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18BSA026 - Principles of Law > L3 - Contract Law - Consideration, Contractual Terms and Representations > Flashcards

L3 - Contract Law - Consideration, Contractual Terms and Representations Flashcards

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1
Q

How is consideration defined?

A

‘Consideration’ is the price given in exchange for goods or services under a contract, or a promise to do (or not to do) something in return. The price is usually money – but can be anything that has value.

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2
Q

What are three things needed to make a contract?

A
  • Offer
  • Acceptance
  • Consideration
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3
Q

What is consideration?

A
  • Exchange of promises between parties
  • For a promise to be enforceable under the English law, ‘something of value’ must be given in return for the promise
  • This ‘something of value’ is known as Consideration.
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4
Q

What was the case that Established the legal definition of ‘consideration’?

A
  • Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co Ltd (1915)
  • An act or forbearance of one party, or the promise thereof, is the price for which the promise of the other is bought, and the promise thus given for value is enforceable.
  • Essentially, the price at which one contracting party bought the promise or the act of the other contracting party.
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5
Q

How can the consideration definition be broken down?

A
  • An act or forbearance of one party (something done or something not done)… or
  • …the promise thereof (promise to do or not do something)… is:
  • …the price for which the promise of the other is bought (consideration for the bargain reached with the other party)… and
  • …the promise thus given for value is enforceable (agreements fulfilling these criteria are binding).
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6
Q

When is a contract not enforceable?

A
  • if it is only a gratuitous promise
  • it needs to have value on both sides
    e. g. I am going to run the London Marathon next year if I agree to pay £100 entry fee.
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7
Q

What are the two types of consideration?

A
  • Executory consideration

- Executed Consideration

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8
Q

What is Executory Consideration?

A
  • a promise to do something in the future
  • A promise for a promise.
  • Here, performance of the whole agreement takes place in the future.
  • I send an order for 100 slices of pizza and promise to pay £100.
  • Pete’s Pizzas agree to deliver 100 slices of pizza when they receive payment.
  • At this point the contract is made.
  • Both promises are in the future
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9
Q

What is Executed Consideration?

A
  • consideration that has already been completed
  • A promise for an act.
    It is where one of the parties has done his own part of the bargain.
  • The other party’s consideration remains executory until his own side of the bargain is performed.
  • I send an order for 100 slices of pizza and send £100 to pay for them.
  • Pete’s Pizzas agree to deliver 100 slices of pizza on payment.
  • At this point the contract is made.
  • Pete’s promise is in the future
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10
Q

What is consideration in Unilateral Contracts?

A
  • With a lost dog poster
  • Performance of the action is consideration –> therefore executed
  • Not to promise to find the dog only once you have found it
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11
Q

What is not consideration?

A

Past consideration is NOT accepted in the eyes of the law

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12
Q

What was the case to do with Past Consideration?

A
  • Re McArdle (1951)
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13
Q

What was the case of Re McArdle (1951)?

A
  • William McArdle left a house to his five children in equal shares, subject to a life interest for his widow.
  • The wife of one of these sons, carried out improvements to the house amounting to £488.
  • After the repairs had been carried out, she got all the five children of McArdle to sign a document in which they promised to repay Mrs - McArdle the £488 out of the estate when it was eventually distributed.
    After the testator’s widow died, the other four sons refused to pay her.
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14
Q

What was the Issue of Re McArdle (1951)?

A

Issue:

Was it past consideration?

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15
Q

What was the Ruling of Re McArdle (1951)?

A

Ruling:

The work was completed before the agreement therefore it was ‘past’ consideration and legally unenforceable.

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16
Q

How is Previous Request for Consideration different to Past Consideration?

A

Previous Requests:

  • An exception to the Past consideration rule.
  • Acts done in response to previous requests will be good consideration if a promise to pay is made later.
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17
Q

What were the 2 cases to do with implied promises to pay (Previous Request for Consideration)?

A
  • Lampleigh v Brathwait (1615)

- Pao On v Lau You Long (1980)

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18
Q

What was the case of Lampleigh v Brathwait (1615)?

A
  • Braithwait killed a man called Patrick Mahume unlawfully.
  • He asked Lampleigh to ride to the King and petition for a pardon.
  • Lampleigh was successful and, delighted, Braithwait had promised £100 to Lampleigh; but he never paid up and Lampleigh sued.
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19
Q

What was the Issue of Lampleigh v Brathwait (1615)?

