Topic 2: Consideration

Question 1

Define ‘contract’

Answer 1

An arrangement that creates obligations that can give rise to an action for breach of contract

Question 2

What is the presumption in domestic/social agreements?

What is the case for this?

Answer 2

That there was no intention to create legal relations

Balfour v Balfour (1919)

Question 3

What test was set out in Merritt v Merritt (1970) with regards to agreements in domestic/social situations?

Answer 3

The ‘reasonable person’ test, i.e. would reasonable people regard the agreement as intended to be binding?

Question 4

What is the presumption in commercial agreements?

Answer 4

That the parties did intend to create legal relations

Question 5

Define ‘consideration’

Answer 5

‘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 Misanthropist (1875))

Question 6

What did Chappell & Co v Nestle Co Ltd (1960) establish?

Answer 6

That parties can stipulate for whatever they wish; whether something is legally sufficient consideration does not depend on whether it is a fair exchange for the other party’s promise

Question 7

Briefly outline the facts of Chappell & Co v Nestle Co Ltd (1960)

Answer 7

As an advertising promotion for its chocolate, Nestle promised to give a record to anyone who sent in three chocolate wrappers

This was legally sufficient consideration because the people sending in the wrappers had to collect them which promoted the sale of Nestle’s chocolate

Nestle had therefore received sufficient ‘benefit’ from the wrappers

Question 8

Must consideration be of any economic value?

Answer 8

Yes

Question 9

Which case demonstrates the expression ‘consideration must be sufficient but need not be adequate’?

Answer 9

White v Bluett (1853)

Question 10

Briefly outline the facts of White v Bluett (1853)

Answer 10

In return for a father forgiving his son a debt, the son promised his father to stop complaining

This was not sufficient consideration because the son didn’t have the right to complain in the first place so he hadn’t given anything up

Question 11

What principle does Coombe v Coombe (1951) set out?

Answer 11

That a promise must be motivated by the price and the price by the promise for consideration to be sufficient

Question 12

Briefly outline the facts of Coombe v Coombe (1951)

Answer 12

Wife promised not to sue for maintenance and husband promised his wife some money

However, he did not make his promise in return for the promise of his wife (they were made independently), so this was not sufficient consideration

Question 13

Define ‘past consideration’

Answer 13

When the promise to pay comes after the act which purports to be consideration for the promise

Question 14

Is past consideration sufficient consideration?

Answer 14

No

Question 15

What is the case for past consideration?

Answer 15

Re McArdle (1951)

Question 16

Briefly outline the facts of Re McArdle (1951)

Answer 16

Mrs McArdle carried out improvements to a house belonging to someone else

After all the improvements had been done, the owners of the house put in writing that they would pay her for the improvements ‘in consideration of [her] carrying out alterations and improvements to the property’

Mrs McArdle tried to claim this money but the promise to pay was not enforceable

Her consideration for the promise to pay was ‘wholly past’ so there was no bargain element

Question 17

Define ‘unexpressed bargain’

Answer 17

When an act is requested by the other party where payment is not discussed, but in circumstances where there would not normally be a gift

Question 18

What are the three cases for unexpressed bargains?

Answer 18

Re Casey’s Patents (1892)

Lampleigh v Braithwait (1615)

Pao On v Lau Yin Long (1980)

Question 19

Briefly outline the facts of Re Casey’s Patents (1892)

Answer 19

Casey owned some patents and Stewart worked to obtain some rights for him

After he had done so, Casey promised Stewart a payment

Casey later argued that this promise was unenforceable for want of consideration i.e. Stewart’s act was past

Court upheld the bargain because it was clear from the facts that the parties always understood that Stewart would be paid for his work on the patents

Casey’s later promise merely verbalised this unexpressed understanding

Question 20

Briefly outline the facts of Lampleigh v Braithwait (1615)

Answer 20

Braithwait was convicted of killing a man and requested that Lampleigh get him a pardon from the King, which he did

Braithwait then promised to give Lampleigh £100, but then refused to pay

Court held that the promise to pay was enforceable because Lampleigh obtained the pardon at the request of Braithwait, which carried the understanding, unspoken at the time, that payment would be made for this service

Question 21

What is the principle established in Pao On v Lau Yin Long (1980)?

Answer 21

‘The act must have been done at the promisor’s request [and] the parties must have understood that the act was to be remunerated further’

Question 22

Is performance of an existing public duty sufficient consideration?

What are the three cases that show this?

Answer 22

No, unless the claimant’s performance offers something extra and goes beyond the existing public duty

Collins v Godefroy (1831)

Glasbrook Bros Ltd v Glamorgan CC (1925)

Harris v Sheffield United Football Club Ltd (1987)

Question 23

Briefly outline the facts of Collins v Godefroy (1831)

Answer 23

A witness was due to give evidence in court and someone promised to pay them if they did

This payment was unenforceable

Question 24

Briefly outline the facts of Glasbrook Bros Ltd v Glamorgan CC (1925)

Answer 24

During a miners’ strike, the owner of the colliery asked police to provide extra security

This payment was enforceable because the police had to go above and beyond their existing duty

Question 25

Briefly outline the facts of Harris v Sheffield United Football Club Ltd (1987)

Answer 25

The owner of a football stadium required extra police presence

This payment was enforceable because the police had to go above and beyond their existing duty

Question 26

Is performance of an existing contractual duty sufficient consideration?

