Consideration & Promissory Estoppel Flashcards
To make a valid contract, the parties must express themselves how?
- So their meaning can be determined with a reasonable degree of certainty
No promise will be enforceable unless? (2)
- it is supported by consideration
- Or it is made in a Deed
Is a gratuitous promise enforceable?
- No
- Unless it is made in a deed
Rules of consideration? (2)
- Consideration must be of economic value
2. Consideration must be sufficient but need not be adequate
Is past consideration good consideration?
No
- Roscorla
- Re McArdle
-It can be good under Pau On
Past Consideration can be good under Pau On if? (3)
1) Act was done at the promisor’s request
2) Parties understood that the act was to be remunerated
3) Remuneration would have been legally enforceable had it been promised in advance
Is forbearance good consideration?
Yes
Is an existing duty good consideration? (3)
1) Existing duty imposed by law
o Not good consideration unless you do something more than you are required to do
• Glasbrook Brothers v Glamorgan County Council (1925)
• Ward v Byham (1956)
2) Existing duty owed to promisor
o Stilk v Myrick (1809),
o Williams v. Roffey Bros
- Glidewell’s test
3) Existing duty owed to third party
o Pao On
o can be good consideration
Williams v Roffey Bros
- Glidewell’s Test (6)
- Glidewell LJ created the test
(i) if A has entered into a contract with B to do work for, or to supply goods or services to, B in return for payment by B, and
(ii) at some stage before A has completely performed his obligations under the contract B has reason to doubt whether A will, or will be able to, complete his side of the bargain, and
(iii) B thereupon promises A an additional payment in return for A’s promise to perform his contractual obligations on time, and
(iv) as a result of giving his promise B obtains in practice a benefit, or obviates a disbenefit, and
(v) B’s promise is not given as a result of economic duress or fraud on the part of A, then
(vi) the benefit to B is capable of being consideration for B’s promise, so that the promise will be legally binding
Defence of Promissory Estoppel will occur if (6)
- A is contractually bound to perform a service or pay money to B
- A is not able to perform in accordance with the contract
- B agrees to allow A to perform differently or not at all
- In reliance on that promise A does so perform differently or not at all
- B then decides to sue A claiming the original performance is still due
And the court decides that it would be INEQUITABLE in the circumstances to allow B to enforce his strict legal rights
Then A’s defence of promissory estoppel will succeed
Requirements for Promissory Estoppel? (5)
- Promise that gives rise to the estoppel must be a clear and unequivocal promise
- Promisee must have altered his position in reliance on the promise made
- Must be inequitable for the promisor to go back on the promise and insist upon strict legal rights under the contract
- Promissory estoppel only serves to suspend, not wholly to extinguish, the existing obligations
- Promissory estoppel cannot create a cause of action
Bret v J.S. (1600) Principle
Consideration must be of economic value
White v Bluett (1853) Principle
Consideration must be of economic value
Consideration must be sufficient but need not be adequate
Forbearance can be good valid consideration if it is worth something
Thomas v Thomas (1842) Principle
Consideration must be of economic value
Motive not important
Pitt v PHH Asset Management (1993) Principle
Consideration must be sufficient but need not be adequate
Pitt v PHH Asset Management (1993) Facts
- P mortgage the residence, selling it
- P bid on cottage
- PHH withdrew P’s offer, received a higher offer
- P sued
- PHH said they had a lockdown agreement
- PHH said there was no consideration in the agreement
- Was there valid consideration?
- Lockdown agreement (agreement not to negotiate with someone else)
- P had done enough for valid consideration to support the lockout agreement
- Made enough promises
Roscorla case Principle
Past consideration is not good consideration
Roscorla case Fact
- Sale of a horse (like a car)
- Sold for £30
- Seller said it was a great horse
- Horse was not good
- Can buyer sue the seller
- Held sale was concluded before promise was made
- Sale was done, promise is not enforceable
- It was a gift promise, not part of transaction
Re McArdle Principle
Past consideration is not good consideration
Re McArdle Facts
- Made improvements on a bungalow
- On fathers estate
- Father died, left to wife
- McArdle did work on a bungalow
- Agreed to pay percentage of bungalow sale
- Promised pay
- Valid consideration?
- Promise to pay was made after the work was done, therefore, it is past consideration
- Held: not enforceable
Past Consideration can be good consideration under Pau On if: (3)
1) Act was done at the promisor’s request
2) Parties understood that the act was to be remunerated
3) Remuneration would have been legally enforceable had it been promised in advance
Hughes v Metropolitan Railway Co. (1877) Principle
Promissory Estoppel
Hughes v Metropolitan Railway Co. (1877) Facts
Repairing covenant under a lease
o Oct: landlord gives tenant 6mths notice. Negotiations on purchase Nov-31 Dec. No repairs done by tenant
o April: Landlord tries to claim forfeiture
o Held: Tenant entitled to relief from forfeiture in Equity- time should run from breakdown of negotiations
o Lord Cairns: equity lends a hand-prevent strict legal rts from being enforced
Central London Property Trust v High Trees House (1947) Principle
Promissory estoppel
oPromissory estoppel only serves to suspend, not wholly to extinguish, the existing obligations
Central London Property Trust v High Trees House (1947) Facts
- Block of flat were being let
- War started, had trouble finding tenants
- Reduced ground rent
- War ends
- Rents go up
- Tried to get money from war years
- Issue: Can promise of reduce rent be enforced?
- Held: can only get money back from 1945
- Under normal circumstance, there would be a consideration problem
Contract Structure (5)
1) Valid offer and acceptance
2) Intention to create legal relations
3) Sufficient certainty
4) Valid consideration
5) Could promissory estoppel be used as a defence to a claim?