A

Issue:

Implied promise to pay?

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20
Q

What was the Ruling of Lampleigh v Brathwait (1615)?

A

Ruling:

The Court of the King’s Bench held that there was an implied understanding (“assumption” of obligation) that a fee would be paid. Where a past benefit was conferred at the beneficiary’s request, and where a reward would reasonably be expected, the promisor would be bound by his promise.

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21
Q

What was the Case of Pao On v Lau You Long (1980)?

A
  • Lau asked Pao On not to sell shares in Lau for a year as they didn’t want the share price to fall.
  • Later, Lau gave Pao On a guarantee for any losses between share prices.
  • Shares fell. Lau refused to pay claiming past consideration
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22
Q

What was the Issue of Pao On v Lau You Long (1980)?

A

Issue:

Implied promise to pay?

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23
Q

What was the Ruling of Pao On v Lau You Long (1980)?

A

Ruling:

Pao On could recover the losses. Pao On had only made their promise at the behest of Lau. Lau’s promise to pay, although given after Pao On agreed had been implied at the start.

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24
Q

What was the Principle in the Pao On case?

A

To be a implied promise to pay instead of a past consideration the act must have been done at the promisors’ request:

  • The parties must have understood that the act was to be remunerated either by a payment or the conferment of some other benefit: and
  • Payment, or the conferment of a benefit, must have been legally enforceable had it been promised in advance
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25
Q

How much consideration is needed?

A
  • Adequate consideration
  • -> The market value or, consideration equivalent to whatever is promised
  • Sufficient consideration –> Consideration which is of some value in the eyes of the law, however little

-The law is only concerned that the consideration is Sufficient and NOT Adequate.

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26
Q

What were the two cases to do with Sufficient or Adequate Consideration?

A
  • Mountford v Scott (1975)

- Chappell v Nestle Co Ltd (1959)

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27
Q

What was the Case of Mountford v Scott (1975)?

A
  • Mountford paid £1 to have the option to buy Scott’s house for £10k within 6 months.
  • Scott challenged the validity saying the £1 was only nominal.
  • Can Scott revoke the offer within 6 months?
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28
Q

What was the Issue of Mountford v Scott (1975)?

A

Issue:

Sufficient or Adequate?

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29
Q

What was the Ruling of Mountford v Scott (1975)?

A

Ruling:

The offer was irrevocable within the 6 month period as Mountford had paid the £1. It was sufficient.

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30
Q

What was the Case of Chappell v Nestle Co Ltd (1959)?

A
  • Chappell & Co. owned the copyright to “Rockin’ Shoes” (by The King Brothers). Nestle was giving away records of it to people who sent in three wrappers from 6d chocolate bars, as well as 1s 6d.
  • There were issues around royalties under the Copyright Act 1956.
  • Were the chocolate wrappers part of the consideration?
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31
Q

What was the Issue of Chappell v Nestle Co Ltd (1959)?

A

Issue:

Sufficient or Adequate?

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32
Q

What was the Ruling of Chappell v Nestle Co Ltd (1959)?

A

Ruling:

They were part of the consideration, even though they had no value in themselves. Nestle had benefitted from the sale though.

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33
Q

Why cannot Consideration be empty or illusory?

A
  • It must be real, and not something you do anyway

- A non-smoker promising to give up smoking even though they already dont smoke

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34
Q

What was the case of Consideration cannot be empty or illusory?

A
  • White v Bluett (1853)
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35
Q

What was the case of White v Bluett (1853)?

A
  • Mr Bluett had lent his son some money. Mr Bluett died. The executor of Mr Bluett’s estate was Mr White.
  • He sued the son to pay back the money. In his defense, the son argued that his father had said the son need not repay if the son would stop complaining about how Mr Bluett would distribute his property in his will among the children.
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36
Q

What was the Issue of White v Bluett (1853)?

A

Issue:

Scope of consideration?

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37
Q

What was the Ruling of White v Bluett (1853)?

A

Ruling:

There was no consideration for any discharge of the obligation to repay.
The son had ‘no right to complain’ anyway.
Not complaining was therefore an entirely intangible benefit.

