Topic 7 Consideration in Common Law

• What is consideration Consideration and what forms a contract in the eyes of the Law?

  An element to identify an enforceable promise in a contract by finding legally binding obligations. Makes a contract in law.

  1. Agreements need to be a valid offer
  2. validly accepted
  3. parties having the intentions to create legal agreements.
• Consideration is different from misrepresentation because it finds where a promise is enforceable and is defined in Lush J in Currie v Misa (1875), involves a valuable benefit or detriment to one party or the other in a bilateral contract
• 4 main elements to consider when considering consideration

  • Sufficiency or Adequacy
  • Forebearance
  • Past consideration
  • Exceptions to past consideration
• What is Sufficiency and which case represents the concept?

  Consideration must be sufficient but not adequacy. The benefit/detriment does not have to match what was received in return.

  
  

  Chappel & Co v Nestle- Nestle had a promotion where 3 wrappers and 6s equals a music disk. There was a n argument of royalties because they were sold for less that what they were worth which decreased prfots so sued for damages. However, 3 wrappers and 6s were sufficient but not equal
• What is ForebearaForbearancence and provide 2 case examples

  When a party willingly restricts themselves from doing something but must be in reference to the contract itself.

  1. Hamer v Sidway
  2. 2. White v Bluett
  3. 3. Pitt v PHH Asset Management
• Hamer v Sidway, White v Bluett, Pitt v PHH Asset Management


  • Hamer v Sidway: Uncle promised nephew 1k if he gave up alcohol, smoking and gambling. The Nephew did but the uncle passed away. The executor of the will refused to fulfil the promise as there was no consideration. However, the courts decided there was since the there was a choice to give up habit was fine for consideration.
  • White v Bluett: Father can £100 from estate as a loan from his estate and registered it in his will. There was a promise he would stop bothering the father on how he should deal with his will in return. The father passed and the executors registered the amount as a loan which was paid back with interest but Bluett refused as there was good consideration. Courts argued it was still a loan even if there was nothing in exchange of promise.
  • Pitt v PHH Asset Management: Purchase of a house, the claimant wanted to buy a house for the asking price and the estate agent agreed. During the cooling off period someone gave a higher offer so the original buyer matched the offer with money on top and kept doing so. The buyer discovered some shady deals and threatened the agent with action unless he agrees to sell. The agent created a lock-in agreement where no other offer will be accepted. The agent accepted buyers 2 offer so the original buyer sought consideration. Estate agent agreed there was nothing of value and it was an informal promise. Courts disagreed as there was a lock-in agreement which had some consideration.
• What is the principle of Past consideration, name 2 cases ?

  Past consideration is no consideration Promises based on actions of the past where no parties asked to be completed in the first place.

  Eastwood v Kenyon- Inherited estate to care for friends daughter to raise her to the standards of the time and she would repay him when of age. He used some of his own money but her husband (kenyon) refused to pay. The courts agreed because it was past consideration

  
  

  Re McArdle
• What was the principle and facts of Re McArdle

  • KO: Past consideration is no consideration
  • Re McArdle Owner of a house died and the house was shared between 5 sons. One wife renovated and signed on an agreement that it would be repaid. The house was sold and they refused to pay. It was unenforceable because none of the brothers asked for the renovations
• What are the Exceptions to past consideration, Name 2 cases

  If there is indication that action done in the past was made in relation for something in the future, then there is consideration. Past consideration is good when: Act was done at the promisor's request, parties have understood the act to be remunerated, payment or benefit received have been legally enforceable and was promised in advance.

  
  

  1. Lampleigh v Braithwaite
  2. Re Casey’s Patents
• Lampleigh v Braithwaite, Re Casey's Patents


  • Lampleigh v Braithwaite: Braitwaite killed a man and was on trial for murder. He told Lampleigh to get a pardon from the king which he did under a provision of repayment. Braitwaite was free but refused to pay. This was argued to be past consideration but under the circumstances it made no sense Lampleigh would have done this so past consideration was good enough.
  • Re Casey's Patents: Claimant (Casey) was asked by the owner of some patents to manage them. No payment was promised, and it was time to decide ownership of the patents. A letter was signed by Casey and the owners of the patents that in consideration of the services would own the patents as a beneficial owner so would get an equal share of the royalties from the use of patents. The owners did not like this and wanted it removed as a beneficiary. Argued his services was a past consideration then the promise was made. Courts said no because it looked like it was past consideration but no one would have managed the patents without the promise of the return. Despite the owners signing him as a beneficiary, it would have been good consideration either way.
• Performance of a non-contractual obligation (Public duty cases). Provide 2 case examples

  Generally, the performance of an existing non-contractual duty cannot form good consideration alone.

