CONTRACT law

consideration, promissory estoppel and duress

Consideration: exchange of promises given by both parties to acontractthat induces them to enter into the agreement to exchange mutual performances. Consideration is the bargaining element of the contract.

DEFINITION

‘An act or forbearance of one party, or the promise thereof, is the price for which the promise of the other is bought, and the promise thus given for value is enforceable’ (Dunedin LJ in Dunlop v Selfridge)

BILATERAL CONTRACTS

Consideration is provided by the exchange of promises, the act/performance of which will occur in the future. Either party is liable to be sued for breach of contract if they do not perform their promise.

This is called executory consideration.

UNILATERAL CONTRACTS

Consideration consists of a promise in exchange for the performance of an act. The promise must come before the act.

This is called executed consideration.

Consideration must not be past.

Eastwood v Kenyon – D’s husband promised to pay E for having raised his wife but did not keep his promise.

HELD: C’s actions were all in the past. They had already been done when the promise had been given therefore they couldn’t be consideration for a promise to do something in the future. Therefore C had no grounds to sue.

Exception: Lord Scarman’s criteria in Pao On v Lau Yiu Long:

Was it at the request of the promisor? [Lampleigh v Braithwaite]

In Pao’s case, yes the promisor asked the company to hold on to the shares.; AND

Was payment understood to be due? [Yes in Re Casey’s Patents, but not Re McArdle]

Was it the sort of circumstances where there would be an expectation of payments? If there is, then consideration may be valid. [similar to ITCLR commercial presumption]; AND

Would the contract be enforceable apart from this issue?

If all other elements of contract have been met and there are no other issues/barriers (e.g. public policy issue) then consideration may be valid.

ONLY if all of this criteria is satisfied will past consideration be good consideration.

Consideration must move from the promisee

Tweddle v Atkinson

Father of bride and father of groom both promised that they will give money to groom. One paid but the other did not pay and died.

Groom sues estate of the deceased.

HELD: Groom is not entitled to money because he hasn’t got a cause of action – he has given no consideration to the deceased for the promise.

Strange circumstances of case: the party that provided consideration was the groom’s father, so he has cause of action. But the money wasn’t promised to him (he’s not the promisee) so he has no loss.

Only person with consideration has no loss, and the only person with a loss has no cause of action. The wrong therefore goes uncompensated.

This rule is similar to the rule of Privity – doctrine of privity = in order to sue on a contract, you have to be a party to it. One criteria to being a party to contract = consideration.

Consideration must be sufficient, not adequate.

Chappelle v Nestle Co – royalty issue. Nestle stated that the ordinary retail selling price was $1 6s enough but it was argued that the chocolate wrappers also formed part of the consideration – sweet wrappers could be good consideration as they were of value to Nestle. Consideration need only be sufficient.

‘A contracting party can stipulate for what consideration he chooses. A peppercorn does not cease to be good consideration if it is established that the promisee does not like pepper and will throw away the corn.’

Lord Somervell

White v Bluett – promise to stop complaining is not sufficient. Public policy argument – if not hassling someone was sufficient consideration, then it’s like sanctioning blackmail.
Hamer v Sidway – giving up legal rights is good consideration. This case is distinguishable from White v Bluett because Hamer was refraining from doing things that he was legally entitled to do. In White, he was refraining from hassling someone.

VARIATION CONTRACTS

Performance of an existing contractual obligation is not good consideration for a promise of extra
- Stylk v Myrick

Voyage from London to the Baltic. Two sailors desert and ship captain gets worried that others will desert, so promises to share out the wages of the deserters amongst remaining crew members. After voyage, Captain refuses to pay.

HELD: Courts concluded that sailors were already under an obligation to do the extra work as a result of the contract which stated that they would do “all your best endeavours to get the ship back to London. Crew had done nothing above and beyond their duties to get the extra money – no consideration had been given.

Policy reason for decision: accepting consideration could lead to duress.

