Contract Law: Consideration & Intention to Create Legal Relations (L5)

Question 1

What is consideration in the formation of a valid contract?

Answer 1

Consideration is an essential element to show that the agreement should be legally binding. It does not mean that the parties have to consider each other’s feelings.

Question 2

How was consideration defined in the 19th Century?

Answer 2

Consideration began to be defined in terms of benefit and detriment.

E.g. Thomas V Thomas (1842): ‘some detriment to the plaintiff or some benefit to the defendant’

Question 3

What is an example of a gratuitous promise?

Answer 3

If Amy promises to give her new phone to Bea without any return promise from Bea, Amy’s promise is not enforceable because it is not supported by consideration.

Question 4

What roles do parties play in a contract?

Answer 4

In most contracts, each party is both a promisor and a promisee.

Question 5

What is executory consideration?

Answer 5

Executory consideration occurs when both parties promise to do something in the future.

Question 6

What is executed consideration?

Answer 6

Executed consideration occurs when one party promises to do something in return for the act of another.

Question 7

What are the rules regarding past consideration?

Answer 7

• Consideration must not be past
• Consideration must be sufficient but need not be adequte
• Performing an existing public duty
• Performing an existing contractual duty does not amount to consideration
• Contractual duties to pay debts

Question 8

What is an exception to the rule that consideration must not be past?

Answer 8

If the act was done at the promisor’s request and there was an understanding that the requested act was going to be remunerated.

E.g. Lampleigh V Braithwaite (1615)

Question 9

What does it mean for consideration to be sufficient?

Answer 9

Consideration must be real, tangible, and have some recognizable value.

Question 10

What is the difference between sufficient and adequate consideration?

Answer 10

Sufficient consideration must have value, while adequate consideration must be of roughly equal value to the other party’s consideration.

Question 11

What is the significance of performing an existing public duty in terms of consideration?

Answer 11

Performing an existing public duty does not amount to consideration unless the promisee does something beyond their duty.

Question 12

What is the rule regarding performing an existing contractual duty?

Answer 12

Performing an existing contractual duty does not amount to consideration.

Question 13

What is the Pinnel’s Case rule?

Answer 13

Payment of a smaller sum will not discharge the duty to pay a higher sum.

Question 14

What is an exception to the Pinnel’s Case rule?

Answer 14

Exceptions include agreeing to accept a lesser sum paid earlier, agreeing to accept something other than money, or agreeing to pay in a different way.

Question 15

What is promissory estoppel?

Answer 15

Promissory estoppel prevents a party from going back on a promise when the other party has relied on that promise.

Question 16

What are the rules of promissory estoppel?

Answer 16

• It arises in an existing contractual agreement from a promise made by one party to the other party, where the other party has given no consideration
• it varies rights within a contract
• It** cannot be used to create new rights** but only to prevent the enforcement of rights already held
• it normally suspends rights for a period of time rather than extinguishing them altogether
• It is an equitable principle and thereofre the courts will only allow a defendant to use it if its just to do so in the circumstances

Question 17

What is one way a promise can be made binding without consideration?

Answer 17

If it is put into a document called a deed.

Question 18

What is the presumption regarding social, domestic, and family arrangements?

Answer 18

There is a presumption that the parties did not intend to be legally bound by an agreement.