#3104 - Consideration, Part Payment Of Debt, Promissory Estoppel And Duress - GDL Contract Law

Doctrine of Consideration

- Valid contract: agreement, ILCR/capacity, consideration.

- Definitions: consideration.

• Currie v Misa, [Lush J]: ‘right, interest, profit, benefit accruing to one party, or some forbearance, detriment, loss or responsibility given, suffered or undertaken by the other’.

• Dunlop v Selfridge, [Dunedin LJ]: ‘act of forbearance of one party, or promise thereof, is the price for which the promise of the other is bought, and the promise thus given for value is enforceable.’

• - PAST CONSIDERATION.

  • general rule: not good consideration (Eastwood v Kenyon: raising girl; Roscorla v Thomas: buying horse).

  • exception: Pao On v Lau Yiu Long, [Ld Scarman]:

    • 1. act performed at promisor’s request (Lampleigh v Braithwait: c. intervened with king at d’s request).

    • 2. payment understood to be due (may be implied).

      • commercial: more likely (Re Casey’s Patents: manager’s past service).

      • domestic: less likely (Re McArdle: wife did repairs on h’s bungalow, then promised pay no).

    • 3. contract would have been legally enforceable apart from this issue (i.e. agreement, ICLR, capacity; existing contractual obligation; existing public duty obligation?).

  - Consideration must move from promisee: both parties must give (Tweddle v Atkinson: fathers of bride + groom agree to give money to groom groom cannot enforce father-in-law’s promise).

  • but: s1 The Contract (Rights of Third Parties) Act 1999: 3^rd party can enforce contract explicitly for his benefit (unless excluded).

  - Consideration must be sufficient, not adequate.

  • need not be adequate (Chappell v Nestle: chocolate wrappers part of consideration).

  • must be sufficient: ‘value in eyes of the law’.

    • White v Bluett: promise not to complain NOT good consideration (no legal right to complain).

    • Hamer v Sidaway [US]: promise to refrain from vices good consideration (curtailing rights).

    • Arrale v Costain Civil Engineering: promise not to do thing did not intend to NOT good consideration.

  - Existing public duty obligation: not good consideration (Collins v Godefroy).

  • legal duty (Collins v Godefroy: attending court when subpoenaed).

  • parents (Ward v Byham: maintenance of child + keeping child happy OK: beyond legal duty).

  • police: duty limited.

    • England v Davidson: duty does not extend to providing info. to individuals can claim reward;

    • Harris v Sheffield United FC: police presence on ground OK: assisting club in duty to maintain order.

  - Existing obligation to 3^rd party: valid consideration (Scotson v Pegg: delivery of coal to party already bound to receive).

  • rationale: promisor gains legal certainty – right to sue promisee directly for breach.

  • confirmed: The Eurymedon.

  • extended: promise to perform pre-existing contractual duty to 3^rd party valid (Pao On v Lau Yiu Long).

Promise to Pay More (i.e. consideration: performance of existing obligation)

• - General rule: existing contractual obligation NOT good consideration (Stilk v Myrick: seamen contracted to finish voyage).

  • approved: The Atlantic Baron.

  - Exception 1: extra obligation (Hartley v Ponsonby: finish voyage with undermanned ship – dangerous).

  - Exception 2: promisor receives ‘factual consideration’/’practical benefit’ (Williams v Roffey Bros, [Glidewell LJ):

  • test – [Glidewell LJ]:

    • 1. A has contract with B to supply goods + services.

    • 2. B has reason to doubt A will not complete on time (i.e. late, bankrupt, unable to finish).

    • 3. B promises to pay A extra to complete on time.

    • 4. B obtains ‘practical/factual benefit’ or obviates disbenefit.

    • 5. no duress.

  • BUT V. LIMITED: HAS NEVER BEEN APPLIED.

    • not when promisee approaches promisor – ev. of duress (Adam Opel v Mitras Automotive).

    • does not apply to part payment of debt (Re Selectmove).

  - Consider ECONOMIC DURESS (DSND Subsea v Petroleum Geo Ltd, [Dyson J]; confirmed in Carillion Construction v Felix).

  • definition: coercion of the will so as to vitiate consent (The Siboen & The SIbotre).

  • effect: contract voidable court can set aside (Pao On v Lau Yiu Long).

  • requires: PRESSURE –

    • a. resulting in lack of practical choice (e.g. time pressure).

      • definition: no ‘realistic practical alternative but to submit’ (DSND Subsea v Petroleum, [Dyson J]).

      • B & S Contracts v Victor Green: c. (stand co.) asked d. for more money days before exhibition.

      • Atlas Express v Kafco: threat not to deliver baskets to Woolworths just before Christmas.

