enforceability of a contract - contract law Flashcards
0ffer plus acceptance equals what
agreement
what is consideration?
the same as a valid offer and acceptance a contract needs consideration. there is not a valid contract if there is consideration therefore it is an important as acceptance and the offer.
the same as valid offer and acceptance a contract needs consideration. there is not a valid contract if not consideration therefore it is an important as acceptance and the offer.
in this context what is consideration
essentially making a promise in exchange for something.
HINT - REMEBER CONSIDERATION AS THE THING THAT EACH PARTY IS EXCAHNAGED.
an example of consideration
if someone gives yu a choclate bar and you DONt pay for it this is merely a gift not a contract. if you paid for the choclate bar the promise to pay the money and the choclate bar is consideration from both parties.
Legal definition
outlined the case of Currie v misa (1875) = Some right,interest,profit or benefit accuring to one party or some forbearance, detriment loss or responability give, suffered or undertaken ny the otehr.
another legal defiition of consideration
an act of forbearance of the one party or the promise thereof, is the given for which the promise thus given for value is enforceable.
executed vs executory
when teh conisderation has been performed is is said to be executed
if it is yet to be performed is it executory
what is executed
when the consideration has been performed it is said ro be executed
what is executory
consideration yet to be peformed
a person agrees to paint a house for a jhomeowner in exchange for 1,000 and the paaymemt to be made sfter the work is done whta is this
executory
a person pays £500 in cash to buy a used car from a seller the seller immediatyly hands over the car
executed
what are the rules to consideration
1 - consideration need to not to be adequate but sufficient
2- past consideration is not good consideration
3- consideration must move from the promise
4- performing an exisiting duty cannot be the consideration 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.
1.key case for consideration not be adequate but sufficient
Thomas v Thomas
Thomas v Thomas
before a man died he expressed a wish for his wife to remain in the house after he died. Wish was not stated in will. widow was charged a nominal rent of £1 per year. when they tried to evict her later they failed as consideration was provided by the £1 per year, meaning there was a legally binding contract.
legal principle -sufficient as consideration was provided by the £1 per year meaning there is a legally binding contract
extra information about Thomas V Thomas
- as you can see from the case Thomas v Thomas a house is more than than 31 per year but because it is sufficient there is something being passed from her to the house owners then this is upheld. the rent insufficient even though it is not adequate.
- remember phase - the law will not protect you from a bad bargain- example chappel & co nestle co ltd
chappell & co v nestle co Ltd
nestle said who ever sent in 3 chocolate bar wrappers would get a record or a song for a fraction of the price it usually is.
courts held that chocolate wrappers alone would have been valid consideration as something sufficient has been exchanged.
even though they where only chocolate wrappers, it is still of nominal value because customers may have bought more chocolate bars then they would have intended beforehand, benefiting nestle.
Ward v Byham
a militance agreement was made between mother and farther of a child. in exchange for payments from the farther the mother promised to keep the child well looked after and happy.
and let child decide who it wanted to live with
held there is consideration in this agreement. the requirement to keep the child happy and allowing it to choose where to live were enough to be valid consideration. was a benefit to the farther - having a happy child and allowing it to live with him if he wishes
there are some cases where services are not deemed to be sufficient
white v bluett
white v bluett
a son owed his farther money but the farther said he did not have to pay it if he stopped complaining about the way his estate was to be disrupted. after his farther passed his estate tried to make him pay back the loan.
held -he did not have to pay it back because the service was not sufficient because he had no right to complain in the first place.
suffieiency
- must be something of value
adequacy is not required. consideration does not need to be the market value of something.
- past consideration is not good consideration
do not confuse past consideration to executed consideration
past consideration occurs when the consideration has been provided before the agreement has been made
executed - consideration happens at the time the agreement being made
past consideration is not legally binding
past consideration
when the consideration has been provided before the agreement has been made
executed consideration
consideration happens at the time the agreement being made
Re Mcardle 1951
house was inherited by several children when the mother died. one of the children’s wives had undertaken repairs on the bungalow whilst mother was alive.
only after the repairs had been done the mother said she would reimburse her from her estate once she died,
held this is past consideration as the repairs took place before the agreement had come into existance.
Lampleigh v Brathwait 1615
expectation to the rule
brathwait had been convicted of murder and was to be hanged. lampleigh agreed to do what he could to obtain a royal pardpn - (only way to avoid execution) he negotiated the pardon, brathwaith promised to pay £100 which he did not. Brathwait argued the gaining of the pardon was past consideration as there was no obligation ro pay the £100.
held - although the consideration has preceded the promise. actions takes were at the d request and it svaed his life due to its importance a fee must have bene implied for such importance.
implied contract
-if one party asks the other party for a service to be provided, this is a service that one usually would pay for. and the service is then provided.
