Transcript Lecture 7 - Dr Myra Williamson

COMPARATIVE CONTRACT LAW
PART II: THE LAW OF CONTRACT
(CONTINUED) - THE ENGLISH
COMMON LAW
COMPARATIVE LAW
LLM
KILAW
SPRING 2013
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DR MYRA WILLIAMSON
TODAY’S CLASS:
CONSIDERATION
ROADMAP - CONTRACT LAW
Offer
Acceptance
Intention to create legal relations
Consideration
Capacity
Other aspects:
Consent
Void and voidable contracts
Breach and remedies
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Performance of contract
CONSIDERATION: AN OVERVIEW
• Unless a contract is made by deed,
consideration is a universal
requirement of contracts in the
common law
• A bare promise (nudum pactum) is
not legally binding
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• A promise without consideration is
a gift
TERMS TO KNOW #1 – DEED
Deed – What is it?
A signed (and sometimes sealed) instrument in writing that
gives legal rights
It is like a contract but it is enforceable without consideration
A deed is a document that says “This is a deed…”
It is usually executed in front of witnesses (this is called
being in solemn form)
Some type of transactions MUST be done by deed
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• For example conveyances (buying and selling real estate),
mortagages, leases
For present purposes it is important to simply note that a deed
is enforcebale without consideration
TERMS TO KNOW #2:
CONSIDERATION
Consideration: what is it?
“…some right, interest, profit or benefit
accruing to one party, or some forbearance,
detriment, loss or responsibility given,
suffered or undertaken by the other.”
• Currie v Misa (1875)
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Consideration means any benefit to the
promisor or detriment to the promisee
CONSIDERATION
Each party to the contract must receive
something of value
To put it simply: “consideration” is the price for
which the promise of the other is bought
Eg. I promise to give you my watch. You don’t give me
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anything in return. If I break my promise and decide not
to give you my watch, you can’t go to court to make me
give it to you. There would be no legally-binding
contract because you didn’t give me consideration for
my promise
GENERAL RULES
a)It must be real/genuine
b)It need not be adequate
c)It must be legal
d)It must move from the promisee
e)It must be possible
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f)It must not be past
A) CONSIDERATION MUST BE
REAL
General principles
The court will not enforce vague or sham promises or
promises in which there is no benefit at all
There must be some real benefit OR real detriment
Many cases are authority for this proposition – we will look at
just two cases :
White v Bluett (1853)
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Shadwell v Shadwell (1860)
A) CONSIDERATION MUST BE
REAL CONTINUED…
White v Bluett (1853)
Facts: Mr Bluett had lent his son money. Mr B died. The
executor (Mr White) sued the son – asking him to pay the
money back to the estate
Son argued that father had told him he need not pay back the
money if he would stop complaining about how he was going
to distribute the money in his will
The consideration = the promise to stop complaining
Held: The promise to “cease complaining that he was not as
well-treated as his brother” was not sufficient (ie. Not good
enough) consideration
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“not complaining” was not a tangible (or real) benefit so
there was no contract
A) CONSIDERATION
MUST BE REAL CONT’D…
Shadwell v Shadwell (1860)
Facts: Uncle promised to pay nephew £150 a year if he
married Ellen Nicholl
The nephew married Ellen Nicholl
Some payments were made – uncle died
Nephew sued executor of uncle’s estate for the rest
Held: by marrying, the nephew had incurred responsibilities
and had changed his position; the uncle had obtained benefit
in seeing his nephew marry
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The consideration was real – nephew won
B) CONSIDERATIONS DOESN’T
NEED TO BE ADEQUATE
“adequate” = fair or a good price; enough
Parties are free to make whatever types of contracts they like
They can name the price for their goods – whatever price they
like
The rule is: The price does not need to be “fair” or “adequate”
but it must have some value in the eyes of the law
A person cannot complain to the court simply because they
have paid too much – ie. If they made a bad bargain
The court applies the rule caveat emptor which means “let the
buyer beware”
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This rule means that the court is not going to interfere if a
person pays too much or too little – the parties have to look out
for their own interests when entering into contracts
B) CONSIDERATION NEED NOT
BE ADEQUATE CONT’D…
Cases which are authority for the
proposition that consideration need
not be adequate:
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• Bainbridge v Firmstone (1838)
• Chappell & Co Ltd v Nestle Co Ltd
(1960)
b) Doesn’t need to be
adequate cont’d…
• Bainbridge v Firmstone (1838)
• The facts:
• Bainbridge allowed Firmstone to weigh two
boilers owned by Bainbridge on the condition
that they were returned in the same condition
• F took them apart and returned them without
putting them back together
Held: there was consideration
“there is a detriment to the plaintiff in parting with the
possession of the boilers even for so short a time”
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Plaintiff (B) was successful
B) CONSIDERATION NEED NOT
BE ADEQUATE CONT’D…
• Chappell & Co Ltd v Nestle Co
Ltd (1960)
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• Facts: Nestle was giving away records to people who
bought 3 chocolate bars and sent in the wrappers with
an extra “1s 6d” (ie 1 shilling and 6 pennies). The
chocolate bars cost 6 pennies each
Copyright Act stated that 6.25% to be paid on the
“ordinary selling price” of the records
Chappell & Co owed the copyright to the
music (“Rocking Shoes” by the King Brothers)
Chappell & Co Ltd v Nestle Co Ltd
(1960)
Chappell sued Nestle for failing to pay the correct amount of
royalties (ie commission on sales of the records)
The case turned on whether the chocolate wrappers were
part of the “consideration” for the sale of the records
Held: Majority of the House of Lords held that the chocolate
wrappers were part of the consideration; Nestle had to pay
Chappell & Co much more in royalties
This statement: “the wrappers will help you to get smash hit
recordings” meant Nestle saw the wrappers as
consideration
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It didn’t matter that the wrappers were “worthless” to Nestle*
ROAD MAP
Where are we at now?
