Copyright Guy Harley 2008 1 Week 5 Consideration

1Copyright Guy Harley 2008

Week 5

Consideration


Types of Enforceable Agreement

Deeds Formal contracts Contracts that comply with special rules Do not require consideration

Simple contracts Do require consideration


Deed

In writing Maker of deed must sign, seal and deliver the

document Independent witness Special attestation clause

SIGNED SEALED AND DELIVERED )by the said JOE BLOGGS )in the presence of: )


Consideration

Some right, interest, profit or benefit accruing to one party, or some forebearance, deteriment, loss or responsibility given, suffered or undertaken by the other. – Currie v Misa


Consideration

Every simple contract must be supported by consideration

The law will not enforce a gratuitous or bare promise

Lack of consideration may be overcome by the equitable doctrine of estoppel


What is Consideration

Consideration must flow from both sides of the contract

Can be: A promise to do something A promise not to do something Doing something Refraining from doing something A benefit for the promisee A benefit for a third person at the promisee’s direction A detriment to the promisor Anything of real value to the promisee


Consideration Must be Sufficient

Must have some value in the eyes of the law Can be trivial or nominal Need not be equal in value to the promisor’s

promise The very nature of contract law is to let the

parties make their own bargain However, doctrine of unconscionable conduct

has developed to overcome resulting injustices


Consideration Must be Sufficient

Must be definite and not too vague Illusory promises are not consideration E.g. “in consideration of natural love and

affection” Too uncertain to be enforced Dunton v Dunton


Consideration Must Be Sufficient (Cont)• Illusory promises are not consideration• E.g. “in consideration of natural love and

affection”• Too uncertain to be enforced• Dunton v Dunton (S&OR p 106)


Consideration May Not Be Past

A promise can be executed (i.e. present execution) or executory (i.e. future execution) but cannot be past

A promise must be paid for but if consideration has already been given then there is nothing being paid for the new promise Roscorla v Thomas

Settling unsettled aspects of a past transaction may be consideration Re Casey’s Patents: Stewart v Casey


Existing Contractual Duty

Promising to perform an existing contract is not consideration

To be binding, there must be a promise to do something additional to contracted duty Stilk v Myrick Hartley v Ponsonby

Rule may be undergoing change Williams v Roffey Bros. & Nicholls

A practical benefit is conferred No duress


Existing Contractual Duty

Promise to perform an existing contractual duty to a third party is sufficient consideration The Eurymedon


Performance of a Public Duty

Performance of a public duty is not sufficient consideration Collins v Godefroy

Exception Where the service goes over and above that

which the person is legally bound to provide Glasbrook v Glamorgan


Compromise & Forbearance to Sue

Settling disputes Forbearance to sue (i.e. an offer not to sue) is

good consideration provided The claim (defence) was reasonable The promisee had an honest belief that the

claim had a reasonable chance of success The promisee has not concealed any facts

that might affect the validity of the claim Wigan v Edwards


Examples

$1 for a Rolls Royce “I promise to be an honest public servant” “I’ll give up my legal claim against you” “I will pay you less than I owe you if you forget

the rest” “In love and affection” “I promise to carry out my contractual

obligations”


Renegotiating a Debt

A promise to pay a lesser sum in satisfaction of a larger debt is not binding Pinnel’s Case ( approved by House of Lords

in Foakes v Beer) Exceptions

Something given in addition to lesser amount Payment at an earlier date Payment at a different place Payment by third party Composition with creditors


Promissory Estoppel

A strict application of the rules of contract formation can lead to unjust results

Courts use equitable jurisdiction to intervene and prevent unfairness

Estoppel is used to stop a person from denying something that they have represented

Central London Property Trust v High Trees House (obiter dicta by Lord Denning)

Applied in Australia Je Maintiendrai v Quaglia (SASC) Waltons Stores v Maher (HCA)


Promissory Estoppel

Walton Stores v Maher Estoppel applies where

No consideration exists Formalities of making a contract have not

been satisfied


Elements of Promissory Estoppel

1. RelationshipA relationship (usually contractual or pre-contractual) exists between the parties

2. PromiseA promise not to assert legal rights

3. ExpectationPromisee expects promise to be kept

4. ReliancePromisee acts in reliance on promise

5. DetrimentPromisee alters its position to its detriment

6. UnconscionableUnconscionable to allow promisor to break promise


The Promise

One party either Made a promise; or Being aware that the other party was acting

on an assumption, deliberately remained silent in circumstances where the they could reasonably have been expected to speak


Expectation

The promisee on reasonable grounds assumed that a particular legal relationship Existed; or Would exist

Legal relationship includes: A right to something Release from an obligation For the promisee or someone else Now or in the future


Detriment

The promisee will suffer a detriment if the promisor fails to perform the promise

Mere failure by the promisor to carry out the promise will not of itself amount to detriment Je Maintiendrai v Quaglia & Quaglia


Remedy

Minimum orders to prevent detriment Not necessarily the same remedy as for breach

of contract Not a new cause of action


Withdrawal of Promise

Promisee is given notice of promisor’s intention to break the promise

Notice must Be reasonable Give promisee sufficient time to return to its

pre-promise position Must be possible for parties to resume pre-

promise positions

(Hightrees Case)

Documents

Copyright Guy Harley 2008 1 Week 5 Consideration