38
Q

Why Can’t Consideration be Public Duty?

A
  • Performance of a duty you are bound by law to do, would not count as sufficient consideration for another promise.
  • Also applies to promises not to do that which the law prohibits.
39
Q

What was the Case to do with Performance of Public Duty?

A

Collins v Godefroy (1831)

40
Q

What was the Case of Collins v Godefroy (1831)?

A
  • Collins was a witness in a trial and was legally bound to give evidence in the trial.
  • Godefroy promised to pay Collins to testify.
41
Q

What was the Issue of Collins v Godefroy (1831)?

A

Issue:

Public duty?

42
Q

What was the Ruling of Collins v Godefroy (1831)?

A

Ruling:

  • The court held that the agreement that the plaintiff’s should attend court was not supported by consideration.
  • This was because the plaintiff was under a public duty to attend court anyway having been subpoenaed.
43
Q

When is there an exception to Consideration not being Public Duty?

A

Exception: if a person’s performance goes beyond the legal duty this could amount to sufficient consideration.

44
Q

What was the Case of the exception to Consideration not being Public Duty?

A

Glasbrook Bros v Glamorgan County Council (1925)

45
Q

What was the Case of Glasbrook Bros v Glamorgan County Council (1925)?

A
  • During a strike, Glasbrook Brothers (the owners of a colliery) requested police protection.
  • They police offered to place constables in exchange for a financial contribution.
  • After the strike, the police presented the colliery with a bill for the provided services.
  • The colliery refused to pay saying policing was a public duty and so the police sued.
46
Q

What was the Issue of Glasbrook Bros v Glamorgan County Council (1925)?

A

Issue:

Beyond legal duty?

47
Q

What was the Ruling of Glasbrook Bros v Glamorgan County Council (1925)?

A

Ruling:
The local authority had provided more than they were legally obliged.
The promise by Glasbrook was binding.

48
Q

What other Performance does not amount to sufficient Consideration?

A

performance of an existing contractual duty does not amount to sufficient consideration.

49
Q

What were the 3 cases of Performance of an existing contractual duty does not amount to sufficient Consideration?

A
  • Stilk v Myrick (1809)
  • Hartley v Ponsonby (1857)
  • Williams v Roffey Bros & Nicholls (Contractors) Ltd (1990)
50
Q

What was the case of Stilk v Myrick (1809)?

A
  • Stilk was contracted to work on a ship owned by Myrick for £5 a month, promising to do anything needed in the voyage regardless of emergencies.
  • After the ship docked two men deserted.
  • The captain promised the crew the wages of those two men divided between them if they fulfilled the duties of the missing crewmen as well as their own.
  • After arriving at their home port the captain refused to pay the crew the money he had promised to them.
51
Q

What was the Issue of Stilk v Myrick (1809)?

A

Issue:

Existing contractual duty?

52
Q

What was the Ruling of Stilk v Myrick (1809)?

A

Ruling:

The crew were merely completing their contractual promises.
The promise by the captain was not binding.

53
Q

What was the case of Hartley v Ponsonby (1857)?

A
  • Half the crew of a ship deserted, and the master said he’d pay the crew more to sail home.
  • The crew did so, even though it was unsafe to do so.
  • Ponsonby refused to pay the extra money.
  • Could he rely on Stilk v Myrick?
54
Q

What was the Issue of Hartley v Ponsonby (1857)?

A

Issue:

Existing contractual duty?

55
Q

What was the Ruling of Hartley v Ponsonby (1857)?

A

Ruling:
The crew were entitled to the additional money as they had delivered far more than their contractual obligation. It was ‘extra’ consideration.

56
Q

What was the Case of Williams v Roffey Bros & Nicholls (Contractors) Ltd (1990)?

A
  • Roffey Bros was contracted by Shepherds Bush Housing Association Ltd to refurbish 27 flats.
  • They subcontracted carpentry to Mr Lester Williams for £20,000 payable in instalments. Some work was done and £16,200 was paid. Then Williams ran into financial difficulty because the price was too low.
  • Roffey Bros was going to be liable under a penalty clause for late completion, so they had a meeting on 9 April 1986 and promised an extra £575 per flat for on time completion.
  • Williams did eight flats and stopped because he had only got £1,500.
57
Q

What was the Issue of Williams v Roffey Bros & Nicholls (Contractors) Ltd (1990)?