-court will draw the conclusion that both parties knew in advance that the service was meant to be paid for and will enforce promise to pay even if it was made after the service had been performed. i.e promise was made after the consideration was provided.
- example - i walk into the hairdressers - i get my hair cut and the dont pay. te hairdresser could use teh exceptionof the rule in order tomakeme pay- even though teh hair cut (consideration) camje before the money.
- however the impliocation comes before teh consideration therefor it is not really past conisderation.
what must apply inorder for theree to be a implied contract
- express or implied request by the promisor to the promise 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.
- then payment of money to the promisor to the promise for that performance
- consideration must moveform the promise
this means that a person cannot be used under a contract unless he/she has provided consideration for it.
in a bilateral contract each person is a promisor and a promise
in a unilateral contract, one person makes the promise (promisor) and the other does the act rather than make a promise.
key case for consideration must move form the promise
Twedle v Atkinson 1861
Twedle v Atkinson 1861
both farther of a young couple who intended to marry agreed in writing, to each give a sum of money to the couple. women’s farther died before giving over the money. husband tried to use executor of the estate when they refused to pay the money in the writing.
however eventhough the husband was named in the agreement, his claim failed becuase he had given no considerationand was not a party the agreemnet himself
legalprinciple - consideration must move from the pormise
- key cases for performing an existing duty cannot be the consideration for am new contract
Thomas v Thomas
Collins v godefroy
Thomas v Thomas
courts stated, consideration is something that
is of value in the eye of the law
- in this case a widower was allowed to stay in her husbands house despite it not being in his will, she was because she was paying £1 rent per year
colllins v Godefory
services can be seen as something of value, the expert witness wanted to enforce payment of 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 therefor he could not use this as consideration in this contract.
Existing legal duty
Stilk v myrick
Stilk v myrick
Stilk was a crew member on a voyage along with a number of others, the wage was £5 per month. Part of their contract was to carry out all necessary duties including dealing with emergencies. Two crew deserted during the voyage. The captain agreed to share the 2 people wage amongst the other crew members if they agreed to carry on with 2 man short.
When they got back, captain refused to pay extra money. Saying they only did what was contractually obliged to do.
Legal principle - courts agreed with captain. Crew had already agreed to do everything possible in the case of an emergency therefore it was an already legal duty.
- A promise to accept part payment of a pre-existing debt in place of the who,e debt is not consideration
- this rule arises from Pinnels case 1602
- the payment of a lesser sum on the day is a debt due cannot be in satisfaction of the greater debt
- therefore a creditor can claim the remainder of the debt even if he or she agreed with the debtor that a part payment will clear the debt.
-this is unless there is early repayment or something additional given
- rule is confirmed in the case of Foakes v Beer
Foakes v beer
D foakes owed my beer £2090 after a court gave judgement in favour to mr beeer. The 2 reached an agreement that mr foakes could pay in installments. With mrs beer agreeing that no further action would take place if the debt was paid of by an agreed date.
Later, mrs Beer demanded the agreement to the interest to which she was entitled to under a judgment debt and sued when Foakes refused to pay. She was successful following rules in pinnels case.
Pinnels case
Exception to the rule number 1
Principle of accord and satisfaction
-where there is agreemend (accord) to end end a contract and satisfaction (consideration) that has been cited upon voluntarily.
- accepting something other than money for the whole debt is good consideration, even if it is not equal value to the debt. This must be done at the request of the creditor, not the debtor.
For example if a owed B £1000 and A suggested that B gives him £200 and Bs car (even if the car isn’t worth £800) and B agrees to the arrangement
Exception to the rule number 2
The doctrine of promssiory estoppel
-if one party to an existing contract agrees to vary the contract and the other party relies on that promise, the promisor cannot go back on the agreement as he or she is estoppel (prevented) from breaking the promise.
Authority case for promissory estoppel
Central London property trust ltd v high trees house ltd
Central London property trust ltd v high trees house ltd
The owner of a block of flats agreed with the company he leased his block to said that only half of the rent was to be paid during ww2. Agreement was made because finding individual tenants in London was difficult
.
After the war, finding tenants was easy so the landlord claimed full rent for the period.
Even though there was no consideration from the tenant for the reduction in rent, he had relied on and acted on the owners promise.
