#15521 - Consideration Duress Part Payment Promissory Estoppel - GDL Contract Law

Contract Law: Consideration, Duress, Part Payment, Promissory Estoppel

Consideration

• Consideration = ‘an act or forbearance of one party, or the promise thereof, is the price for which the promise of the other is bought’ (Dunlop v Selfridge, Dunedin LJ).

• If no consideration promise not enforceable.

• So a promise of the consideration (the act or forbearance) is enough to be consideration (Dunlop)

• Rules of ‘good consideration:

  • (1) must not be past (Eastwood v Kenyon; exception, Paon on v Lau Yiu Long, Lampleigh, Re Casey, Re McArdle).

  • (2) must move from the promisee (Tweddle v Atkinson).

  • (3) must be sufficient not adequate (Chappel v Nestle; White v Bluett CF Hamer v Sidway).

Consideration must not be past

• Eastwood v Kenyon—an act/forbearance prior to promise to pay = bad consideration.

• Exception—where some prior act/service was provided at promisor’s request; and was always understood payment would be made

• Pao On v Lau Yiu Long, 3 conditions

  • (1) act must have been done at (express) request of the promisor (Lampleigh v Braithwait—Braithwait expressly requested Lampleigh to get him a pardon).

  • (2) Payment understood to be due (parties understood the act to be rewarded)—may be implied, eg in commercial context.

  • implied understanding; Re Casey’s Patents, implied understanding, commercial setting—Re Casey: implied understanding of payment due to past dealings between the parties, had been paid for that work for 40 years.

  • cf domestic setting, less likely to be implied, Re McArdle).

  • (3) Contract enforceable apart from this issue:

  • (a) ICLR issues: eg if between family, no ICLR, no contract;

  • (b) offer & acceptance issues:

  • (c) any other consideration issues:

    • The consideration must be good, aside from it being past.

    • Eg, whether ‘sufficient’ consideration (Chappel v Nestle), or whether only public duty (Collins v Godefroy) etc etc

    • So might need to discuss here whether is good consideration, eg Hartley; Wiliams v Roffey etc.

• NB: not really an ‘exception’—the subsequent promise to pay is simply evidence of an obligation to pay which had already arisen.

Consideration must move from the promisee (Dunlop v Selfridge)

• Similar to privity, but separate—2 different principles, overlapping.

• Tweddle v Atkinson: consideration was between the fathers, Tweddle JR had given no consideration (was unenforceable for 2 reasons: (1) no consideration; (2) no privity.

Consideration must be sufficient, need not be adequate

• As long as courts can find value, won’t assess the relative value of each party’s contribution---freedom of contract.

• Must be sufficient, need not be adequate: Chappell v Nestle: wrappers were part of the consideration. A ‘peppercorn’ can be good consideration.

• But consideration must be sufficient, must have some value ‘in the eyes of the law’. Is forbearance good consideration?

  • NO White v Bluett: giving up something you never had a legal right to in the first place = not good consideration, not a detriment.

  • CF, yes if: consideration if giving up legal rights--Hamer v Sidway: had given up rights which he had a right to do aged 16 (smoking/drinking/gambling) = restricting his lawful freedom = good consideration.

  • No consideration if promise to resist a course of action he never intended to pursue: Arralge v Costain.

Existing obligations—good consideration?

• Public duty—performance of exiting obligation

  • Not good consideration (Collins v Godefroy, re public duty to appear in court).

  • Exceptions—going beyond duties imposed by law

  • England v Davidson, police officer went beyond duty by providing info to a private individual.

  • Police, Harris v Sheffield United—police, by protecting safety of supporters inside th stadium = ‘special serivces’, over & above normal duties—Sheffield Utd had to pay.

  • Parental, Ward v Byham: public duty to look after child; but not to keep their children happy. So was consideration.

• Courts use sufficiency of consideration as a way to decide along policey concerns.

Performance of an existing obligation to a third party

• Doing something one was already bound to do under a pre-existing contract with a 3^rd party.

• Can be good consideration, Scotson v Pegg.: delivery of coal to Pegg was god consideration for Pegg’s promise of a discount; immaterial that S had previously contracted with C to deliver the coal to Pegg. Pegg still got a benefit.

• The Eurymedon (PC): PC applied Scotson, where D already bound by a contract with a 3^rd party to unload goods. The consideration given to the promisee = the right to sue, the benefit of a direct obligation. Promi

• Pao On v Lau Yiu Long: a promise (CF actual performance) to perform a pre-existing contractual duty owed to B = good consideration to C.

• Promisor gets benefit of 2 separate contracts for doing 1 obligation; but also gets double liability.

