Contract Law - Consideration PDF

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Consideration and Promissory Estoppel ​(promise that cannot be broken)Consideration 1. The requirement of consideration [Treitel 3-001] - in order for a promise to be binding as a contract, there must be consideration given for the promise (unless the promise is contained in a valid deed, or some ca...

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Consideration and Promissory Estoppel (promise that cannot be broken) Consideration 1. The requirement of consideration [Treitel 3-001] - in order for a promise to be binding as a contract, there must be consideration given for the promise (unless the promise is contained in a valid deed, or some cases of promissory estoppel) - deed (契約): formal legal written documents signed and sealed (indicates it is performed intentionally) 2. Consideration defined - basic idea: something of value (in the eye of the law) given to the promisee in return for a promise (price of promise) [Treitel 3-004] - Currie v Misa (1875) LR 10 Ex 153, 162 (Lush J) “...may consist either in some r ight, interest, profit, or benefit accruing to  triment, loss, or responsibility, the one party, or some forbearance, d e given, suffered, or undertaken by the other .” “ ‘Consideration’ means that, in exchange for a promise by one party, a counter-promise or performance is given by the other party”: A Burrows, Restatement of the Law of Contract (2016), s.8(2) - Generally: the promisor’s gain is the promisee’s loss; but the definition makes clear that it is sufficient if either the promisor gains or the promisee suffers a loss (唔洗對等) ● Edmonds v Lawson - requirement of consideration is satisfied where the promisee suffers some detriment at the promisor’s request [Treitel 3-024] - considerations is not a must to have same value as offer, but at the request of promisor - simply giving a promise is already something of value - Sir Frederick described consideration as simply “the price for which the promise is bought” [Treitel 3-007] -

Are these considerations? ● Example 1. A promises to pay B $1,000. In reliance on this promise, B buys an expensive CD ->no (not request of offeror) ● Example 2. A promises B that A will pay B $100 if B washes A’s car. ->yes (washing car is something of value, consideration) ● Example 3. A promises B $10,000 if B promises to act as A’s financial advisor. ->yes (classic consideration) ● Example 4. A. “I promise to pay you $100.” B. “Great, let me buy you a drink.’’ ->no (not requested by offeror)

3. Past consideration is not good consideration - general rule: consideration must be given in return  for the promise [Treitel 3-017]

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if the performance has already occured prior to the giving of a promise, then it cannot serve as consideration for that promise Re McArdle [1951] Ch 669 (DM) ‘In consideration of your carrying out certain alterations and improvements..’ performed act before giving promise -> no contract **however, what appears to be past consideration may, on analysis, not truly be such. Lampleigh v Brathwaite (1615) Hob I05 (Burrows, 95) -> implied promise (by the request) Pao On v Lau Yiu Long  [1980] AC 614 (Burrows, 95-97) P agrees with F to sell shares in company S in return for F issuing P with shares in F P promises not to sell proportion of shares in F until a certain date, at which date L will buy back shares at $2.50 P then gets L to enter into a different agreement, where L promises to compensate P if share price drops below $2.50 **whether there is agreement supported by consideration Pao On : ‘An act done before the giving of a promise to make a payment or to confer some other benefit can sometimes be consideration for the promise. The act must have been done at the promisor’s request : the parties must have understood that the act was to be remunerated either by payment, or the conderment of a benefit’ (Lord Scarman) moral obligation cannot provide consideration for a promise [Treitel 3-021] ● duty which one owes and thinks ihe ought to perform ● not legally binding

4. Consideration must move from the promisee - In order to enforce a promise made to him, the promisee must himself provide consideration for it. [Treitel 3-023] ● no right to enforce promise if consideration moved from a third party - Example. A promises B that A will pay B $1,000 if C washes A’s hair. -> no consideration, as B does not give anything of A’s promise - Tweddle v Atkinson (1861) 1 B & S 393, 399 ● son is seen as “stranger” to the contract, cannot enforce - this rule is sometimes thought to explain the ‘doctrine of privity’ of contract, a common law rule (now altered by legislation) which prevents third parties enforces a contract -> doctrine of privity: a contract cannot (as a general rule), confer rights or impose obligations arising under it on any person except the parties to it - consideration need not move to promisor [Treitel 3-024] 5. Consideration only needs to be sufficient, it does not need to be adequate - some value must be given, but needn’t be adequate/appropriate  amount of value (ie may not be market value, need not be fair) - courts do not ask whether adequate value is given or whether agreement is harsh or one-sided [Treitel 3-013]

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as long as agreed to it (and not breaking the law), contract formed ● merely the fact that value is inadequate would not make contract invalid [Treitel 3-013] ● otherwise may have manyyy disputes due to fluctuating prices Chappell & Co Ltd v Nestle Co Ltd [1960] AC 87 (Burrows, 90-93) ->are wrappers consideration/qualifications of the records? Consideration need not be adequate, but must be of some value [Treitel 3-027 to 3-032] ● must be of economic value - Thomas v Thomas - White v Bluett ● illusory consideration (usually disregarded) ● trivial acts or objects (can be consideration) - Chappell v Nestle VS Lipkin Gorman v Karpnale Ltd (gambling)