Owner had accepted the reduced rent without question. So both parties s 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 key case for this
Re select move 1995
Re select move 1995
Selectmove ldt owed tax to the inland revenue.
Agreement was made that the tax owed would be paid by instalments and the company stared to pay the instalments.
The revenue then claimed the whole debt and wanted to put the company into liquidation.
Company argued that it had relied on the revenues promise not to claim the who,e debt while payments were being made and that promissory estoppel applied this arguement failed.
Legal principle -
Limitations of promissory estoppel
1) it can only be used to defend and existing claim - not to found a new contract.
2) for it to be valid,promiseee must have relied on it to their detriment
3) it may only suspend rights but not extinguish rights of the promised (high trees cases)
4) since it is am a quotable principle, anyone seeking to rely on the principle must show that they behaved equitably
Probity of a contract
The doctrine of privity means that a contract cannot, as a general rule, confer rights or impose obligations arising under it any person except the parties to it.
Part 1
Treitel, the law of contract
A person may not sue unless they are privity to the contract
Part. 2
Treitel, the law of contract
A person my not be sued unlesss they are privity to the contract.
Key case for
Part 2 of the Treitel, the law of contract. - a person may not be sued unless they are privity to the contract
Dunlop pneumatic tyre co. Ltd v seldridges
Dunlop pneumatic tyre co. Ltd v seldridges
Dunlop manufactored tyres and sold some to dew, who agreed to resell them below a certain price. De resold to selfrisges on the basis of the same term not to sell below a certain price. Selfrisges then resold bellow this price. As dew refused to sue selfrisges. Dunlop sued them. As Dunlop was not a party to the contract between dew and selfrisges. He could not sue selfrisges for selling below the agreed price.
Relationship between privity and consideration -
tweed and akingson
Relationship between privity and consideration -
- privity is based on the Turks that consideration must move from the promisee
- in the Dunlop case, wrightman stated that no stranger to the consideration can take advantage of the contract, even if it is for his own benefit
Injustice
Something they will consider if they don’t award someone
Case example for courts finding ways to avoid rule in certain circumstances as it sometimes seen to be injustice
Jackson v Horizons holidays Ltd (1975)
Jackson v Horizons holidays Ltd (1975)
Mr Jackson booked a holiday for himself and his family. The holiday was very disappointing. He sued them for damages for himself and his family. Courts decided it would be unfair to limit the award of damages to mr Jackson. Damages awarded would reflected the loss suffered by all of the members of the holiday party.
Legal principle- if there is an injustice the courts will avoid the rule
- Exceptions - agency
-There are 3 exceptions ri the general rule of the privity
-an agent is authorised to make a contract on behalf of absorber person, the principle
- it will be the principle that is bound by the terms of the contract even though they didn’t physically make the contract themselves.
- the agent and principle are treated as being the same person therefore the principle is part to the contract.
- example - whennan employee makes a contract on behalf of a company. Exmployee= agent. Company = principle.
- Exceptions - collateral contracts
When a second contract is found alongside the main agreement
Shanklin Pier Ltd v Detal products Ltd 1951
Shanklin Pier Ltd v Detal products Ltd 1951
lol - courts found that there was a collateral contract between them and the paint would last 7 years. Consideration high was reg instruction given by the pier company to its contractors to order the pin for the defendant.
- Exceptions - statutory exception - contracts (right of third parties) fact 1999
- under S1 of this Act, a third party may enforce the contract against either or both of the actual parties to the contract IF:
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 benfit of the term on the third party.
Step 2: is the section 1 test satisfied
- C mus established legal A and A intended him to enforce the contract
a) the contract expressly provides that C can enforce the terms of the=contract (s1)(1)(a)
b) the term purports to confer a benefit on C (s1(1)(b)
Can you think of a case where this act would have applied.
Intention to create legal relations
-once you have formed agreement with offer and acceptance, there must also be an intention to create legal relations
- this is rather than just intending to have an informal agreement with someone
- 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
However the courts do not look at this subjectively
They do not review each persons state of mind at the time they entered into the contract.
Instead we use an objective test (what would the reasonable man think)
And we have two general presumptions
For social and domestic agreements
Presumption that there is no intention to create legal relations
Can be rebutted (proved diffently)
For commercial agreements
Presumption that there is an imtention to create legal relations
Ommercail (buisiness) agreements
- general,presumptions is that these are sen as having a legal intention, but can be rebutted if proved otherwise
-an example of when it can be rebutted us in the what is called a gentleman’s agreements
Which is a term that states the contract is binding in honour only - jones v Vernons pool
Jones v vernons pool
The agreement was based on the honour of the parties and not legally binding there was no intention to create legal relations and no legal contract.