A

Issue:

Existing contractual duty?

58
Q

What was the Ruling of Williams v Roffey Bros & Nicholls (Contractors) Ltd (1990)?

A

Ruling:

  • The defendant had received a benefit from the claimant continuing the work.
  • The defendant ‘obtains in practice a benefit, or obviates a disbenefit’ from giving the promise.
59
Q

What was the practical benefits principle in Williams v Roffey?

A
  • This consideration was practical benefit received by the contractors, by avoiding the penalty clauses for late completion of the contract.
  • Consideration may be found where there is a factual benefit to the promisor, or
  • Avoidance of a dis-benefit from a promise to pay more money under an existing contract
  • Doesn’t apply where the duty is the payment of money – only goods and services.
60
Q

What is Consideration as Part-payment of Debt?

A
  • If a debtor owes money, the creditor may agree to take a lessor sum as full settlement of the debt.
  • This agreement is NOT binding and the creditor can later make a demand that the debtor pays in full.
  • Unless there is further consideration from the debtor.
61
Q

What were the 2 cases to do with Consideration as part payment of Debt?

A
  • Pinnel’s Case (1602)

- Re Selectmove Ltd (1995)

62
Q

What was the casee of Pinnel’s Case (1602)?

A
  • Pinnel sued Cole, in an action of debt upon a bond, for the sum of £8 10s.
  • The defendant, Cole, at Pinnel’s request, had tendered £5 2s and the plaintiff had accepted in full satisfaction for the debt.
63
Q

What was the Issue of Pinnel’s Case (1602)?

A

Issue:

Part-payment of debt?

64
Q

What was the Ruling of Pinnel’s Case (1602)?

A

Ruling:
The payment of a lessor sum cannot be settlement for the whole debt unless it is paid earlier or alongside something else (even if it is lower value).

65
Q

What was the Case of Re Selectmove Ltd (1995)?

A
  • Selectmove Ltd owed the Inland Revenue substantial sums in outstanding tax and national insurance.
  • Selectmove agreed with the collector of taxes to pay in instalments the money owed.
  • Company received a demand for the full amount.
  • Company said an agreement to pay in instalments had been agreed.
66
Q

What was the Issue of Re Selectmove Ltd (1995)?

A

Issue:

Part-payment of debt?

67
Q

What was the Ruling of Re Selectmove Ltd (1995)?

A

Ruling:

  • Collector did not have authority to make this agreement.
  • But even if he had, just agreeing to pay a debt bound by law to pay was not good consideration – despite Williams v Roffey
68
Q

When is Consideration of performance of existing contractual duty and its concern of additional payment?

A
  • Concern additional payment (Williams v Roffey) could occur if the promisor is coerced into promising the extra payment.
  • E.g. if you don’t pay me extra, I won’t finish the job.
69
Q

What was the Case of Consideration to do with the performance of existing contractual duty and the concern of additional payment?

A

North Ocean Shipping v Hyundai Construction (The Atlantic Baron) (1979)

70
Q

What was the Case of North Ocean Shipping v Hyundai Construction (The Atlantic Baron) (1979)?

A
  • Hyundai agreed to build a tanker at a price just below $31m, to be paid in 5 instalments.
  • After the first instalments, the dollar fell by 10% so Hyundai demanded a 10% increase in the contract. The claimants could have claimed then as it was under duress, but didn’t as they had a profitable charter at the end so agreed to pay the money.
  • After eight months the claimants sued for the additional money.
71
Q

What was the Issue of North Ocean Shipping v Hyundai Construction (The Atlantic Baron) (1979)?

A

Issue:

Extra Payment under duress?

72
Q

What was the Ruling of North Ocean Shipping v Hyundai Construction (The Atlantic Baron) (1979)?

A

Ruling:

There was economic duress but they couldn’t recover the money. The delay in claiming affirmed the contract.

73
Q

What is the general difference between Contractual Terms and Mere Representations?

A
  • Terms are binding parts of a contract.

- Mere representations are not binding. (a statement made during negotiations)

74
Q

Why id the distinction between Contractual Terms and Mere Representations important?

