Intention and consideration Flashcards
What is one of the things needed to form a contract?
- Intention
What does the law say about domestic or social relationships when forming contracts?
- Where an agreement is made in a domestic or social
relationship, the law presumes that the parties did not
intend to create a legally binding contract.
Balfour v Balfour [1919] 2 KB 571
What does the law say about commercial relationships when forming contracts?
- In a commercial relationship, the law presumes that they
did intend a legally binding contract.
How do you rebut the presumption in family and domestic agreements?
- The other party must show enough evidence that there was an intention to create a legally enforceable contract.
- Evidence must demonstrate that “reasonable people would regard the agreement as intended to be binding.”
Merritt v Merritt [1970] EWCA Civ 6
When can a commercial agreement not be legally binding?
- When the agreement expressly states that it should not be legally binding
Offer and acceptance
Consideration
- Agreement
- Bargain
Define consideration
- “A valuable consideration, in… law, may consist either in some right, interest, profit or benefit accruing to the one party, or some forbearance, detriment, loss or responsibility given, suffered or undertaken by the other”
Currie v Misa (1875) LR10 Ex 153 per Lush J.
Do benefits need to be equivalent?
- Consideration must be legally sufficient, but the courts will not look into whether the benefit you give is equivalent in value to the benefit you receive in return.
- Consideration must be sufficient but need not be
adequate.
Chappell & Co Ltd v Nestle Co. Ltd [1960] AC 87
What is of value?
- A contracting party must have provided something of value for the promise of the other. So the idea of consideration is broad.
- However, not everything that is bargained for amounts to
legally sufficient consideration.
What are executed and executory contracts?
- An exchange of promises to do things in the future
What is consideration?
- Something offered or given in exchange for something else
- “The promise of one is the price for which the promise of
the other is bought”: Dunlop v Selfridge [1915] AC 847.
What is past consideration?
- Not good consideration
What is the legal consequence of consideration?
- Unless the promises are made as part of a bargain in this way, there is no contract and the promises are
unenforceable
Explain unexpressed bargains
- When a service is requested and performed by a
professional sometimes a price is not said until afterwards - e.g. a visit to the hairdresser
- Pao On v Lau Yiu Long [1980] AC 614: Per Lord Scarman: “The act must have been done at the promisor’s request; the parties must have understood that the act was to be”
paid for. EG the act must have been requested in a
commercial setting.
Can a person under an existing public duty bee entitled to extra promised payment?
- Performance of an existing public duty is not good
consideration for the promise of extra payment to perform
the same duty: Collins v Godefroy (1831) 1 B & Ad 950. - If the person under the duty goes “above and beyond” their public duty by providing extra agreed services, the promise to pay for those extra services can then be enforced: Harris v Sheffield United Football Club Ltd [1987] 2 All ER 838.
Can a person be paid more for completing their existing contractual duties?
- Generally, performance of an existing contractual duty is not good consideration for a promise of an extra payment:
So, simply doing what you are contracted to do anyway
will not be good consideration. - Stilk v Myrick (1809) 2 Camp 317 In this case payment could not be enforceable as the workers did not go ‘above and beyond’.
- Hartley v Ponsonby (1857) 7 E & B 872 In this case the claimant did go ‘above and beyond’ therefore, they were entitled to extra payment.
Are third party existing contractual duties with promised extra payment enforceable if supplied by a third party?
- According to the case of Shadwell v Shadwell (1860)
9 CB NS 159, this promise is enforceable.
Is part payment of a debt good consideration?
- The rule in Pinnel’s Case and Foakes v Beer (1884) LR 9
28 App Cas 605: As a general rule, part-payment of a debt is not good consideration for a promise to accept less in discharge of the full amount owed.
What are the exceptions to the Pinnel’s Case and Foakes v Beer rule?
- Paying a smaller sum on an earlier date.
- Giving a piece of personal property, e.g. horse, as
satisfaction of the debt.
What is the doctrine of promissory estoppel?
- The doctrine of promissory estoppel may stop (“estop”) a
party from going back on a clear promise to waive their
legal rights under a pre-existing contract.