Burden of. Proof
If you do not wish to rebut the presumption in a commercial setting that there is an intention To relate legal relations then the following applies
“In a commercial context, the onus of demonstrating that there was a lack of intention to create legal relations lies on the party asserting and it is a heavy one
Key case - Edward v skyways Ltd (1969)
Edward’s v skyways Ltd 1996
Legal principle - a business gremeng and they failed to rebut
Free gift
-offer of a free gift can cause problems
- if the free grift is to promote a business, it can still ne help to,ne legally binding
Key case for free gifts
Esso Petroleum Co. Ltd v commissioners of customers and excise 1976
Esso Petroleum Co. Ltd v commissioners of customers and excise 1976
Esso gave a World Cup. Pin with ever 4 gallons of petrol,purchased. Should this free gift attract tax.? Esso was clearly trying to gain more business from the promotion
Legal principle - Intention to be bound by the arrangement, so tax was payable
Competition prizes
- another prinlem area
- same as a free gift situation price for the co,petition is meant to,promote the company
Competition prizes Key case
Claimant entered a radio competition. Prize was state to be a Renault Clio car. Winner was given a four inch scale modell of a Renault cilo. Radio Buxton argued there was no intention to create legal relations.
Held- there was legal intention in line with previous case.
What is a Letter of comfort
A written assurance provided by parent company in respect of its subidiary financial obligations to a bank. Usually where the parent company wishes to give some assurance to the lender in the respect of the subsidiary ability to repay the loan but has no obligation to pay on its behalf.
Letter of comfort
- found only to be. moral obligation. Not a legal obligation
-court of appeal also states that the letter had only represented a fact that it was their presnet intention to ensure that Metals Ltd would be able to meet its liabilities. As a result intention to create legal relations was irrelevant.
Sadler v Reynolds is they key case for falling in between being a business agreement or social/domestic agreement
Dorado between journalist and business man who were also friends. Was held that their agreement fell somewhere between an obviously ommercial transaction and a social exchange.
-burden was on the journalist. To probe there was an intention to create legal relations, that it was business agreement and not a social one.
Social and domestic arrangements
-presumed not to be legally binding
- presumption can be rebutted
- distinction between thus can be seen in the case of Balfour v Balfour 1919 and merrit v merrit 1970
Balfour v Balfour
Husband worked abroad his wife stayed in England and hi promised he a £30 income per month.
When they divorced, she tried to claim. £30 per month.
As the agreement had beeen made at an amicable arrangement and therefore not legally enforceable.
Merrit v merrit
Had left his wife, an arrang,ent 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
Blurred lines
- sometimes families may ms,es arrangements that appear to be business arrangements due to the nature of it
-the court must then examine the real purpose of the arrangement
-jones v Padavatton 1969
jones v Padavatton 1969
Mother wanted her daughter Tom one home and study for the bar. Several years ,after the daughter still did not pass the bar and the mother wanted to evict her. Daughter said she couldn’t cos there was a contract.
At the time of the arrangment the mother and daughter were very close and it was therefore held to ne a domestic agreement and not a legally binding one.
Money involved
If there is money involved/changed hands then even if the agreement is made socially , it will likely be a business arrangement and legally binding.
Simpkins v pays
Simpkins v pays
Lodger spans two members of the household entered competitions. The lodger filled in the form in the landlady’s name. One of the entered won. The claim was made by the lodger on the basis there was an understanding that they would share any winnings. Action succeeded as this was more than just a social arrangements
The same if parties put their financial security at risk too
Lp- If money is involved there is legal intention
Theory of consideration, privity and intention
Theory of consideration is that is shows the law is concerned with bargains and not just gifts.
- justification for ten rule that consideration must be sufficient, which may seem silly to customers, is that it shows the courts willingness to validate an agreement.
- however if people know that this is the courts aim, they may abuse this. This is because they may not use a deed or gift but could merely agree to sell so,etching at a gross undervalue to achieve the objective. This was the. Axe thomas v thomas.
This would,then conflict with the criminal law of fraud
The assumption that is freely negotiated
-this is not always the case
-consumers,and sometimes businesses, have no choice but to accept terms stated or implied a contract.
-the rationale for freedom of contract assumes that the benefits of a contract will on,y be to the contracting party.
- this is rekefctef in the privity of contract where only a party to the contract can take legal action on it.
- in promissory estoppel there is a conflict between the morality of breaking a promise and the strict rule of law that is required first a valid contract.
