Lecture 4-Consideration Flashcards
Consideration
Currie v Misa (1875)
Something of value/worth being linked to the exchange of promises
Considerations
1.Value
2.Past Consideration
3.Performance of a pre-existing obligation
Value
The consideration must amount to value
The consideration must be sufficient but need not be adequate.
The value that consideration must possess is ‘value in the eye of the law’, not in the eye of the parties.
Case Authority
CHAPPELL V NESTLE [1960]
Nominal value is sufficient
Benefit and Detriment
Courts ask whether what was provided by the promisee constitutes a ‘benefit’ to the promisor, or a ‘detriment’ to the promisee
Lancelot Shadwell v Cayley Shadwell and another (1860)
Legal and Factual
The legal detriment comes from his having consented to doing something he was not legally bound to do. In legal terms, any restriction on your personal freedom is a detriment, even if the factual consequences of that restriction are to your benefit.
In contrast, the inverse situation, where the benefit or detriment is purely factual and not legal, has proven more problematic, as White v Bluett illustrates.
A promise to abstain from doing what he had no right to do could not be consideration.
Past Consideration
RE MCARDLE [1951]
The act for which the promise has been given (me giving him the car) happened BEFORE his promise.
Exceptions
Pau On v Lau Yiu Long
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
Re Casey’s Patents, Stewart v Casey [1892]
PITTS V JONES [2007]
What matters is the actual nature of what is given, not the parties’ motives in giving or receiving it. This is sometimes referred to as the court ‘inventing’ or ‘refusing to invent’ consideration, but in reality it simply reflects the fact that consideration, like formation, is judged objectively, not subjectively.
Consideration must
1.move from the promisee
Crow v Rogers
2.be in respect of the promise
Combe v Combe
Third party
Tweddle v Atkinson (1891)
Price v Easton (1833)
If it is provided by a third party (someone outside the agreement), then it will not constitute consideration.
Peppercorn consideration
Peppercorn consideration (artificial-nominal value to create a sufficient agreement for a ‘gratuitous promise’) offers a powerful tool to make enforceable agreements which would otherwise have been unenforceable for want of consideration.
Performance of existing obligation
1.Performance of a non-contractual duty (public duty)
2.Performance of a contractual duty owed to a third party
3.Performance of a contractual obligation already owed to the promisor
Public Duty
Collins v Godefroy (1831)
A promise to pay a witness who was already under a legal duty to attend court to provide evidence lacked consideration. No benefit or detriment arose in relation to the proposed payment
Exceeding public duty
Glasbrook Bros Ltd v Glamorgan CC [1925]
Thus a distinction was clearly drawn between the police (i) performing their duty of doing what is necessary to prevent crime and provide protection (for which they cannot make a charge) and (ii) doing something else at the request of an individual (for which they can charge)
Statutory Duty
Ward v Bytham [1956]
Exceeding statutory duty may amount to sufficient consideration
What is a third party?
Right of third party to enforce contractual term.
(1) Subject to the provisions of this Act, a person who is not a party to a contract (a “third party”) may in his own right enforce a term of the contract if— (a) the contract expressly provides that he may, or
(b) subject to subsection (2), the term purports to confer a benefit on him.
Case Authority
Pao On v Lau Yiu Long [1980]
Performance of a contractual duty owed to a third party can form good consideration for a promise
PERFORMANCE OF OBLIGATION ALREADY OWED TO THE PROMISOR
Traditional rule – Stilk v Myrick (1809)
A promise to perform a contractual obligation already owed to the other party does not constitute good consideration.
Exception
WILLIAMS V ROFFEY BROS & NICHOLLS (CONTRACTORS) [1991]
Where some practical benefit gained by such renegotiations – this should be regarded as good consideration.
Economic duress-preventative measure- the law has developed enough to allow this interpretation of consideration.
Part-payment of debt
Traditionally a further promise to only pay off part of the debt (and possibly interest!) is not generally good consideration.
Rule set down in Pinnel’s Case (1602) and confirmed in Foakes v Beer (1884).
MWB v Rock Advertising Ltd [2018]
But if it is to be overruled or its effect substantially modified, it should be before an enlarged panel of the court and in a case where the decision would be more than obiter dictum
Estoppel
Estoppel holds a party to be legally prevented, or estopped, from going back on something a party has agreed and relied upon.
Promissory estoppel
HUGHES V METROPOLITAN RAILWAY COMPANY (1877)
If parties who have entered into definite and distinct terms involving certain legal results…..by their own act or with their own consent enter upon a course of negotiation which has the effect of leading one of the parties to suppose that the strict rights arising under the contract will not be enforced, or will be kept in suspense, or held in abeyance, the person who otherwise might have enforced those rights will not be allowed to enforce them where it would be inequitable having regard to the dealings which have thus taken place between the parties
Case Authority
CENTRAL LONDON PROPERTIES V HIGH TREES [1947]
A person, in very limited circumstances, can be estopped from going back on their agreement even though they may have a legal right due to the absence of consideration.
Confirmed in
Tool Metal Manufacturing v Tungsten [1955]
What is required?
In High Trees Lord Denning referred to 4 requirements relating to the promise:
The promisor must intend it to be binding
The promisor must intend it to be acted upon
It must be acted upon
The promisor must attempt to act inconsistently with his promise
D & C Builders Ltd v Rees
In point of law payment of a lesser sum, whether by cash or by cheque, is no discharge of a greater sum
Difference to Williams
Promisor must do something which makes clear that they’re not going to enforce their rights (makes a promise that they aren’t going to enforce their legal rights).
It must be intended that the second promise is going to be relied upon- detriment isn’t essential.
Shield or Sword?
A promisee must wait to be sued upon a pre-existing obligation and they can then seek to raise promissory estoppel as a defence (a shield)
