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Consideration Notes - Lecture notes, course 3 - 5

Module

Contract Law (LAWS10021)

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Generally speaking, it is the

price of a promise

 B rescues A from an accident and A

THEN promises him a reward. This is

unenforceable because the

consideration is “past” – i. the act for

which the promise has been given has

already been done. Eastwood v

Kenyon

 Not very fair, perhaps, but not

everything in life is fair!

 I owe you £1000. I can’t afford to pay so I offer you £600 and tell you that it is £600 or nothing. You accept. Can you then sue me for the remaining £400?

 Yes, according to Pinnel’s Case and Foakes v Beer

 Why? Because I are under a legal obligation to pay £1000. There is no consideration moving from me for your promise to forego the extra.

 Re-affirmed in D&amp;c Builders v Rees and Re Selectmove

 Can I give you something instead of the £400?

 Fair? Unfair? To whom?!

 Suppose A is under a contractual duty to do

something for B. Can that support a contract with C to do the same thing and be paid?

 Yes – The Eurymedon – “...... is good

consideration because the promisse obtains the benefit of a direct obligation”

 Such as? C could sue A as well as B if A

doesn’t perform.

 Circular argument!

 Can only be a policy decision

 The traditional view was always that by simply doing what you have already promised to do cannot be good consideration – Stilk v Myrick

 We can vary contracts if you do MORE – say, you promise to deliver goods to me on 1st December and I promise to pay £100 for them. You can demand £110, IF we agree that you will deliver them tomorrow. My promise to pay the extra £10 is enforceable by you because it is supported by your promise to deliver early

 Roffey had contract to re-furbish 27 flats

 They subcontracted the carpentry work to Williams for £20,

 After finishing 9 flats Williams got into financial difficulties – contract price too low

 Roffey Bros offered him an extra £575 per flat - £10,300 - to finish the job on time

 Williams completed 8 more flats but Roffey paid only £

 Williams abandoned the job and sued for the balance

 Roffey said that they were not bound to pay

because Williams had provided no

consideration for their promise

 Court of Appeal disagreed and ordered

them to pay the extra sum

 Why? Basically because an “extra” benefit

had accrued to Roffey Bros, who avoided a

penalty clause if the job was finished late

 Recognises “commercial reality”

 This really just deals with the

issue that if you say or do

something and another person

takes you at your word and relies

on what you have said or done,

you cannot later change your

mind – the law says you are

“(e)stopped” from doing so

 Central London Properties v High Trees

 In 1937, Landlord granted a long lease on a

block of flats for £2,500pa. He agreed to reduce the rent, when war broke out, to £1,250 because not all the flats could be let. At the end of the war, when they were, landlord brought an action to reclaim the difference for the last two quarters of 1945, after the war ended.

 What principle are we dealing with here?

 Weak, first instance authority!

 Nevertheless, followed ever since

 Has led to the doctrine which we

now call promissory estoppel

 Has a wider application now than

just the part-payment of a debt

situations

 There must be a clear, unambiguous promise

or representation by the creditor that he will not insist on his strict legal rights

 The legal rights must be existing, so this

cannot work at formation stage, only at variation

 The promise or representation must be relied

upon by the debtor, i. he must alter his position and act differently

 To his detriment?

 Combe v Combe

 Husband promised to pay wife £100pa on separation. He didn’t pay anything for 6 years. Wife brought an action for the arrears. She argued that she had supplied consideration by refraining from applying for a permanent maintenance order. But, there had been no request from the husband that she should do so refrain.

 Enforceable?

 No

 Could the courts enforce the promise by using a different means?

 Abolish the requirement of consideration?

 Even Lord Denning said “No” to this

 Estoppel?

 Yes, if it can reconciled with consideration

 “A shield and not a sword” – you cannot create new legal rights where none existed – as Mrs Combe was seeking to do. You can only enforce existing legal rights – as in High Trees

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