Consideration, Promissory Estoppel & Privity Flashcards
What is meant by consideration?
Each party must gain a benefit and suffer a detriment as a result of entering into a contract
What is the necessity for consideration?
Necessary for all simple contracts (those not by deed) to be formed
What is the difference between executory and executed consideration?
Executory: promise given for a promise (e.g. promise to do work in return for pay)
Executed: occurs when one party has done all they are bound leaving outstanding liability on one side
What is meant by need not be adequate but must be sufficient?
Consideration must be something real and have some value in the eyes of the law, however the courts are not concerned whether a good deal exists or not (Chappell v Nestle Co)
What is past consideration?
A mere sentiment of gratitude for benefits received after the act has been carried out is not valid consideration
What are the requirements in order for past consideration to be valid?
Pao On v Lau Yiu Long, the act must have been done at the promisors request, the parties must have understood the act was to be remunerated and the benefit would have been enforceable had it been promised in advance
What is the rule on consideration where there is performance of a contractual duty owed to a third party? (i.e. someone other than the person who makes the promise?)
- The Eurymedon, performance of pre-existing duty to a third party is good consideration
- Pao On v Lau Yiu, this applies where the consideration takes the form of a promise to perform as opposed to performance of it
What is the rule on consideration when there is a pre-existing duty owed to the promisor?
Stilk v Myrick, no consideration to carry out a duty that you already had to HOWEVER
Williams v Roffey, where the person derives a practical benefit and the duty has an extra element, this is valid consideration
What is the rule on consideration where there is performance of a duty imposed by law?
- This is not good consideration
- However, this has been attacked and challenged by Lord Denning in the case of Ward v Byham
What is the rule in Foakes v Beer?
Payment of part of a debt is not good consideration for a promise to discharge the entire debt
What is promissory estoppel?
A promise that can be enforced in a pre-existing contract without consideration if one party relies on the promise and suffers loss/harm as a result
What case laid down promissory estoppel
Central London Property Trust Ltd v High Trees House Ltd, if the landlord had tried to go back on his promise during the wartime he would have been stopped
What is the privity doctrine under the common law?
You cannot be sued or sue under a contract unless you are a party to it
What cases demonstrate the doctrine of privity?
Tweedle v Atkinson, the agreement was made between the fathers
Dunlop Pneumatic Tyre Co Ltd v Selfridge
What happens when a party in a contract also acts for the benefit of a third party?
The party to the contract can claim damages for the third party if they also benefit, Jackson v Horizon Holidays
In what ways is Jackson v Horizon Holidays limited?
Woodar Investment Developments v Wimpey Construction UK, contracting party is entitled only to nominal damages where he has personally suffered no loss, view in Jackson is limited to the specific fact pattern
What act protects third parties so they can claim in a contract?
Contracts (Rights of Third Parties) Act 1999
When can a person claim under the act?
Under s1(1) if the contract expressly provides they can or if a term exists to confer a benefit (must be identified expressly or as a class of people)
What does the case of White v Jones show?
Duty of care can be owed to a third-party who suffers a loss of expectation as a result of negligence by a professional in the course of a service meant to benefit the third party (in this case a new will)
Can a third party enforce an exclusion clause?
The Eurymedon, the third party could rely on an exclusion clause as the wording was designed to cover all parties involved in carrying the goods. The respondents had the benefit of a directly enforceable action, the stevedores had the benefit of the time limit, therefore sufficient consideration had been made even though they were only doing what they had already contracted to do with a third party
What does the most recent case law tell us about the operation of the Contract (Rights of Third Parties) Act 1999?
Sec of State for the Dept of the Environment v PCSU
* The presumption under s1(1)(b) is a strong one, the only thing that will rebut it under s1(2) an express clause or the test finding there is an implied term
* Lord Burrows critiqued Chudley v Clydesdale in which s1(3) was found to be complied with by reference to a ‘client account’. Said this came too close to identification by implication, when under s1(3) it must be explicit
NOTE: Can refer to as the DEFRA case
