#6 - Enforceability Consideration And Promissory Estoppel - Contract Law

Contract Law reading session 2 Chen-Wishart chapter 4 * "bare pacts" or simple undertakings are unenforceable. There must be an undertaking "plus". This "plus" can often be consideration, where "something of value has been given in return for another's undertaking". An alternative to consideration is to frame the promise within a "formal requirement" e.g. where a promise is contained in a deed. Third way is "promissory estoppel" where A has relied on B's undertaking no to insist on strict legal rights and where it would be "unconscionable" for B to go back on it. * Consideration is used for evidence of the seriousness of the agreement; reflects the idea of reciprocity i.e. that a bargain is supposed to benefit both parties, NOT exploitation; marks the boundary of legal involvement to enforcing the valuable ability to contract (an important way of securing autonomy) but prevents the law from interfering with family/social situations where moral/social sanctions are more appropriate than law; facilitation of exchange i.e. by making contracts enforceable we allow people to accumulate what is most valuable to them (assuming people to be rational maximisers of their own welfare) and thereby allow people at large to get what they most value, maximising society's economic welfare. * Nexus: Consideration states that only undertakings which have been paid for are enforceable and only parties who have paid can enforce the undertaking. Consideration "must move from the promisee". i.e. the promise. A party who doesn't provide the consideration cannot enforce the agreement (hence privity of contract). However the Contract Act 1999 allows a 3rd party to enforce a contract for his benefit, provided consideration has been given by someone. * Consideration is conferring a benefit or obviating a disbenefit and must have been requested by the offeror for it to be valid. E.g. In Combe v Combe a man promised to pay his wife PS100 a year after their divorce. Relying on this, she didn't apply for maintenance. The CA said it was an unenforceable agreement, since he, the promisor, had not asked her to do it. Sometimes the courts imply a request. * Consideration cannot be given before the promise (otherwise it would merely have been a gift). Consideration is past (and therefore bad) if: (1) its performance predates the promise given; (2) The consideration has already been used for a promise e.g. if I give you PS5 for a book then I cannot rely on that PS5 for another book. * There have been attempts to expand meaning of consideration so as to have greater enforcement: Wider enforcement is good to recognise genuine bargains, recognise subjectivity of values (regardless of whether the courts think they price paid was far too high or low), protect promisee's reliance, encourage finality in dispute resolution. AGAINST enforcement are the arguments that gifts/deals in the private domain shouldn't attract legal enforcement, it would validate one-sided/unfair bargains, it would enforce extorted promises (i.e. those duties which a party would perform anyway. * Ways of expanding enforceable contracts: NOMINAL consideration: Consideration doesn't need to be "adequate" but must be "valuable in the eye of the law" e.g. an agreement to sell a Monet for 5p is enforceable, because 5p is valuable in the law's view. Problem is that this could mask something as a contract when it is rally a gift. EXECUTORY consideration is where there isn't actual consideration but a right to enforce consideration. INTANGIBLE consideration e.g. where D promises to pay a sum to E upon his marriage to F, or a wife's agreement to behave properly * Limitations to what consideration is enforceable: MOTIVE or desire to confer a benefit is not consideration. There is also a distinction between consideration (which supports the enforcement of a promise) and the SATISFACTION OF A CONDITION which doesn't. E.g. in Carlil catching influenza was a condition, not a consideration (which came from her buying the ball). Generally INTANGIBLE benefits are not consideration e.g. love and affection but see above. ILLUSORY consideration is rejected by the courts and exists where (1) both parties know at the time of contracting that it is impossible for the consideration to be given; (2) where the promise of consideration is discretionary i.e. not enforceable; (3) where the offeror didn't ask for that particular consideration * Compromise is where X agrees not to pursue a claim against Y in return for a settlement, but Y doesn't admit wrongdoing. Forbearance is where Y admits wrongdoing but X agrees not to pursue the claim in return for something. These are considerations. Again only valid if asked for as consideration. Invalid if the forbearer knows that his claim is invalid. Valid where the claim is merely "doubtful"/made BF/on reasonable grounds. * Acts done under pre-existing duties (that they would have done anyway) is valid consideration where the duty arises from a contract with a third party, but not where it comes from general law or by an existing contract with the promisor. The third one has been modified by a "practical benefit" doctrine. - SEE CW FOR EXTENSIVE ANALYSIS OF THIS RULE * Modifications of the contract: where both parties still owe consideration and release each other from obligations as consideration to be released from their own. Not valid where only one party gives up contractual rights. One can also agree to end the existing contract and make a new one. Or one can make modifications supported by consideration on both sides. Modifications which can only benefit one party are unenforceable. * SEE CW FOR REFORM PROPOSALS