  1. Collins v Godefroy
  2. Glasbrook Brothers Ltd v Glamorgan CC
• Collins v Godefroy (1831), Glasbrook Brothers Ltd v Glamorgan CC (1925)


  • Collins v Godefroy (1831): A witness under a public duty lacked consideration for a promised payment for giving evidence.
  • Glasbrook Brothers Ltd v Glamorgan CC (1925): Police provided good consideration by exceeding their public duty during a miners' strike.
• Consideration when there is existing duty owed to a promisor, provide 2 examples.

  When a party is already obligated to perform an action but wants to renegotiate the terms, there may not be considerata ion unless there is something else offered.

  1. Pinnel's case (lessor sum with a Horse, Hawk or Robe)
  2. Foakes and Beer
• Pinnel's Case, Foakes v Beer


  • Pinnel's Case: Debt was alleged, the debtor stated the creditor agreed to take a lesser sum. There is a plea for satisfaction (agreement of a lesser sum) but the accord (agreement) requires a different consideration so a less sum was not a discharge of the debt. However, a lesser sum and an item may satisfy it.
  • Foakes v Beer: Beer lent money to Foakes but later agreed to a payment in installments which was paid back in return of her not seeking action. This was done but without interest of the debt. Beer enforced this and the courts agreed since there was no consideration like in Pinnel.
• When might Consideration be established from an existing contractual Duty? Provide a case example

  If there is fresh consideration (additional consideration) on top of what is contracted of the parties.

  Stilk v. Myrick
• What was the LP and facts of Stilk v. Myrick (1809)

  • Fresh consideration on top of an existing contractual duty would suffice as consideration.
  • Stilk v. Myrick (1809): This case had 2 sailors abandon ship and the rest of the crew was promised a share of the other 2 sailors' salary by the captain. The ship returned and the captain refused to pay. This was because they were already contracted to complete the journey so there was no new consideration.
• What would be established if there was Extra work not covered in contract? Provide 2 case examples.

  Would amount to additional consideration so would mean that any benefits promised would be enforceable.

  1. Hartley v Ponsoby

  2. Williams v Roffey Bros
• Hartley v Ponsoby (1857), Williams v Roffey Bros


  • Hartley v Ponsoby (1857): Voyage with large number of people fell overboard and extra wages were agreed if they completed the journey. Master would recruit new people for each voyage, with employees with a certificate of discharge (proof of their service). Sailors were set a price but was not paid until the journey's completion. It was considered okay for the extra pay because there was an extra step of the crew.
  • Williams v Roffey Bros: William was in a subcontract to build flats. They agreed to complete the whole job for a set price but had liquidative damages in the contact for failure to complete. William failed to complete the contract but was because it was too expensive. Roffey offer more money on top for each flat done (10k). William completes this and refuses arguing there was no consideration. Courts state there is consideration via practical benefit because Roffey would have to find other contractors.
• Can Existing contractual duties can still have consideration to 3rd parties? Provide an example

  Yes For example: Contractors hired to complete a build by A for a certain price. B asks contractor to hurry up for an extra cost to save time. Contractor finishes early but B refuses to pay. Although he was already contractually obligated to A there is good consideration to B because he benefitted from the property being built.
• Pao On v. Lau Yiu Long


  • Pao On v. Lau Yiu Long: 2 companies who were not suing, families owning the companies were, The transaction were not from the family. It was to do with shares and regulations. Lead judgement established that When you promise to carry on an existing contract to someone else then it can be good consideration to a third party.
• Can Going Beyond duty (Public duty) be classed as good consideration? Provide a case example

  May be classed as good consideration but only in very rare situations.