    • b. which is illegitimate: factors – [Dyson J]:

      • i. actual/threatened breach of contract? (Atlas Express v Kafco).

      • ii. good/bad faith? (dep. on facts: legitimate threat? legitimate purpose?)

        • Atlas Express v Kafco: demand to get money not entitled to bad faith.

        • The Universe Sentinel: not let ship leave till contributed to union welfare fund bad faith.

        • DSND Subsea v Petroleum: c. refused to work until insurance in place good faith.

        • CTN v Gallagher: genuine mistake over who responsible for insurance good faith.

      • iii. v. protested at time? (DSND Subsea v Petroleum: no allegation of duress at time; parties on good terms).

      • iv. v. affirmed? ([Dyson J]: ‘if v. fails to take action to set aside within reasonable time after freed from undue influence’ – b/c contract only voidable, not void).

        • failure to take action variation contract affirmed.

          • The Atlantic Baron: c. waited 8 months to claim too long: contract affirmed.

          • DSND Subsea v Petroleum: P. relied on terms of variation contract affirmed.

        • immediate action to avoid duress affirmed

          • Atlas Express v Kafco: K paid only original contract price when invoiced.

          • B & S Contracts v Victor Green: VG deducted sum from bill no affirmation.

    • c. which is a significant cause inducing c. to enter into contract.

      • ‘but for’ test (Huyton SA v Peter Cremer, [Mance J]: decisive or clinching).

      • (cf. duress of the person: need only be 1 reason – Barton v Armstrong).

  • commercial pressure: NOT duress.

    • hard bargain (Alec Lobb v Total Oil: harsh lease-back of garage just hard bargain, not duress)/

    • overwhelming pressure (R v AG England + Wales: SAS member had to sign Official Secrets Act or be demoted overwhelming pressure, but not illegitimate – justified purpose).

  Promise to Accept Less (i.e. consideration: part payment of debt)

  - General rule: part payment of debt NOT good consideration (Foakes v Beer: judgment debt interest).

  • factual benefit irrelevant (Re Selectmove: Williams v Roffey does NOT apply to debt – Inland Revenue need not accept payment in instalments to prevent bankruptcy)

  - CL Exception 1: ‘new element’ with creditor’s agreement (Pinnel’s Case).

  • 1. different thing

    • Pinnel’s Case: ‘hawk, a horse or robe’ to clear money debt, but not less money.

    • not promissory note for money (D & C Builders v Rees: cheque in no way better than money).

  • 2. different place (Van Bergen v St Edmund Properties).

  • 3. earlier time (Pinnel’s Case).

  - CL Exception 2: payment of lesser sum by 3^rd party (Welby v Drake).

  • rationale 1: fraud on 3^rd party to renege.

  • rationale 2: new contract – creditor agrees 3^rd party’s conditions in return for payment.

    • The Contract (Rights of 3rd Parties) Act 1999 may apply: debtor takes benefit of term not to sue him.

  - Equitable exception: promissory estoppel (Central London Property Trust v High Trees House, [Ld Denning]).

  • definition: man ‘will not be allowed to go back on [promise] when it would be unjust or inequitable for him to do so’ (CLPT v High Trees House, [Ld Denning]).

  • elements:

    • 1. shield not a sword: defence only, NOT cause of action (Combe v Combe).

    • 2. clear + unequivocal promise (Woodhouse Cocoa v Nigerian Produce).

      • can be implied (Hughes v Metropolitan Railway Co: talks to buy suspend obligation to repair).

    • 3. promisee alters position in reliance (E.A. Ajayi v R.T Briscoe Ltd).

      • promise need not be only reason for alteration: promisor must disprove reliance if action taken after promise (Brikom Investments v Carr, [Ld Denning]).

      • part payment of debt: reliance by paying? BUT DUBIOUS (Collier v P & MJ Wright, [Arden LJ]).

    • 4. reliance need not be detrimental (Alan & Co v El Nasr Export & Import: relied on better exchange rate, so no detriment [Ld Denning]: only reliance needed).

    • 5. inequitable to resile promise (The Post Chaser): i.e. have circs giving rise to estoppel ceased?

      • detriment: not needed, but ev. of inequality (The Post Chaser).

      • equitable doctrine: discretionary – clean hands etc. (D & C Builders v Rees: taking advantage of builders’ poor finances).

  • effect: suspends legal rights, does not extinguish (Alan v El Nasr, [Ld Denning]) – can be resumed:

    • 1. reasonable notice: must give promisee opportunity to resume position (Ajayi v Briscoe).

      • can be implied (Tool Metal Manufacturing v Tungsten Electric: earlier court case...