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Week 5 Consideration

1

Types of Enforceable Agreement

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

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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: )

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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 4

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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

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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 6

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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

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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

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• • • •

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)

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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 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 10

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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 11

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Existing Contractual Duty

 Promise to perform an existing contractual duty to a third party is sufficient consideration  The Eurymedon 12

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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 13

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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

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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”

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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 16

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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) 17

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Promissory Estoppel

  Walton Stores v Maher Estoppel applies where  No consideration exists  Formalities of making a contract have not been satisfied

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Elements of Promissory Estoppel

1.

2.

3.

4.

5.

6.

Relationship A relationship (usually contractual or pre-contractual) exists between the parties Promise A promise not to assert legal rights Expectation Promisee expects promise to be kept Reliance Promisee acts in reliance on promise Detriment Promisee alters its position to its detriment Unconscionable Unconscionable to allow promisor to break promise 19

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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 20

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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 21

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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

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22

Remedy

  Minimum orders to prevent detriment Not necessarily the same remedy as for breach of contract  Not a new cause of action 23

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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) 24

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