  
  

  Ward v Byham arraged care of a child with a promise for the payment of amount. Ward did not keep the promise so sued. Ward argued no consideration. The courts emphasised 'pay enough to make him happy' It was described as an extra obligation ebcause it was almost impossible.
• When you promise to carry on an existing contract to someone else

  It can be good consideration to a third party
• Tweddle v Atkinson


  1. Young couple gets married

  2. Both dads agreed to settle a certain amount of money

  3. Guy promised to pay £200 to William Tweddle

  4. John Tweddle promised to pay £100 to William Tweddle

  5. One dad provides the money while the other passes away

  6. Executor refuses to pay out and is sued by the couple to perform what the other dad would have done had he'd been alive

  7. He loses because there was no contract between the groom and the executor
• What is the Privity Rule? provide a case example.

  The claimant must be a party to the contract in order to enforce the promise and have consideration

  1. Dunlop Pneumatic Tyre Co v Selfridge & Co and Tweddle v Aktinson
• Dunlop Pneumatic Tyre Co v Selfridge & Co

  1. Tires being sold by retailer below the list price

  2. Dunlop sold tires to an intermediatory who sells them to Selfridges who sells them to a customer

  3. Selfridges sells it underprices so Dunlop wants to sue

  4. Viscount Haldane established the privity rule, stating that only a person who is a party to a contract may sue upon it
• Collateral Contract


  A contract that exists alongside the main contract with separate consideration (so the privity rule is overcome)

  Shanklin Pier v Detel- Plaintiffs owned a Pier and wanted it renovated. C was approached by Detel to use their paints so the c wrote this into the contract with renovators. The paint did not work properly so plaintiffs sued. The outcome was that there was a warranty and consideration which caused the Plaintiff to prescribe the company into the contract. So Detel was liable for damages
• What was the LP and facts of Eurymedon.

  LP: Contracting on behalf of a 3rd party

  1. Appellants were contracted to unload machinery

  2. The contract was between the owners (Respondents) and the carriers (who had limitation clause)

  3. The contractors damaged the machinery negligently and the Respondents brought an action outside of the one-year limitation period

  4. Appellants claimed the clause excluded their liability

  5. Contractors can rely on the clause as the wording would cover all parties in the carriage of goods such as the contractors
• Jackson v Horizon Holidays Ltd

  1. C booked a holiday via a travel company for him and his family

  2. Before departure, the company informed C that the hotel was unavailable and proposed it was just as good for £1,200

  3. The C found it to be unsatisfactory which brought distress, discomfort and inconvenience so brought an action for misrepresentation

  4. Appeal from Horizon was dismissed

  5. The C was able to claim compensation for damages for the breach and discomfort and distress
• How do you distinguish between consideration and misrepresentation? Which case defines this?

  Consideration is different from misrepresentation vecause it finds where a promise is enforceable and is defined in Lush J in Currie v Misa (1875)

  Misa exchanged bonds from Lizardi and was told to make payments to the bank of Currie. Misa did this via cheque but after learning of Lizardi's debts said that they cannot make future payments and said the cheque cannot be honoured becase it goes to Lizardis account.

  LP: valuable benefit or detriment to one party or the other in a bilateral contract
• What is meant by the principle of 'Consideration must move from the proimise'? Provide a case example


  Consideration must move from the promisee and promisor, It would not apply if there is a no contract established shown in Tweddle v Atkinson
• What is the Agency rule? Name a Case

  an agent which creates a direct contractual relationship between a third party can be held accountable to their actions if there is consideration. However, only if they are in a contractual relationship under the privity rule. Adler v Dickson  (‘The Himalaya’)

  1. Mrs Adler has sued against the owner of the ship and the boatswain for her injuries

  2. The exemption clause could only protect the contracting party, which is the company itself, and not the employees or the owner of the ship
• What would recovering damages for another's loss result in? Name a case

   would mean a third party can sue for a breach of duty of care owned to them under tort law such as breaches occurred in the course of contractual obligations. 

  Jackson v Horizon Holidays Ltd
• What are the basic effects of the Contracts Act 199?

  Act provides exceptions to the Privacy rules. Parties intentions need to be expressly or implied so the 3rd party can enforce a term.
• What act was the case of Dolphin Maritime v Sveriges related to?

  Under Article 5(3) S1 of the contracts (rights of 3rd parties act) 1999