Consideration:
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a)It must be real/genuine
b)It need not be adequate
c)It must be legal
d)It must move from the promisee
e)It must be possible
f)It must not be past
C) CONSIDERATION MUST BE
LEGAL
The consideration must be
legal – this is obvious*
Authority:
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•Pearce v Brooks (1866)
•Foster v Driscoll (1929)
C) CONSIDERATION MUST BE
LEGAL CONT…
• Pearce v Brooks (1866)
Facts: The owner of a brougham (a closed four-wheeled
carriage with an open driver’s seat in front) hired it out to a
prostitute for use by her knowing it would be used in her
business
She failed to keep up the payments; Plaintiff sued the
prostitute
Held: Since the pl. knew that the brougham would be used
for an illegal purpose, there was no consideration. The
contract was void.
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Consideration must be legal.
Pearce v Brooks (1866) vocabulary
A “brougham”:
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“Prostitute”:
“Void”:void means that the contract has no
legal effect – agreements of this kind do not
confer any legal rights on the parties (see
Barker at p.103)
C) CONSIDERATION
MUST BE LEGAL CONT…
Foster v Driscoll (1929)
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Facts: A contract was entered into for the shipment of
whiskey from England to the US during the period of
prohibition (when alcohol was not allowed).
Held: the English Court of Appeal would not enforce
the contract because the “consideration” involved
doing something that was against the law of the other
country (ie importing whiskey)
Consideration here = the whiskey
Whiskey was not legal in the US which is where it was
heading
Contract was void
D) CONSIDERATION MUST MOVE
FROM THE PROMISEE
The consideration must move from the promisee (the person
to whom the promise was made)
It is not enough that consideration has been given – it must
have been given by the promisee
So, if a third party provides the consideration that would not
be good enough
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Privity of contract and consideration are separate (Barker
Law Made Simple is a bit misleading on this point)
D) CONSIDERATION MUST MOVE
FROM THE PROMISEE CONT…
Authority: Tweedle v Atkinson (1861)
Facts: a contract was made between the fathers of a married
couple. Each father was supposed to pay a sum of money to
the husband. One of the fathers died. The husband sued the
executor (Atkinson) of the estate.
Held: Tweedle (the husband) could not succeed because no
consideration had been given by him
There was consideration – but it had not come from the
promisee
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As far as Tweedle was concerned, the promise was a
gratuitous one
E) IT MUST BE POSSIBLE
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The law will not enforce that which
is outside the realm of human
endeavour
A promise to do the impossible
is not consideration
eg. A promise to make pigs fly
eg a promise to go the centre
of the Earth
F) IT MUST NOT BE PAST
A benefit that was conferred in the past cannot be
considered as consideration for a present promise
If someone did something for you in the past, that can’t be
used as consideration for a contract that is made at a later
point in time
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The consideration has to be given or promised at the time of
making the contract
SUMMARY OF
CONSIDERATION
• Consideration is something of value given by both
parties to a contract that induces them to enter into
the agreement
• It is an essential element of a contract
• If there is no consideration, there is no contract
• Remember the 6 rules that relate to consideration –
use them as a checklist
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• If the problem involves consideration, apply those
rules and see whether there was “consideration”
COMPARING COMMON
LAW WITH CIVIL LAW
See the reading handed out in class
It is an extract from Alain A. Levasseur Comparative Law of
Contracts – Cases and Materials
It provides some background on the difference between
common law and civil law legal systems on this requirement
Common law requres “consideration” but the civil law
requires a “lawful cause” or a “lawful reason”. It does not
require consideration
Please read the extract and I will write a post on the Blog.
Please try to find the relevant part of the Kuwaiti law which
requires a ‘cause’