Consideration and privity

Cards (40)

  • Basic principles
    • contract law requires a bargain and not a gift
    • both parties give something to the other by way of an exchange
    • Defined in Currie v Misa as being in terms of 'benefit and detriment'
    • In Dunlop v Selfridge was defined as: the price or which the promise of the other is bought
  • Currie v Misa
    • as being in terms of 'benefit and detriment'
  • Dunlop v Selfridge
    • defined as: the price for which the promise of the other is bought
  • Definitions
    • Promiser: person who makes a promise to another
    • promisee: person to whom the promise is made
    • executed consideration: an act in return for a promise
    • executory consideration: a promise for a promise
  • Rules of consideration:
    • Adequacy: Freedom to contract
    Chappell v Nestle co Ltd :
    • F: Customers able to to claim a recording of a song if they sent in some chocolate wrappers and a nominal sum
    • LP: wrappers amounted to sufficient consideration themselves
  • Thomas v Thomas 

    • F: man warned his widow to remain in their house after he died. she was charged £1 per yr and executors of will tried to evict her
    • LP: payment of the small rent was consideration. Consideration need only be legally not economically adequate
  • Sufficiency - White v Bluett
    • F: gave father a promissory note father died and father’s executors sued for the money the claimed his father promised to write of debt if he stopped complaining abt assets
    • LP: an intangible benefit is not consideration
  • Ward v Byham
    • F: father stopped paying £1 a week for maintenance of daughter
    • LP: good consideration - as making her child happy was sufficient
  • Past consideration no consideration 

    • when someone promises to give you something in return for something you’ve already done
    • A court will not enforce the promise to make the payment because the performance wasn’t bargained for
    • You did it without knowing that someone would come along later and offer to pay for it
  • Past consideration is no consideration
    • Re McArdle - general rule
    • Re Casey’s patent - exception - where there is the promisor’s express or implied request for a particular task there must be an implied understanding that the task should be paid for
  • Past consideration is no consideration
    Lampleigh v Braithwaite - exception:
    • the matter was so important that some payment could be implied as intended by the parties
  • Consideration must move from the promise 

    Tweddle v Atkinson
  • Performing a pre- existing duty cannot be the consideration of a new contract
    1. a duty imposed under a public duty
    2. A duty imposed under an existing contract
    3. A promise to make payment of an already existing duty
  • Public duty to act
    Collins v Godfrey:
    • F: someone has to go court + asked police offer to give evidence on his behalf - wants to be paid and find out he didn’t provide the evidence - was his public duty
    • LP: no consideration
  • Existing contract
    Stilk v Myrick:
    • F: still agreed to sail with m for £5 a month . Two of few deserted and asked remaining crew to do extra work , sharing wages saved. Claim for additional wages failed - no consideration
    • LP: a pre existing contractual obligation was not sufficient consideration to create a contact
  • Glasbrook Bros v Glamorgan county council : 

    • F: during strike, a pit owner asked for extra protection from police, refused to pay as police provided more men and in a different way than they would have normally make - no consideration
    • Lp: the police had provided more men and in a different way than they would have done, so there was consideration for the promise
  • Williams v Raffey Bros and Nicholls
    • F: The c’s subcontracted some work to Williams, a carpenter, Williams fell behind with his work - offered him bonus payment to finish on time. Williams carried on working until the payments stopped. He sued the c’s for breach of contract.
    • LP: the extra benefit of not having to pay a sum for delay to a client is consideration.
  • Hartley v Ponsonby :

    • a great change in circumstances and workload amounted to consideration
  • Privity of contract
    • means that a contract cannot confer rights nor impose obligations on someone who is not a party to the contract
  • Dunlop Pneumatic Tyre v selfrifge
    • rules of privity seen
    • F: D manufactured and sold tyres - to dew who agreed not to resell below certain price - dew sold to selfridges below price - dew refused to sue and Dunlop did
    • Lp: As dunlop was not a party to the contfact between Dew and Selfridge it could not sue selfridge for selling below the agreed price
  • The relationship between privity and consideration
    • rule of privity can be seen as based on the rule that consideration must move from the promise
  • relationship between privity and consideration :
    Jackson v horizon Holidays ltd :
    F: Mr J booked a holiday - very disappointed and sued for damages for him and family
    Lp: it would be unfair to limit the award of damages to mr Jackson . Claims of his family were allowed even though, strictly they were not parties to the holiday contact
  • General exception
    Rule of privity doesn’t apply :
    • Agency: arises when the person (agent) is authorised to make a contract on behalf of another person. Effect is that the principal will be bound by terms of contract even though he or she did not make the contract him/herself. Treated as same person
    • Collateral contracts: courts may be able to avoid the rule by finding a second contract alongside the main agreement - seen in shanklin pier ltd v detel products ltd
    • shanklin pier ltd v detel products ltd:
    • Facts : contractors asked to paint pier + told to use the paint that was manufactured by d . said it would last 7 yrs - only 3 months - LP: there was found to be a collateral contract between them to the effect that the paint would last seven years
  • Contracts (Rights of Third Parties Act) 1999:

