Enforceability of a contract Flashcards
what is consideration?
outlined in currie v misa is some right , interest profit or benefit accuring to one party or some forbearance loss or responsibility given, suffered or undertaken by the other.
promise in exchange for something
if consideration is yet to be performed
executory
if consideration has been performed
executed
rules relating to consideration
1 consideration need not be adequate but must be sufficient
2 past consideration is not good consideration remcardle
3 consideration must move from promisee tweddle v atkinson
4 performing an existing duty cannot be the considertion for a new contract
5 a promise to accept part payment of a pre existing debt in place of the whole debt is not consideration
thomas v thomas 1842
before he died a man expressed the wish that his wife should be allowed to remain in the house after he died. this wish was not stated in the will. the executors carried out this wish and charged the widow a nominal rent of £1 a year. when they later tried to evict her they failed because consideration was provided by the £1 per year rent meaning there was a legally binding contract.
chappell & co v nestle co Ltd
Nestle stated that whoever sent in 3 nestle chocolate bar wrappers would get a record of a song for a fraction of the price that it usually is.
The courts held that the chocolate bar wrappers alone would have been valid consideration, as something sufficient had been exchanged.
eventhough they were only chocolate bar wrappers it is stillof nominal value because customers may have broufh more chocolate bars than they would hsve intened to beforehand therefore being a benefit of nestle.
Ward v byham
a maintenenace agreement was amde between a mother ans a father of achild. in exchange for payment from the father, the mother promised to keep the child well looked after and happy and also to allow the child to decide whether it wanted to live with the mother or the father.
It was held that there was consideration in this agreement. The first of these is an existing legal duty not consideration but the requirement to keep the child happy and allowing it to choose where to live were enough to be valid consideration. There was a benefit to the father in these parts ie having a happy child and allowing it to live with him if he wishes .
White v Bluett
A son owed his father money but the father said he did not have to pay it if he stopped complaining about the way his estate was to be distributed. After his father passed his estate tried to make him pay back the loan.
It was held that he did have to pay it back because the service was not sufficient consideration because he had no right to complain in the first place.
Past consideration
Occurs when the consideration has been provided before the agreement has been made whereas executed consideration happens at the time of the agreement being made .
Past consideration is not legally binding.
Re McArdle 1951
A house was inherited by several children when the mother died. One of the children’s wives had undertaken repairs on the bungalow whilst the mother was still alive. Only after she had done the repairs did the mother say she would reimburse her from her estate once she had died. It was held that this was past consideration as the repairs took place before the agreement had come into existence.
Lampleigh v braithwait 1615
Braithwait had been convicted of murder and was to be hanged. Lampleigh agreed to do wha the could to obtain a royal pardon the only way to avoid being executed. Lampleigh negotiated the pardon and braithwait then promised to pay him £100 but did not do so. Braithwait arguement was that gaining the pardon was past consideration so there was no obligation to pay the £100.
Held the court decided that although the consideration had preceded the promise, the actions taken were at the defendants request and were so important that a fee must been implied.
Exception to implied contracts
If one party asks the other for a service to be provided and this is a service that one would usually pay for and the service is is then provided
The court will draw the conclusion that both parties knew in advance that the device was menant to be paid for and will enforce a promise to pay, if it was made after the service had been performed ie haircuts
What need apply in order for their to be a implied contract
Am express or implied request by the promisor to the promised to perform a task
An implied promise inherent in the request that the promisor will pay the promise a reasonable sum for performing the task
The performance of the task and
The payment of money by the promisor to promisor to the promised for that performed
consideration must move from the promise
this means that a person cannot sue or be sued under a contract unless he/she has provided considerastion for it.
in a bilalteral contract each person is a promisor and a and a promise.
in a unilateral contract however one perosn makes the promise promisor and the other does the act rather than make a promise.