Exception 1: going above and beyond your contractual obligation

Hartley v Ponsonby

Similar facts to Stylk - captain promised extra money to crew and then did not pay. The difference was this time so many sailors deserted that continuing the voyage became a ‘new and dangerous journey’. Staying on board therefore meant that the sailors were doing something extra.

HELD: Sailors had given consideration so they were entitled to the extra money they were promised.

Exception 2: Promisor receives a practical benefit

Factual consideration/practical benefit = good consideration.

Williams v Roffey Bros

Building contract with main contractor, D, who has been contracted to refurbish a block of 27 flats. D subcontracts carpentry work to C, who struggle to keep up with the work.

20,000 = agreed sum to be paid to C. After completing 9 flats, C tell D that they’re running out of money because they lacked resources as they had underpriced the tender to win the contract. D has a deadline with landowners and would have to pay liquidated damages if they didn’t meet deadline.

D said they’d give C extra money and tell C to change method of work – work on project flat by flat rather than altogether. D made some payments, but not everything they promised.

C took D to court for money they had promised.

D said C had done nothing more than what they had initially agreed to do.

C refuted this, claiming they’d changed the way the work was done doing something extra.

HELD: Courts didn’t accept that C had done more. But just by doing what they’d promised to do, they could have provided the consideration as the other party gain a practical benefit.

Gladwell LJ set the following criteria for factual consideration/practical benefit:

Existing contractual obligation for services
Paying party has reason to doubt completion
Paying party offers to pay extra
Paying party gains a practical benefit or obviates a disbenefit
No duress

ALL OF THIS CRITERA MUST BE MET.

*This decision has been heavily criticised*

Performance of an existing public duty is not good consideration.
- Leeds Utd v CC for West Yorkshire

The court held that policing around areas within the immediate vicinity of the football club (even though it was outside of the football grounds) is not going beyond normal duties to maintain law and order, so no consideration was given.

Collins v Godfrey

C was summoned to appear as a witness. G later offered C money to appear as a witness, but then did not pay.

HELD: C gave no consideration as he was already obliged to perform a public duty – you’d have to go further than that duty to enforce the promise.

Exception: going above and beyond your duty

Harris v Sheffield Utd

D had asked for extra police on their grounds. Police agreed and sent forces to the ground. Police then claimed they were going beyond the public duty because they wouldn’t usually send so many officers and requested money. D argued it was their duty to prevent crime, so they weren’t doing anything extra.

HELD: The police were going beyond their duty therefore they could be paid for this

Ward v Byham

Daughter born out of wedlock – father said he would let mother have the child and give her an allowance, providing the child would be well looked after and happy and could decide where she wants to live. Later, he stopped paying allowance.

PROBLEM: Could the promised be enforced?

Father’s argument: it’s the mother’s duty to take care of the child anyway, so she doesn’t need to get paid for it.

HELD: Lord Denning said: there is a public duty on parents to look after their children, but there is no requirement to keep them happy. Therefore, he believed the mum was going beyond her duties.

Rest of court agreed that father had to pay, but with a different focus: mother was letting the child choose where she wanted to live this was the main aspect of her going above and beyond her duty.

Performance of an existing obligation to a third party is good consideration.

Scotson v Pegg – third party gets benefit of being able to sue the party directly

X owned coal and contracted with C to deliver coal to X or whoever X elected in the event that he sells coal before delivery. X subsequently sold coal to D and requested that C deliver coal to D.

C were unable to unload coal as they only deliver. D offered to unload the coal at a discounted price if C delivered the coal directly to them.

D then found out about the existing contract (between X and C) and refused to unload coal. D claimed that they were not getting any consideration for unloading the coal at a discounted rate as C was already obliged to deliver coal to D.

HELD: Court said that the benefit D got from the contract was the right to sue C directly if they didn’t deliver. According to the court, this benefit is good consideration,...

#14765 - Consideration Promissory Estoppel And Duress - GDL Contract Law

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