Existing obligation within a contract (1) Stilk general rule; (2) Hartley legal benefit; (3) Roffey practical benefit

• Performance of existing obligation = not good consideration (Stilk v Myrick): re ship sailors, 3 deserting sailors, sailed ship back: had only performed existing obligations, not entitled to extra money.

  • [[NB: now, Stilk v Myrick would be covered by doctrine of economic duress. So before that, consideration was used to police duress.]]

• Exception (1), Legal benefit, ‘over & above’—Hartley v Ponsonby:

  • 16 sailors deserted; dangerous journey on way back, ship seriously undermanned—legal benefit, ‘over and above’ original obligations good consideration for a fresh contract.

• Stilk general rule + Hartley exception approved in The Atlantic Baron.

• Exception (2), practical benefit, Williams v Roffey

  • Facts: Williams a carpenter; changed working plays with extra payment promised;

  • Roffey obtained practical benefits: avoided losing money under ‘penalty’ clause with the owner; obviated disbenefit of finding alternative contractor; benefited from altered working arrangements.

  • = good consideration.

  • Court interpreted Stilk as guarding against duress; and now we have separate doctrine of economic duress.

  • Test, Glidewell LJ:

  • (1) Promisee has an existing contract with promisor to supply goods or services;

  • (2) Promisor has a reason to doubt that promisee will, or will be able to, complete his obligations.

  • (3) Promisor promises to pay promise extra to complete obligations.

  • (4) Promisor obtains ‘practical benefit’ or ‘obviates a disbenefit’.

  • (5) Promisor’s promise not given as result of duress or fraud.

• Williams confirmed in Adam Open v Mitras: saying that now we have economic duress principle, consideration no longer used to protect against duress.

• Note, uncertain how far Williams goes: does it apply to part payment of debt, agreeing to a lesser sum? (Re Selectmove, following Foakes v Beer: no; but maybe, MWB v Rock).

Duress (effect = contract voidable)

• Duress to person: Barton v Armstrong:

  • Causation test: easy test, only need be a/one reason influencing the wronged party’s behaviour. Burden of proof on D to say the duress was not one factor on their mind when entered contract.

• Duress to goods, The Siboen & The Sibotre: but CF from ‘rough & tumble of commercial bargaining’ (no duress on the facts).

  • Causation test: ‘but for’.

Economic duress

• Development of doctrine:

  • The Siboen, first recognition ‘coercion ov the will’.

  • PC, Pao on v Lau Yiu Long: ‘coercion of will, which vitiates consent’.

  • The Universal Sentinel, shift away from ‘coercion of will’ to ‘compulsion of will + legitimate of the pressure’ resulting in ‘absence of choice’.

DSND Subsea v Petoleum Geo Services, Dyson J criteria:

• There must be pressure, resulting in:

  • (1) Whose practical effect is that there is a ‘lack of practical choice’ for victim

  • (2) Which is illegitimate

  • (3) Which is a significant cause inducing C to enter the contract.

• So, pressure resulting in:: (1) lack of practical choice; (2) illegitimate pressure; (3) causation.

• Effect: contract voidable.

• Distinguish from ‘rough & tumble’ of normal commercial bargaining.

• Facts: commercial diving; DSND sent down deep-sea divers; wouldn’t send down divers due to inadequate insurance provisions. hELD: not economic duress, because DSND had good reason for threatening breach.

• Confirmed in Carillion Construction v Felix; Kolmar v Traxpro.

(1) Lack of practical choice:

• DSND Subsea: No lack of practical choice, Petroleum didn’t have sense of urgency.

• B & S Contracts v Victor Green Publications—lack of practical choice: C contracted to erect stands for D; week before exhibition, C’s workman go on strike; C told D, unless pay more, contract would be cancelled. D paid, contract performed, but didn’t pay the extra. C claimed unpaid balance.

• There was duress—no realistic choice other than to pay, because cancellation of contract would have caused serious damage to D’s economic interests. Taking an action for breach of contract, although technically an alternative option, was not a ‘practical’ choice.

• Important: D had acted sufficiently promptly.

• Carillion Construction v Felix: C a building company; F provides cladding; F late delivery, says if make extra payment, will supply; C said yes to get done. No realistic practical choice—needed supply of cladding, unrealistic to expect victim to seek a mandatory injunction.

• Atlas Express v Kafco: duress found.

• Kolmar v Traxpo: no practical choice -> given pressing need to satisfy an order with a 3^rd party client, otherwise would be in breach of contract with them.

(2) Legitimate or illegitimate pressure (distinguish from rough & tumble)

• Lord Scarman, The Universe Sentinel: pressure may be illegitimate...