Consideration of a contract Flashcards
What is consideration?
- Consideration is making a promise in exchange for something else, this is the thing that each party is exchanging
What is the definition in Currie v Misa?
- The definition in Currie v Misa is a right or benefit accruing to one party for a detriment or loss given or suffered by the other party
What is executed consideration?
- Executed consideration is when it has been performed
What is executory consideration?
- Executory is when consideration is yet to be performed
What are the five rules of consideration
- Consideration need not be adequate but must be sufficient
- Past consideration is not good consideration
- Consideration must move from the promise
- Performing an existing duty cannot be the consideration for a new contract
- A promise to accept part payment of a pre-existing debt in place of the whole debt is not consideration
What does consideration need not be adequate but must be sufficient mean?
- The law will not protect you from a bad bargain
- It must be sufficient but not adequate of equal value. Shown in Thomas v Thomas
- Chappell And Co v Nestle = They had some nominal value
- Services can be sufficient as seen in Ward v Byham but also not sufficient in White v Bluett
What does consideration must move from the promisee mean?
- The person in the contract must have provided consideration for it, in a bilateral contract both people are promisee and promisors but in a unilateral contract one person makes the promisor and the other does an act rather than a promisee
- Seen in Tweddle v Atkinson
What does past consideration is not good consideration mean?
- Past consideration occurs when the consideration has been provided before the agreement and is therefore not legally binding
- Shown in Re McArdle
- However an exception is an implied contract when it is a service that is usually paid for, they will state in advance that there is likely a conclusion it will be paid for. As shown in Lampleigh v Braithwaite
What does a promise to accept part payment of a pre-existing debt in place of the whole debt is not good consideration mean?
- This rule was established in Pinnell’s that a 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 it has already been agreed that a part payment will clear the debt. This is seen in Foakes v Beer
- Unless there is an early repayment or something additional given
What does performing an existing duty cannot be the consideration for a new contract mean?
- Services can be seen as something of value if they added an additional benefit. Williams v Roffey Bros
- However if it was already legally obligated to do it under an existing contract, they cannot use consideration
- Two examples of existing legal duties are Collins v Godefroy and Stilk v Myrick
What are the two exceptions to part payment of a pre-existing debt?
- Principle of accord and satisfaction
- Promissory estoppel
What is principle of accord and satisfaction?
Principle of accord and satisfaction
- There is an agreement to end a contract that has been acted upon voluntarily accepting something other than the money for the whole debt, it is good consideration even if it is not of equal value but must be done at the request of the creditor
What is promissory estoppel?
Doctrine of promissory estoppel
- If one party to the existing contract agrees to vary the contract and the other relies on that promise, the promisor cannot go back on the agreement as they are estopped from breaking the promise
- This can be seen in Central London Property Trust v High Trees House
- Re Selectmove showed a case of failed promissory estoppel
What are the limitations of promissory estoppel?
- It cannot found a new contract and only an existing claim,
- They must have relied on it to their detriment
- it does not extinguish rights of the promisor
- They must have behaved equitably