Tweddle v Atkinson 1861
both fathers of young couple who intended to marry agreed in writing to each give a sum of money to the couple. the womans father died before giving over the money and the husband then sued the executors of the estate when they refused to pay the money. even though the husband was named in the agreement, his claim failed because he had given no consideration and was not a party to the agreement himself.
thomas v thomas
in thomas v thomas the courts state that consideration is something that is of value in the eye of the law.- therefore , in this case a widower was allowed to stay in her husbands house despite it not being in his will, because she was paying £1 rent per year.
collins v godefroy
services can be seen as something of value. in the above case, the expert witness wanted to enforce payment for his services. this would have been sufficient consideration but he was already subpoenaed to appear in court therefore not upheld. because he was already meant to appear in court, he was already legally obliged to do it under another existing contract therefore he could not use that as consideration in this contract.
stilk v myrick
existing legal duty
a number of crew member were engaged to sail on s voyage. stilk was one of them and the wage was £5 per month. as part of their contract, all crew members had agreed as part of their contract to carry out all necessary duties including dealing with emergencies. two crew deserted during the voyage. the captain agreed to share their two wages between the rest of the crew if they agreed to continue to sail with two men short.
when they got back the captain refused to pay the extra money , saying they only did what they were contractually obliged to do.
held the courts agreed with the captain. the crew had agreed to do everything possible in the case of emergencies therefore this was already existing legal duty.
pinnel’s case 1602
the payment of a lessser sum on the day a debt is due cannot be in satisfaction of the greater debt.
therefore a creditor can claim the remainder of the debt even if he or she has agreed with the debtor that a part payment will clear the debt.
this is unless there is early repayment or something additioonal given.
this rule us cofirmed in the case of foakes v Beer 1884.
foakes v beer 1884
dr foakes owed Mrs beer £2090 after a court gave judgement in favour of Mrs Beer. the two reached an agreement that foakes could pay in instalments, with Mrs beer agreeing that no further action would be taken if the debt was paid off by an agreed date.
later, Mrs beer demanded the interest to which she was entitled under a judgement debt and sued when foakes refused to pay. she was successful following the rule in pinnels case.
what are the exceptions to part payment of a debt is not consideration to the whole debt
1 principle of accord and satisfaction
where there is agreement accord to end a contract and satisfaction consideration that has been acted upon voluntarily. thus accepting something other than money for the whole debt is good consideration, even if it is not of equal value to the debt. this must be done at the request of the creditor , not the debtor.
2 the doctrine of promissory estopple
if one part to an existing contract agrees to vary the contract and the other part relies on that promise, the promisor annot go back on the agreement as he or she is estopped preented from breaking the promise.
central london property trust ltd v high tree house ltd 1947
authority for promissory estoppel
the owner of a block n of flats agreed with the company to which he released the block than only half rent was to be paid during ww2. the agreement was made because finding individual tenants was easy so the landlord claimed full rent for the period after the war had ended.
even though there was no consideration from the tenant for the reduction in rent, he had relied on and acted on the owners promise. the owner had accepted the reduced rent without question, so both parties had acted voluntarily on the agreement so the agreement was valid . however the owner would not have been entitled to the forfeited half rent accrued during the war.
courts are reluctant to use promissory estoppel.
re selectmove 1995
selectmove Ltd owed tax to the inland revenue. An agreement was reached that the tax owed would be paid by instalments and the company started to pay the instalments. the revenue then claimed the whole debt and wanted to put the company into a liquidation . the company argued thatit had relied on the revenues promise not to claim the whole debt while payments were being made and that promissory estoppel applied. this arguement failed.
limitations of promissory estoppel
1 it can only be used to defend an existing claim- not to found a new contract
2 for it to be valid the promise must have relied on it to their detriment
3 it may only suspend rights but not extinguish the rights of the promisor high trees case
4 since it is an equitable principle anyone seeking to rely on the principle must show that they behaved equitably
privity of a contract
the doctrine of privity means that a contract cannot as a general rule confer rights or impose obligations arising under it on any person except the parties to it
part 1 - a person may not sue unless they are privy to the contract
part 2- a person may not be sued unless they are privy to the contract
dunlop pneumatic tyre co.ltd v selfridge 1915
dunlop manufactured tyres and sold some to dew, who agreed not to resell them below a certain price. dew resold to selfridge on the basis of the same term not to resell below a certain price. selfridge then resold below this price.
as dew refused to sue selfridge dunlop sued them.because dunlop was not a party to the contract between dew and selfridge ,it could not sue selfridge for elling below the agreed price
Jackson v Horizon holidays ltd 1975
Mr Jackson booked a holiday for himself and his family. the holiday was very disappointing.
he sued for damages for himself and his family. the court decided that it would be unfair to limit the award of damages to Mr Jackson. damages awarded reflected the loss suffered by all the members of the holiday party.
exception to privity
1 - agency, an agency is authorised to make a contract on behalf of another person , the principle.
it will be the principle bound by the terms of the contract even though they didnt physically makethe contract themselves. the agent and the principle are treated as being the same person therefore the principle is party to the contract.
