Contract Law
In order to be entitled to enforce a promise a promisee must have given something in return for the promise – where there is no consideration, it is merely a promise to make a gift – which is not enforceable unless it is made in a deed.
Definitions:
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Currie v Misa – Consideration may consist either in some right, interest, profit or benefit accruing to one party, or some forbearance, detriment, loss or responsibility suffered or undertaken by the other. It may either be a benefit or detriment but it need not be both
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Pollock – the p rice one p ays for another’s p romise
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O’Sullivan – Consists of either detriment or benefit however both promisee and promisor do not have to coexist
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Consideration must be sufficient but need not be adequate ( Chappell v Nestle ) : Where consideration is monetary, the court will readily find that consideration is sufficient. There is no requirement that the consideration is adequate, i.e. of market value, so £1 in exchange for a house would be sufficient.
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Bainbridge v Firmstone – Where consideration is non-monetary, the court decides whether the alleged consideration has in law any value and whether or not it amounts to consideration – though in commercial cases the court tends to give credence to what the parties decide is or is not of value
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Thomas v Thomas – Consideration must have some economic value
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White v Bluett – Forbearance is usually not considered good consideration due to public policy issues (floodgates argument), but may be sufficient if it involves giving up one’s legal right ( Hamer v Sidney – US case)
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Contract Law
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Consideration must not be past: Where the promise to perform is given after the relevant act of the other party has already been performed, this will not amount to good consideration
( Roscorla v Thomas ). The exception is where: a) !
the act is done at promisor's request ( Lampleigh v Braithwait ); b) !
the parties understood that the act would be remunerated by payment/other benefit ( Re
Casey’s Patents ); and c) !
the payment/benefit is legally enforceable had it been promised in advance ( Lampleigh v
Braithwait )
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The pre-existing duty rules a) !
Performance of contractual duty for a 3rd party: A promise to do something will constitute valid consideration even if the promisor is already bound to perform the obligation to another party ( Scotson v Pegg ). b) !
Performance of duty imposed by law: Where a duty to perform is imposed by law, performance of this duty or the promise to perform this duty does not in law amount to consideration ( Collins v Godefroy ). Exceptions include:
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Where the claimant exceeded their duty in some way and done more than they are legally bound to do, this may amount to valid consideration ( Glasbrook Brothers )
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If it isn’t contrary to public policy, it may be good consideration ( Williams v Williams ). c) !
Performance of existing contractual duty (Increasing pact): The traditional view is that performance of existing contractual duty is not sufficient consideration for a promise to pay more ( Stilk v Myrick ). Exceptions include:
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Hartley v Ponsonby – Where the defendant goes beyond their existing duty, or confers extra benefit on the promisor (consider fact and degree as well as public policy)
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Contract Law
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Williams v Roffey Bros – If the claimant obtains a practical benefit as a result of the defendant performing his existing contractual duty, such as having the work completed on time, consideration may be found. Lord Glidewell gives the following principles:
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There is a contract to do work or supply goods in return for payment
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A doubts whether B will complete his obligations
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A promises additional payment if B completes his obligations on time
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A obtains a practical benefit as a result or obviates a loss
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A’s promise was not a result of economic duress or fraud on the part of B
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Re Selectmove – The rule in Williams v Roffey Bros cannot be extended to cases involving the part payment of undisputed debts d) !
Part-payment of debt (Decreasing pact): An alteration of the agreement to accept less than was due under the original contract i.e. the part-payment of the debt, will not extinguish the obligation to pay the whole because there is no consideration ( Foakes v Beer ).
Exceptions include:
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Pinnel’s Case – Part payment is made by the debtor with either something different or pays early. The debt can be discharged where part-payment is made by a third party
( Hirachand v Temple ); or
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High Trees House – where the defendant can successfully raise the defence of
"promissory estoppel”
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Consideration must move from the promisee and not be illegal: The consideration must come from the promisee, i.e. from someone who is privy to the contract, and not a third party.
However, a person who is not party to a contract may enforce a term of the contract ( S1
Contract (Rights of Third Parties) Act 1999 ). If consideration amounts to an illegal act, it will not be enforceable ( Foster v Driscoll ).
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Contract Law
Where a promisor has by words or conduct made a promise to the other party to forgo a legal right, once the other party has acted on this promise, he will have a good defence to any claim brought by the promisor which is inconsistent with the promise ( High Trees House ).
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The doctrine will apply if the following conditions are fulfilled:
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Promise – There must be a clear promise to waive a legal right ( Hughes v Met Railway )
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Reliance – The promisee must act on the promise ( Ajayi v RT Briscoe; Alan v El Nasr ) – does not have to be to his detriment
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Inequitable – It must be inequitable/unjust for the promisor to go back on his promise and insist on his full legal rights ( D&C Builders v Rees )
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Defence – Promissory estoppel does not give rise to a cause of action; it can only be used as a defence ( Combe v Combe )
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Effect – The effect is to extinguish or suspend legal rights
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