What are the two cases for this?

Answer 26

No, unless the person under a contractual duty goes above and beyond their existing duty

Stilk v Myrick (1809)

Hartley v Ponsonby (1857)

Question 27

Briefly outline the facts of Stilk v Myrick (1809)

Answer 27

Two sailors deserted a ship mid-voyage, so the captain offered to divide the wages of the deserting sailors amongst the sailors who remained on the ship if they got the ship home safely

When they got home, the sailors sued for the extra payment they were offered by the captain

The remaining sailors were already under a duty to sail the ship, so they had given no good consideration for the promise of the extra payment

Question 28

Briefly outline the facts of Hartley v Ponsonby (1857)

Answer 28

Half the crew deserted a ship that was sailing to Bombay

The captain promised to pay the remaining crew extra if they continued to work the ship to Bombay, which was now a more hazardous voyage due to the lack of crew

The extra payment was enforceable because the crew went above and beyond their existing duty (there was extra detriment)

Question 29

What was established in Shadwell v Shadwell (1860)?

Answer 29

Where one person is under a contract to one person to do something, they can make a valid promise to a third party to do the same thing; this will be an enforceable contract

Question 30

In which case was the ‘practical benefit’ rule established?

Answer 30

Williams v Roffey Bros & Nicholls (Contractors) Ltd (1991)

Question 31

Briefly outline Williams v Roffey Bros & Nicholls (Contractors) Ltd (1991)

Answer 31

Williams was a carpenter who was subcontracted by a head contractor, Roffey, to do the carpentry work on 27 flats

Roffey was subject to a penalty clause in their main contract with the client if the whole project was not finished on time

Williams showed some difficulty in being able to finish by the completion date, so the parties renegotiated

Roffey acknowledged that the contract price was too low and offered Williams an extra amount per flat to finish on time

Although Williams was already under a duty to finish the work by the completion date, Roffey received a ‘practical benefit’ because he managed to avoid the penalty clause in his contract with the client

Question 32

Is part-payment of a debt good consideration?

Give the exceptions to this rule

Which case established this?

Answer 32

No, except:

(i) Paying a smaller sum on an earlier date or in a different place from that specified
(ii) Giving a piece of personal property as satisfaction of the debt
(iii) If a third party pays a smaller sum in satisfaction of the debt

Pinnel’s Case (1602), confirmed in Foakes v Beer (1884)

Question 33

What case gives the modern position for the part-payment of debt as sufficient consideration?

Answer 33

MWB v Rock Advertising (2016)

Question 34

Briefly outline MWB v Rock Advertising (2016)

Answer 34

Rock had a licence to occupy offices from MWB

Rock wished to expand its business to agreed to pay MWB a higher fee for 12 months for larger offices, split unevenly across the year

After the fourth month, Rock were £12,000 in arrears; MWB sought to sue

The parties attempted to orally vary this agreement so that Rock should pay less initially but more at the end of the 12 months

The Court of Appeal held that Williams v Roffey should be applied rather than the rule in Pinnell’s Case, i.e. if the new oral agreement conferred a practical benefit on the creditor, then it would be enforceable

The practical benefit for MWB is keeping the offices occupied so that they are still receiving some rent and the property is not devalued

The Supreme Court held that the terms of the contract prohibited the parties from making an oral modification in the first place, so they did not examine whether there was valid consideration

Question 35

Define ‘promissory estoppel’

Answer 35

When one party to a contract promises, by words or conduct, that he will not enforce his rights under the contract in whole or in part

Question 36

Is promissory estoppel part of the law of consideration?

Answer 36

No; it is a rule of equity

Question 37

When can the doctrine of promissory estoppel apply (not the criteria)?

What are the two cases that show this?

Answer 37

When it is inequitable in all the circumstances to allow the party to go back on the promise

D & C Builders Ltd v Rees (1996) and MWB v Rock Advertising (2016)

Question 38

Can promissory estoppel be used as a cause of action, as a defence, or both?

What case shows this?

Answer 38

Only as a defence

Central London Property Trust Ltd v High Trees House Ltd (1947)

Question 39

What are the criteria for promissory estoppel to apply?

What cases gave these?

Answer 39

All criteria: Central London Property Trust Ltd v High Trees House Ltd (1947)

(i) The promise relied upon must be clear an unequivocal, not unambiguous (Woodhouse AC Israel Cocoa Ltd SA v Nigerian Produce Marketing Co Ltd (1972))
(ii) The promisor intends that the promisee act in reliance on that promise
(iii) The promisee does rely on the promise, altering their their position as a result
(iv) The promisee acts to their detriment in reliance on the promise (MWB v Rock Advertising (2016))

Question 40

What are the two possible effects of promissory estoppel?

What cases gave these?

Answer 40

(i) The promisor must stick to his promise (Central London Property Trust Ltd v High Trees House Ltd (1947))
(ii) The promisor may go back on his promise, upon giving reasonable notice, and insist on returning to the original agreement (Tool Metal Manufacturing Co Ltd v Tungsten Electric Co Ltd (1955))