A
  • Why is this distinction important?
  • Distinction determines what happens when untrue statements are made by parties to a contract.
  • A term if untrue, could give rise to an action for breach of contract.
  • A mere representation if untrue, could only give rise to an action for misrepresentation
75
Q

What are the 4 tests to distinguish a |Term from a Representation?

A 
Four tests to distinguish a term from a representation:
1- Special Knowledge or Skill
2-Oral Contract Reduced into Writing
3 -Time of Statement
4 -Importance of the Statement
76
Q

What were the two Cases the difference between Term or Representation under Special Knowledge or Skills?

A
  • Oscar Chess Ltd v. Williams (1957)

- Dick Bentley Productions Ltd v Harold Smith (Motors) Ltd (1965)

77
Q

What was the Case of Oscar Chess Ltd v. Williams (1957)?

A
  • Williams sold Oscar Chess Ltd a Morris car for £290.
  • It was described as a 1948 Morris 10, but it was really a 1939 model worth £175.
  • Williams said it was 1948 in good faith, relying on the car log book, but the book was a forgery.
78
Q

What was the Issue of Oscar Chess Ltd v. Williams (1957) ?

A

Issue:

Term or Representation – Special Knowledge or Skill

79
Q

What was the Ruling of Oscar Chess Ltd v. Williams (1957)?

A

Ruling:
OC were the experts in the relationship so they should have had the specialist knowledge to determine the age. Williams didn’t, so would only be reliant on the log book.

80
Q

What was the Case of Dick Bentley Productions Ltd v Harold Smith (Motors) Ltd (1965)?

A
  • Dick Bentley Productions Ltd wanted a ‘well vetted’ Bentley.
  • Harold Smith (Motors) Ltd, car dealers, found one which they said had done only 20,000 miles since a replacement engine.
  • It later emerged that the Bentley had done 100,000 since the engine and gear box had been replaced.
  • Dick Bentley sued Harold Smith for breach of warranty.
81
Q

What was the Issue of Dick Bentley Productions Ltd v Harold Smith (Motors) Ltd (1965)?

A

Issue:

Term or Representation – Special Knowledge or Skill

82
Q

What was the Ruling of Dick Bentley Productions Ltd v Harold Smith (Motors) Ltd (1965)?

A

Ruling:

Harold Smith was a specialist in the car trade and Bentley had relied on this knowledge.

83
Q

What was Case the difference between Term or Representation under Oral Contract reduced into Writing?

A

Routledge v. McKay (1954)

84
Q

What was the Case of Routledge v. McKay (1954)?

A
  • The claimant bought a 1936 Douglas motorcycle outfit in a part-exchange deal which required him to pay a balance of £30.
  • The registration documents falsely stated that it was a 1942 model, as a previous owner had earlier modified the bike and had wrongly registered it as a 1942.
  • The current seller had, during negotiations, mentioned the 1942 date, but the actual deal only took place several days later.
85
Q

What was the Issue of Routledge v. McKay (1954)?

A

Issue:

Term or Representation – Oral contract reduced into writing

86
Q

What was the Ruling of Routledge v. McKay (1954)?

A

Ruling:

An oral statement is usually a representation and not a term. The date was not mentioned in the written document so assumed it was never intended to be important.

87
Q

What was Case the difference between Term or Representation under Time of Statement?

A

Time of Statement
- A time gap between the statement and making of the contract raises presumption that statement is a representation.

  • Partly why the judgement of Routledge v. McKay (1954) was held for the defendant.
88
Q

What was Case the difference between Term or Representation under Importance of the Statement?

A

Bannerman v White (1861)

89
Q

What was the Case of Bannerman v White (1861)?

A
  • Bannerman formed a contract with White, regarding the purchase of hops.
  • He specifically enquired as to whether the hops had received a sulphur treatment.
  • Bannerman expressly stated that he would be unwilling to buy the hops if they had been treated.
  • White assured Bannerman that the hops were untreated.
90
Q

What was the Issue of Bannerman v White (1861)?

A

Issue:

Term or Representation – Importance of the statement

91
Q

What was the Ruling of Bannerman v White (1861)?

A

Ruling:

This assurance WAS a condition of contract as the buyer would not have contracted without it.

18BSA026 - Principles of Law (13 decks)

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