Combe v Combe Facts
- Husband to pay maintainance payments to wife
- Action to get payments
- Failed
- Not enforceable because there was no consideration
- She did not provide anything for the payments
PE is a Shield not sword
Cannot create an action
Offord v Davies (1862) Facts
- D made an offer to discount firm for another firm, D would discount
- Before 12 month period, D revoked the offer
- O sued D
- Promisor was D
Offord v Davies (1862) Principle
Consideration must move from the promisee, but not necessarily to the promisor.
Bret v J.S. (1600) Facts
- Son training as servant for B
- Father promised to pay B to train son for 3 years
- Father died
- Mother can’t afford payment, pay a little less
- Mother married J.S.
- B sued to receive money
- Was this an entire contract for an entire year?
- Held that is was of economic value (training)
White v Bluett (1853 Facts
- B lent son money
- B died, W got estate
- W sued son to get money
- Son promised to forebear his right to complain about his father
- Held the promise not to complain does not have economic value
- If son had a actual legal claim against his father, it may be good consideration.
Thomas v Thomas (1842) Facts
- Action against husband’s executor (widow)
- Said he wanted wife to have a house for her life
- Executor said she had to pay rent (£1 a year) and keep it in good repair
- Was this good consideration?
- Yes, it is of some economic value
Pao On v Lau Yiu Long (1980) Facts
o Business
o Lau wanted a building that P owned
o Made an agreement
o P would sell shares in exchange for L shares
o Agreed to not sell shares for a year
o Between P and D’s company, not L themselves
o L guaranteed the price of the shares if it dropped. (2nd agreement)
• Between P & L
o Court held: agreement was in good consideration
• Benefit to L by P not selling
• L said there was economic duress, didn’t accept it. (sophisticated party)
o 3 parties involved
Glasbrook Brothers v Glamorgan County Council (1925) Facts
- Promised to pay extra for police protection during strike
- Police provided extra police protection
- Refused to pay, got sued
- Argued that it was their duty to protect
- Court held that since police did more than their public duty, it was good consideration.
- Extra work was considered good consideration
- Already obliged to do something by law= not good consideration
Glasbrook Brothers v Glamorgan County Council (1925) Principle
Duty imposed by law
Extra work was considered good consideration
Ward v Byham (1956) Facts
- Father and mother, not married
- Father to pay mother for child
- Condition: child had to be happy
- Mother tried to enforce the payment
- Held: legal duty to look after the child was already their (minimum standard). Agreement made the standard higher (happy), therefore, good consideration.
- Minimum obligation by law if not good consideration, anything more is
Ward v Byham (1956) Principle
Duty imposed by law
Minimum obligation by law if not good consideration, anything more is
Stilk v Myrick (1809) Facts
- Sailor
- S was to be paid per month at sea
- 2 sailors left
- captain said he would split their wages between others
- refused to pay
- sued
- good consideration?
- Held: no, already under obligation to act as a sailor, no extra work.
Stilk v Myrick (1809) Principle
Performance of an existing duty owed to promisor
Not good consideration if there is no extra work
Williams v Roffey Bros (1990) Facts
- First significant exception
- R had contract to work on flats
- W did carpentry work
- W needed more $ to do work
- R offered extra money if he finished the work on time
- Refused to pay
- Held: there was consideration
- Practical benefit of finishing the work on time, didn’t quit
Is part payment of a debt good consideration?
No
Re Selectmove ltd (1995)
Re Selectmove ltd (1995) Facts
- Accepted agreement with tax collector to agree in installments
- Question: if existing obligation to accept payments in installments, can you bring a claim to collect full amount?
- Installments did not prohibit other claims.
- If you owe a debt, part payment of that debt is not good consideration
- Not a case of goods and services, test doesn’t apply
D&C Builders v Rees [1966] Facts
• Building company, did work for R
• R owed $ to D&C
• They tried to get payment because of money issues
• R offered less money or no money
• D&C took less money
• Later sued for all the $
• Held: not right for R to take go against their promise
– Took advantage of company
– It was inequitable, R used pressure to agree
D&C Builders v Rees [1966] Principle
Promissory Estoppel can be used when there is already a contract between parties
Baird Textile Holdings Limited v Marks & Spencer PLC [2001] Facts
• B made clothing for M for 17 years
• M was very successful
• M realized it was cheaper to buy clothes from elsewhere
– Stop policy of British made clothes
– Bad for B
• B sued
• Argued that close relationship forces M to give at least reasonable notice of leaving
• Held: not possible to hold in favor of B
– Cannot allow a positive claim for promissory estoppel
– Would of created a right of action
Baird Textile Holdings Limited v Marks & Spencer PLC [2001] Principle
Cannot allow a positive claim for promissory estoppel
Promissory estoppel cannot create a cause of action
Is a Promise to accept less (part payment of a debt) good consideration?
not good consideration for a promise to discharge the entire debt
• We don’t want to force creditors to accept less than they are owed
Foakes v Beer
Foakes v Beer Facts
- F needed time to pay debt back to B
- Said wouldn’t do anything if paid part of it immediately and then installments later
- He accepted, didn’t pay interest
- Held: B was entitled to the interest
Formation of a Contract? (5)
Offer
Acceptance
Certainty
Intention to create legal relations
Consideration
•If not, try promissory estoppel
Pinnel’s Case Principle
o General rule: Part payment of a debt is not good consideration for a promise to discharge the entire debt
•Always want to start here (problem question)
o Exceptions:
• If additional consideration is provided
• Promissory estoppel
– enforce promise
• If debt arises from provision of services (Williams v. Roffey)
Intention to create legal relations Domestic Cases?
- Balfour v Balfour
- Jones v Padavattan
- Parker v Clark (exception)
Intention to create legal relations: letter of comfort case?
Kleinwort Benson v Malaysia Mining
