client with his
landlord?
A The client will have to pay £1,000 in arrears of rent and full rent in the future as he
gave no consideration for the landlord’s promise to reduce the rent.
B The landlord suspended his right to full rent but can now demand full rent going
forward even if things have not ‘picked up’.
C The client may raise promissory estoppel as a defence to any action brought by the
landlord and the landlord will have to give reasonable notice to resume his legal right
to receive full rent in the future.
D At common law the client is not obliged to pay the arrears but must pay full rent in
future.
E As the landlord’s promise was simply ‘a gesture of goodwill’ it would not be binding
and he can now demand all outstanding monies.
The correct statement is C.
The question is whether or not the variation is binding. To be binding there must be
agreement, consideration and contractual intention. Here the only issue is with consideration.
Part payment of a debt is not good consideration for a promise to forgo the balance (Pinnel’s
Case). On that basis the client has not given consideration for the landlord’s promise to
reduce the rent by 25% and so is bound to pay the arrears and full rent going forward. This
explains why D is wrong.
There are common law exceptions, such as different consideration, but there is nothing on the
facts to suggest that any of them apply. The landlord agreed to reduce the rent as a gesture
of goodwill, which reinforces the conclusion that no consideration was given for the promise to
accept less.
Consequently the client will have to try and rely on the equitable doctrine of promissory
estoppel as a defence if he is sued for the full rent.
There must have been a promise by the landlord to waive a strict legal right intending the
client to act on it. Here the landlord promised to waive his right to full rent and the client
altered his position by paying the reduced rent.
Looking at High Trees the doctrine operates to suspend legal rights as to the future provided
reasonable notice is given. In relation to the reduced rental payments made over the last two
months it would seem that the landlord’s right to the extra 25% will have been extinguished.
To use promissory estoppel the client would need to have ‘clean hands’. On the facts there is
nothing to suggest otherwise.
As the client may well be able to use promissory estoppel as a defence statements A, B and E
are all wrong.
Question 3
A client decided to set up his own cafe. He took a lease of premises and asked his sister,
owner of ‘1st Choice Blinds’, to supply and fit a large awning at the back of the premises
to provide extra covered seating for customers. His sister agreed and made and fitted
the awning. The client was delighted with what she had done and said he would give her
£1,000 for her trouble.
Which of the following statements best describes the legal position of the client in
relation to his sister?
A The client is not obliged to pay his sister £1,000 as she gave no consideration for the
promise.
B The client is not obliged to pay his sister £1,000 as there was no intention to create
legal relations.
C Your client is legally obliged to pay his sister £1,000 because it was a business- to-
business arrangement.
D The client’s sister may have given sufficient consideration for the promise of £1,000 but
it is unclear on the facts.
E The client’s sister is entitled to £1,000 as she was asked to do the work and it was
mutually understood she would get paid for it.
D is correct.
On the face of it what the sister did looks like past consideration (which is not good
consideration) but the exception may apply (Re Casey’s Patents). The act was done at the
client’s request. Query whether it was mutually understood that she would get something for
what she did. It looks like a large job. Had the promise been made in advance would it have
been legally enforceable? This will hinge on contractual intention. With family arrangements
(eg between brother and sister) there is a rebuttable presumption the parties did not intend
to create legal relations; whereas in a commercial context (business- to- business), which it
looks like here, there is a very strong presumption the parties intended legal relations (see
Chapter 2).
This explains why D is correct and why the other statements, which categorically say the sister
is or is not entitled to £1,000, are inaccurate.
Question 9
A man is given a bicycle as a gift. He later agrees to sell the bicycle for £25 to a woman but no payment has yet been made. He subsequently discovers that the bicycle is worth £390. He informs the woman that he no longer wishes to sell the bicycle because he was mistaken about its value.
What advice should the woman be given?
A. There is a contract because there is executed consideration.
B. There is a contract because sufficient consideration has been promised.
C. There is no contract because the consideration is insufficient.
D. There is no contract because adequate consideration has not been promised.
E. There is no contract because the consideration promised is only executory.
B - There is a contract because sufficient consideration has been promised.
A debtor owes an unsecured creditor £5,000 due to be repaid today. The debtor tells the creditor that he can only repay £4,000 and asks that the creditor agree to this being in full and final settlement of the whole amount. Fearing that the debtor, who also has other unsecured creditors, is about to be made bankrupt, the creditor agrees.
Can the creditor enforce the payment of the remaining £1,000?
A. Yes, because the agreement to accept less than the full amount was extracted under duress.
B. Yes, because the debtor provided no consideration in return for the agreement to accept less than the full amount.
C. No, because the creditor has waived entitlement to claim the full amount.
D. No, because the creditor obtained a legal benefit in receiving £4,000 rather than nothing.
E. No, because the creditor obtained a practical benefit in receiving £4,000 rather than nothing.
B - Yes, because the debtor provided no consideration in return for the agreement to accept less than the full amount.