2 collateral contracts this is when a second contract is found alongside the main agreement
3- statutory exception contracts rights of third parties act 1999
1 the third party is expressly identified by name, or as a member of a class or as answering a particular description and
2 the contract expressly provides that the third party may enforce the contract or
3 the contract term is an attempt to confer the benefit of the term on the third party
Shanklin pier ltd v detel products ltd 1951
collateral contracts
contractors employed to paint the pier were told by the pier company to use paint manufactured by detel. the paint was bought by the contractors from detel. detel made a representation to the pier company that the paint would last 7 years. the paint only lasted 3 months.
there was no privity of contract between the pier company and the defendant paint manufacturer, but the court found that there was a collateral contract between them to the effect that the paint would last 7 years, the consideration for which was the instruction given by the pier company to its contractors to order the paint from the defendant.
intention to create legal relations
the parties to a contract expressly or impliedly agree that the contract is legally binding and therefore enforceable in court.
general presumptions
1 for social and domestic agreements , there is a presumptions that there is no intention to create legal relations.
2 for commercial agreements there is a presumption that there is an intention to create legal relations, can be rebutted if proved otherwise
an example of when it can be rebutted is when it is called a gentleman’s agreement whcih is a term that states the contract is binding in honour only , and it has to say in the contract
jones v vernons pool
mr jones claimed that he had a winning football pool coupon. the coupon which he signed stated that the transactions was ‘ binding in honour only’. as the agreement was based on the honour of the parties and not legally binding, there was no intent to create legal relations and no legal contract.
edwards v skyways Ltd 1969
the plantiff was a pilot who had been made redundant.he was offered and accepted a payment which was stated to be ex gratia. the company then found that the terms that had been offfered would be more expensive than realised. they denied that there was any legsl obligation to make the payment. the arguement failed because it was a business agreement and they failed to rebutt.
esso petroleum co . ltd v commissioners of customs and excise 1976
esso gave a world cup coin with every four gallons of petrol purchased. should this gift attract tax? as esso was clearly trying to gain more business from the promotion , there was held to be intention to be bound by the arrangement so tax was payable.
Mc gowan v radio Buxton 2001
the claimant entered a radio competition. the prize was stated to be a Renault Clio car. the winner was given a four inch scale model of a Renault Clio. Radio Buxton argued that there was no intention to create legal relations . The court decided that there was legal intention in line with previous cases.
what’s letter of comfort?
a written assurance usually provided by a parent company in respect of its subsidiary financial obligations to a bank. usually where the parent company wishes to give some assurance to the lender in respect of the subsidiary’s ability to repay the loan but has no obligation to pay on its behalf.
it was found to be only a moral obligation not a legal obligation.
the court of appeal also stated that the letter had only represented a fact that it was their present intention to ensure that metals ltd would be able to meet its liabilities. as a result, intention to create legal relations are irrelevant.
sadler v Reynolds 2005
contract between journalist and business agreement who were also friends. it was held that their agreement fell somewhere between an obviously commercial transaction and a social exchange.
the burden was on the journalist to prove that there was an intention to create legal relations, that it was a business agreement and not a social one.
Balfour v Balfour
A husband worked abroad. His wife stayed in England. he promised her an income of £30per month. when they divorced she tried to claim her £30 per month. AS the agreement had been made at an amicable point in their relationship, it was purely a domestic agreement and therefore not legally enforceable.
Meritt v Meritt
Mr Meritt had left his wife. an agreement to pay the wife an income if she paid the outstanding mortgage was held to be intended to create legally binding obligations and was enforced by the courts.
Jones v Padavatton 1969
A mother wanted her daughter to come home to study for the bar and she was allowed to stay in the house. several years later, the daughter still hadn’t passed the bar and the mother wanted to evict her . The daughter still said she couldn’t because there was a contract. At the time of the arrangement , the mother and daughter were very close and it was therefore held to be a domestic agreement and not legally binding.
what rebuts a social agreement ?
if money is involved it rebuts the social agreement it will likely be a business arrangement and legally binding .
Simpkins v pays
A lodger and two members of the household entered competitions. the lodger filled in the form in the landladys name. one of the entries won. the claim was made by the lodger on the basis there was understanding that they would share and winnings. their action succeeded as this was more than just a social arrangement. the same is said if parties put their financial security at risk too.
