copyright guy harley 2008 1 week 5 consideration
TRANSCRIPT
1Copyright Guy Harley 2008
Week 5
Consideration
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Types of Enforceable Agreement
Deeds Formal contracts Contracts that comply with special rules Do not require consideration
Simple contracts Do require consideration
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Deed
In writing Maker of deed must sign, seal and deliver the
document Independent witness Special attestation clause
SIGNED SEALED AND DELIVERED )by the said JOE BLOGGS )in the presence of: )
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Consideration
Some right, interest, profit or benefit accruing to one party, or some forebearance, deteriment, loss or responsibility given, suffered or undertaken by the other. – Currie v Misa
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Consideration
Every simple contract must be supported by consideration
The law will not enforce a gratuitous or bare promise
Lack of consideration may be overcome by the equitable doctrine of estoppel
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What is Consideration
Consideration must flow from both sides of the contract
Can be: A promise to do something A promise not to do something Doing something Refraining from doing something A benefit for the promisee A benefit for a third person at the promisee’s direction A detriment to the promisor Anything of real value to the promisee
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Consideration Must be Sufficient
Must have some value in the eyes of the law Can be trivial or nominal Need not be equal in value to the promisor’s
promise The very nature of contract law is to let the
parties make their own bargain However, doctrine of unconscionable conduct
has developed to overcome resulting injustices
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Consideration Must be Sufficient
Must be definite and not too vague Illusory promises are not consideration E.g. “in consideration of natural love and
affection” Too uncertain to be enforced Dunton v Dunton
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Consideration Must Be Sufficient (Cont)• Illusory promises are not consideration• E.g. “in consideration of natural love and
affection”• Too uncertain to be enforced• Dunton v Dunton (S&OR p 106)
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Consideration May Not Be Past
A promise can be executed (i.e. present execution) or executory (i.e. future execution) but cannot be past
A promise must be paid for but if consideration has already been given then there is nothing being paid for the new promise Roscorla v Thomas
Settling unsettled aspects of a past transaction may be consideration Re Casey’s Patents: Stewart v Casey
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Existing Contractual Duty
Promising to perform an existing contract is not consideration
To be binding, there must be a promise to do something additional to contracted duty Stilk v Myrick Hartley v Ponsonby
Rule may be undergoing change Williams v Roffey Bros. & Nicholls
A practical benefit is conferred No duress
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Existing Contractual Duty
Promise to perform an existing contractual duty to a third party is sufficient consideration The Eurymedon
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Performance of a Public Duty
Performance of a public duty is not sufficient consideration Collins v Godefroy
Exception Where the service goes over and above that
which the person is legally bound to provide Glasbrook v Glamorgan
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Compromise & Forbearance to Sue
Settling disputes Forbearance to sue (i.e. an offer not to sue) is
good consideration provided The claim (defence) was reasonable The promisee had an honest belief that the
claim had a reasonable chance of success The promisee has not concealed any facts
that might affect the validity of the claim Wigan v Edwards
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Examples
$1 for a Rolls Royce “I promise to be an honest public servant” “I’ll give up my legal claim against you” “I will pay you less than I owe you if you forget
the rest” “In love and affection” “I promise to carry out my contractual
obligations”
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Renegotiating a Debt
A promise to pay a lesser sum in satisfaction of a larger debt is not binding Pinnel’s Case ( approved by House of Lords
in Foakes v Beer) Exceptions
Something given in addition to lesser amount Payment at an earlier date Payment at a different place Payment by third party Composition with creditors
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Promissory Estoppel
A strict application of the rules of contract formation can lead to unjust results
Courts use equitable jurisdiction to intervene and prevent unfairness
Estoppel is used to stop a person from denying something that they have represented
Central London Property Trust v High Trees House (obiter dicta by Lord Denning)
Applied in Australia Je Maintiendrai v Quaglia (SASC) Waltons Stores v Maher (HCA)
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Promissory Estoppel
Walton Stores v Maher Estoppel applies where
No consideration exists Formalities of making a contract have not
been satisfied
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Elements of Promissory Estoppel
1. RelationshipA relationship (usually contractual or pre-contractual) exists between the parties
2. PromiseA promise not to assert legal rights
3. ExpectationPromisee expects promise to be kept
4. ReliancePromisee acts in reliance on promise
5. DetrimentPromisee alters its position to its detriment
6. UnconscionableUnconscionable to allow promisor to break promise
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The Promise
One party either Made a promise; or Being aware that the other party was acting
on an assumption, deliberately remained silent in circumstances where the they could reasonably have been expected to speak
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Expectation
The promisee on reasonable grounds assumed that a particular legal relationship Existed; or Would exist
Legal relationship includes: A right to something Release from an obligation For the promisee or someone else Now or in the future
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Detriment
The promisee will suffer a detriment if the promisor fails to perform the promise
Mere failure by the promisor to carry out the promise will not of itself amount to detriment Je Maintiendrai v Quaglia & Quaglia
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Remedy
Minimum orders to prevent detriment Not necessarily the same remedy as for breach
of contract Not a new cause of action
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Withdrawal of Promise
Promisee is given notice of promisor’s intention to break the promise
Notice must Be reasonable Give promisee sufficient time to return to its
pre-promise position Must be possible for parties to resume pre-
promise positions
(Hightrees Case)