Contract Law
Professor Gillian Demeyere
Law School, Room 109
Ph. 661-2111 Ext. 81242
gdemeyer@uwo.ca
Contract Formation
• Offer
• Acceptance
• Consideration
• Intention to Create Legal
Relations
Consideration
Page Com-21 to 22:
“If there is no consideration there is no
contract...”
-Fridman
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Consideration Defined
“A valuable consideration, in the sense of the 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
“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.” Dunlop v. Selfridge
Consideration Defined (More Simply)
quid pro quo (“this for that”)
mutual exchange of something of value
(promises have value)
Hamer v. Sidway
•Uncle promises his nephew to pay $5000 to the nephew if the nephew refrains
from drinking, using tobacco, swearing and playing cards until age 21
•At age 21, nephew writes to his uncle informing him that he has refrained from
drinking, using tobacco, swearing and playing cards
•Uncle then sets aside the money with the intention of giving it to the nephew when
the uncle feels that the nephew is mature enough to responsibly manage the
money
•Uncle dies
•Nephew sells his claim to a third party (Hamer)
•Hamer sues the executor of the Uncle’s estate (Sidway)
Does Hamer (standing in for the nephew) have a claim against Sidway (standing in
the for the uncle)?
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Hamer v. Sidway
Issue: Did the nephew provide consideration?
After all, the nephew “by refraining from the use of liquor and
tobacco, was not harmed, but benefited; that which he did was
best for him to do, independently of his uncle’s promise”
The bargain seems to be one-sided: the nephew both
experiences the health benefits and gets the money.
Hamer v. Sidway
The Decision
•the nephew had a legal right to drink liquor and use tobacco
•the nephew abandoned that right for a period of years leading
up to his 21st birthday, on the strength of the uncle’s promise
that the nephew would be compensated ($5000) for such
forbearance
•it is sufficient that the nephew “restricted his lawful freedom of
action within certain prescribed limits upon the faith of his
uncle’s agreement”
•it is does not matter “whether such performance actually
proved a benefit to the promisor”
•the uncle was “benefited in a legal sense”
Wood v. Lady Duff-Gordon
•Lady Duff-Gordon was a fashion designer whose name
had “value in the public mind”
•She hired Wood to “help her turn this vogue into money”
•Wood was to have the exclusive right to place her
endorsements on the designs of others, to place Lady DuffGordon’s own designs on sale, and to license others to sell
her designs
•Lady Duff-Gordon was to have one-half of all “profits and
revenues” derived from any contracts that Wood made
•Lady Duff-Gordon then placed her endorsement on
products without Wood’s knowledge and withheld the
profits
•Wood sued for breach of contract
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Wood v. Lady Duff-Gordon
Issue: Did Wood provide consideration?
After all, strictly speaking, the contract did not obligate Wood
to do anything: “he does not promise in so many words that he
will use reasonable efforts to place the defendant’s designs”
The Decision
•a promise to use reasonable efforts to place Lady DuffGordon’s designs is implied
•implying such a promise is the only way to make sense of the
parties’ bargain
Three Rules Governing Consideration
1. consideration need not be adequate (a
“peppercorn” will do)
2. consideration must move from (each) promisor
3. “past consideration” is not valid consideration
Past Consideration
On Monday, B paints A’s fence.
On Tuesday, A offers to pay B $100 for
having painted A’s fence.
B accepts A’s offer. A then refuses to pay B
the promised $100.
Can B sue A for breach of contract?
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Past Consideration
A’s offer to B was a gratuitous promise.
A received nothing in exchange for her promise. Her fence
had already been painted when she made the offer of $100 to
B.
B provided no consideration in exchange for A’s promise to
pay $100 to B.
But there is an exception...
The Doctrine of Promissory Estoppel
Where A makes a gratuitous promise
to B and B subsequently relies upon
that promise to B’s detriment, B may
be able to enforce A’s promise.
(Central London Property v. High
Trees)
Central London Property v. High Trees
1937: CLP rented block of flats from HT for a term of 99
years, at a rate of Ł2,500 a year.
1941: HT agreed to reduce the rent by half of that stipulated in
the lease because of wartime conditions (which resulted in a
shortage of sub-tenants for CLP.)
1941-1945: CLP paid and HT accepted, without objection, the
reduced rent.
1945: HT told CLP that CLP must pay the full rent as
stipulated in the lease and claimed arrears back to 1941.
Issue: Is HT’s gratuitous promise of 1941 enforceable?
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Central London Property v. High Trees
Issue: Is HT’s gratuitous promise of 1941 enforceable?
Answer: Yes. A promise intended to be binding, intended to
be acted upon, and in fact acted upon, is binding even though
there is no consideration from the promisee.
Note: In Canada, the doctrine of promissory estoppel applies
only to promises made within an existing contractual
relationship (as in the High Trees case).
Intention to Create Legal Relations
For an agreement to be enforceable as a
contract, the parties must have intended to
create legal relations.
In other words, the parties must have intended
that the agreement would be legally binding.
The test for whether there was intention is
objective (the reasonable person test).
Rebuttable Presumptions
Domestic and social agreements are presumed
to not have been intended to create legal
relations.
» Jones v. Padavatton - presumption not rebutted
Commercial and business agreements are
presumed to have been intended to create
legal relations.
» Rose and Frank - presumption rebutted
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A Difficult Case
Fobasco v. Cogan
Which presumption applies?
Is this a business relationship? Or a social
relationship?
The Decision
• no intention to create legal relations
• no consideration for the “umbrella” promise
Next Class
• Mistake
• Misrepresentation
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