Formation: Consideration, Privity, Agency

Question 1

Types of consideration

Answer 1

1. Act (executed)
2. Promise (executory)

Question 2

3 main exceptions + 2 scenarios

What amounts to insufficient consideration?

Answer 2

1. Past consideration for a later promise
2. performance of an existing duty
3. partial repayment of a debt
4. condition required to trigger gift
5. promise to give up liberty

Question 3

When is past consideration (act) sufficient for a later promise?

Answer 3

1. Prior act was done at promisor’s request; and
2. mutual understanding from outset act would be rewarded; and
3. intention to create legal relations

Question 4

3 circumstances

When is performance of an existing duty sufficient consideration?

Answer 4

1. Exceeds public duty or existing contractual duty; or
2. existing contractual duty is owed to a 3rd party; or
3. contract for goods / services + before completion A doubts B will finish on time + A offers B more to complete on time + A obtains a practical benefit or obviates a disbenefit + no fraud or duress

Question 5

When is part repayment of an existing debt sufficient consideration?

Answer 5

1. debtor gives something different (horse, hawk, robe)
2. creditor accepts part payment early
3. 3rd party repays part of debt
4. promissory estoppel applies

Question 6

4 conditions

Conditions for promissory estoppel to apply?

Answer 6

1. clear promise to waive strict legal right (words or conduct)
2. debtor alters their position (e.g. pays half rent)
3. can only be used as a defence (shield not sword)
4. inequitable for creditor to renege on promise (no fraud or duress)

Question 7

Effect of promissory estoppel on ongoing payments?

Answer 7

Future payments: suspends rights (resume on reasonable notice or end of clearly defined event)
Past payments: extinguishes rights
One off debt: unclear (likely can request full repayment after expiry of reasonable notice)

Question 8

Can a third party sue or be sued on a contract?

Answer 8

GR: no (privity of contract)
EXCEPTION:
1. contract entered on or after 1 May 2000; and
2. 3rd party is identified by name, member of class or matches a description; and
3. term expressly provides they may enforce or purports to confer a benefit.

Question 9

Outcome if Agent has actual or apparent authority?

Answer 9

Binding contract between principal and 3rd party (cannot sue agent)

Question 10

Outcome if agent has no authority

Answer 10

3rd party can sue agent in tort of deceit

Question 11

Implied actual authority?

Answer 11

1. Customary
2. Incidental
3. Prior acquiescence

Question 12

Conditions for apparent authority?

Answer 12

1. P represented (words or conduct)
2. 3rd party reasonably relies on P
3. 3rd party alters position

Question 13

Is P legally obliged to sell to 3rd party if A breaches agency agreement?

Answer 13

1. No express actual authority
2. Is there apparent authority? If Y, must sell but can sue A for breach of agency agreement

Question 14

When can 3rd party sue agent in tort of deceit?

Answer 14

1. A knew they had no authority; or
2. A’s authority terminated without A’s knowledge

Question 15

When can P ratify A’s authority if A’s act was unauthorised?

Answer 15

within reasonable time

Question 16

Definition of undisclosed principle?

Answer 16

3rd party does not know A is an agent

Question 17

When can P treat contract with undisclosed principle as made with them?

Answer 17

1. A had actual authority at time contract was entered into (no ratification / apparent authority)
2. contract terms do not purport A was principle

Question 18

Ways agency can be terminated

Answer 18

1. Agreement
2. Withdrawal
3. death, incapacity, insolvency