6. Sufficiency of consideration: some classic problems problem of insufficient consideration often occurs in the context of rescission and variation of contract - rescission (廢除) [Treitel 3-056 to 3-061] ● mutual agreement to release each party from its obligation - can be rescinded before day fixed of performance under mutual consent - can be rescinded after both parties have broken it - partly executed contract can also be rescinded under mutual consent (must have outstanding obligations on both sides) ● eg. A agrees to sell B A’s car for $100,000. Before the time for performance arises, A and B agree not to go ahead with the sale. ● if the agreement to rescind does not generate consideration, it must be supported by separate consideration (accord and satisfaction) [Treitel 3-059] -

variation (變動) [Treitel 3-062 to 3-065] ● performance of, or promise to perform, an existing contractual duty to the other party [Treitel 3-043 – 3-052] - duty enforced by law ● usually unenforceable ● but promise for a reward for info to arrest a felon usually enforced) [ Treitel 3-044] ● can provide consideration by doing/promising more than he is by law obliged to do - duty imposed by contract with promissor ● if it was bound/forbid, then of no consideration to a large extent [Treitel 3-047] - Stilk v Myrick (1809) 2 Camp 317 (Burrows, 106 - 108) ● no consideration provided for the extra money -> no contract

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promise to perform an existing contractual duty to the promissor, in return for a further promise from the promisor Williams v Roffey Bros & Nicholls [1991] 1 QB 1 (Burrows, 108-113) ● given consideration (prevent defendant from penalty clause) ● ‘’As a result of the agreement the defendants secured their position commercially’’ ● (1) avoidance of need to employ another subcontractor (2) more formalised system of payments

performance to accept less for the same - Pinnel’s case : ‘’payment of a lesser sum on the day in satisfaction for the whole, because it appears to the Judges that by no possibility, a lesser sum can be a satisfaction to the plaintiff for a greater sum.’’ - ‘’..but the gift in satisfaction is good. for it shall be intended that it might be more beneficial to the plaintiff than the money, in respect of some circumstance, or otherwise the plaintiff would not have accepted of it in satisfaction.’’ - Pinnel’s case followed in Foakes v Beer ‘’all men of business..do every day recognise and act on the ground that prompt payment…’’ - Relationship between F  oakes v Beer and Williams v Roffey ❖ MWB v Rock: MWB derived a practical benefit which went beyond the advantage of receiving a prompt payment o  f a part of the arrears and a promise that it would be paid the balance of the arrears and any deferred licence fees over the course of the forthcoming months. ❖ MWB hopes to keep the promise occupied - was there really a practical benefit in this case? - if they willing to accept there was a practical benefit, why does it matter that they keep this form to occupy property (to avoid conflict that would arise)

Variation of contracts and consideration- where does the law stand now? - promises to pay more for the same: practical benefit suffices: Roffey. But the precise nature of ‘practical benefit’ r emains unclear in these cases. - promises to accept less for the same 7. Should the law require consideration? - Justifications for the doctrine:

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Evidentiary, cautionary, and channelling functions. (see the classic article by Lon L Fuller ‘Consideration and form’ Fairness- see M Chen-Wishart, ‘In defence of Consideration’ Are these convincing? Consideration would make you think twice before attending a contract/promise (having to pay something in return for a promise would make you rethink the deal) it is easy to make promises, but it doesn’t mean to be thought thoroughly (cautionary) cannot force people into promises, unfair to enforce a promise for free (fairness)

Promissory Estoppel - even if there is no consideration, this gives effect to the promise and the promise could potentially be enforced 1. What is an estoppel? ● Estoppel by representation - if a person made representation, and intended another to rely on it, it should be upheld - only applies to representation about an existing fact, but not for those in the future (‘’I promise to give you $5000 next week -> x) ● Estoppel by convention - reach an agreement between the two parties (agree x it’s true although it’s false) - Amalgamated Investment v Texas Commerce ● Proprietary estoppel - e.g. Thorner v Major [2009] 1 UKHL 18 - related to ownership (of land) ● Promissory estoppel - Central London Property Trust v High Trees [1947] Denning J ‘’They are cases in which a  promise was made  which was intended to and which, to the knowledge of the person making the create legal relations  promise, was going to be acted on by the person to whom it was made, and which was in fact so acted on .’’ - relied on Hughes v Metropolitan Railway Co. ‘’If parties who have entered into definite and distinct terms involving certain legal results..the strict rights arising under the contract will not be enforced’’ 2. Promissory estoppel 3. Elements of promissory estoppel ● Clear promise - Woodhouse v Nigerian Produce - ‘’payment can be made in Sterling and in Lagos’’

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The buyers conduct in accepting the invoice unquestionably amounted to an implied clear and unambiguous promise to accept on those terms.

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Reliance on the promise (promisee relied on the promise) - the promise simply acts on the basis that the promise will be kept - The Post Chaser (Robert Goff J) - detrimental reliance not always required, but may be in some cases - Collier v Wright - part payment of debt can be sufficient reliance (even if not detrimental) - - when one party requests other party to go back onto the promise

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Inequitable (不公平 不公平 不公平) to go back on the promise - if promisee has detrimentally(有害地) relied, more likely to be inequitable - if parties have acted on agreement for a long time, more likely to be inequitable (High Trees) - if party has fully paid off agreed part payment of a debt, likely to be inequitable (Collier), but less so where only one payment in series of installments made (MWB ) - not inequitable if undue pressure or misrepresentations (D&C Builders v Rees)

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Cannot serve as a cause of action (Not an independent cause of action) ‘’..does not create new causes of action where none existed before. It only prevents a part from insisting upon his strict legal rights’’ *may be part of a cause of action, but not a cause of action in itself’’ Compare: Amalgamated Investments

4. The extent of enforcement: suspensory(暫止 暫止 暫止) or extinctive(消滅)? - generally suspensory: Tool Metal Manufacturing v Tungsten [1955, HL] - but can be extinctive where it would be inequitable for the rights to be revived (eg High Trees/ Collier)...