Week 5 Consideration Copyright Guy Harley 2008 1

Week 5 Consideration Copyright Guy Harley 2008 1

Types of Enforceable Agreement § Deeds § Formal contracts § Contracts that comply with special rules § Do not require consideration § Simple contracts § Do require consideration Copyright Guy Harley 2008 2

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: ) Copyright Guy Harley 2008 3

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 Copyright Guy Harley 2008 4

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 Copyright Guy Harley 2008 5

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 Copyright Guy Harley 2008 6

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 Copyright Guy Harley 2008 7

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 Copyright Guy Harley 2008 8

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) Copyright Guy Harley 2008 9

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 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 Copyright Guy Harley 2008 10

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 Copyright Guy Harley 2008 11

Existing Contractual Duty § Promise to perform an existing contractual duty to a third party is sufficient consideration § The Eurymedon Copyright Guy Harley 2008 12

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 Copyright Guy Harley 2008 13

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 Copyright Guy Harley 2008 14

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” Copyright Guy Harley 2008 15

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 Copyright Guy Harley 2008 16

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) Copyright Guy Harley 2008 17

Promissory Estoppel § Walton Stores v Maher § Estoppel applies where § No consideration exists § Formalities of making a contract have not been satisfied Copyright Guy Harley 2008 18

Elements of Promissory Estoppel 1. Relationship A relationship (usually contractual or pre-contractual) exists between the parties 2. Promise A promise not to assert legal rights 3. Expectation Promisee expects promise to be kept 4. Reliance Promisee acts in reliance on promise 5. Detriment Promisee alters its position to its detriment 6. Unconscionable to allow promisor to break promise Copyright Guy Harley 2008 19

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 they could reasonably have been expected to speak Copyright Guy Harley 2008 20

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 Copyright Guy Harley 2008 21

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 Copyright Guy Harley 2008 22

Remedy § Minimum orders to prevent detriment § Not necessarily the same remedy as for breach of contract § Not a new cause of action Copyright Guy Harley 2008 23

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 prepromise positions (Hightrees Case) Copyright Guy Harley 2008 24