    • under s1, someone who is not a party to to a contract may enforce the contract against neither or both the actual parties to the contract if:
    • The third party is expressly identified by name, or as a member of a class or as answering a particular description, and
    • The contract expressly provides that the third party may enforce the contract , or contract term is an attempt to confer the benefit of the term on the third party
  • Beswick v Beswick 

    • F: Mr B made contract with his nephew to sell his buisness in exchange for weekly payments to uncle for life and after he dies his wife. after death - refused to pay
    • Lp: the aunt was not a party to the contract, so there was no privity of contract
  • intention to create legal relations
    • presumed in an business agreement
    • Presumed not to exist where the agreement is purely of a social and domestic nature
    • Both of these presumptions may be rebutted
  • Intention to create legal relations
    • the parties to a contract expressly or impliedly agree that the contract is legally binding and therefore enforceable in court
  • Business agreements - rebuttal of presumption 

    Jones v Vernons pools:
    • F: mr jones claimed that that he had a winning football pool coupon . Coupon signed stated that the transaction was ‘binding in honour only’
    • Lp: this rebutted the presumption in the business contract
  • Edwards v Skyways Ltd:

    • F: C was an airline pilot to be made redundant and he stopped paying into the pension in exchange for an ex gratia payment . Company went back on promise
    • LP: the agreement had been made in a business content which raised a strong presumption that the agreement is legally binding
  • Edwards v skyways + jones v vernons pools 

    • in such cases the burden of proof is on the person seeking to establish that there is no intention to create legal relations
  • free gift can also be held to be legally binding 

    Elso Petroleum Co ltd v commissioners of customs and Exeise:
    • Elso gave a World Cup coin with every four gallons of petrol purchased
    • Lp: as elso was clearly trying to gain more business from the promotion, there was held to be legal intention in the arrangement
  • Business in domestic arrangement
    sadler v reynolds:
    • f: the alleged contract was between a journalist and businessman who were friends. - Lp: there may be a situation which falls into a sort of ‘halfway house’ between domestic and commercial. the person alleging it is legally binding must show that is the case
  • Social and domestic arrangements
    Not to be legally binding
  • Balfour v Balfour 

    • Husband worked abroad - promised her an income of £30 per month. marriage failed. she petitioned for divorce and claimed her £30 per month
    • Lp: the agreement was not binding as it was a domestic agreement between an amicable married couple
  • Merrit v Merrit 

    • mr merrit had left his wife - agreement to pay wife an income is she paid outstanding , mortgage was held to be intended to create legally binding obligations and enforced by court
    • Lp: the agreement was binding as it was an arrangement between separated married couple about future maintenance payments
  • Jones v Padvatton:

    • f: mother persuaded daughter to come to England to study for bar promising her to allow her to stay at home - yrs later not passed, fell out and mother wanted to evict her
    • Lp: there is a presumption that cohabitants would not intend to create enforceable contractural obligations between themselves
  • Simpkins v Pays

    • f: a lodger and members of the household entered competitions. Lodger filled in the form in the landlady’s name. mr. Pays refused to distribute the prize and Ms. Simpkins claimed for one-third of the prize under their agreement.
    • Lp: if money had changed hands, then even if the arrangement is made socially, it is more likely to be a commercial arrangement and therefore legally binding
  • Wilson v Burnett

    • f: 2 young women worked together and decided to attend bingo session - won £153 and prize over £100,000. question was whether there was any contract between them to share any winnings over £10
    • Lp: intention to create a legal relationship did not exist at that time to the claim for a share failed
  • Parker v Clarke:

    • f: young couple were persuaded to sell their house by older couple and for them to move in , with promise they will inherit property after they died. couple fell out and young couple asked to leave. argued that they had a legally binding contract
    • Lp: if parties put their financial security at risk for an agreement, then it must have been intended that the agreement should be legally binding