Contract Law - Consideration And Promissory Estoppel Super Review

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CONSIDERATION

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• Contract to be binding = offer, acceptance, intention to create legal relations AND consideration

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Currie v Misa (1875) [consideration, definition]

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• case involved dispute concerning stopped payment of a cheque
• LUSH J, consideration: "A valuable consideration, in the sense of the law, may consist either of some right, interest, profit or benefit accruing to the one party, or some forbearance, detriment, loss or responsibility, given, suffered or undertaken by the other."

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Dunlop v Selfridge (1915) [consideration, definition; privity]

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• Dunlop sold tyres to Dew & Co wholesalers; Dew & Co undertook expressly that the manufacturers could fix lowest price at which they could sell the tyre and promised not to sell the tyres below that price; Dew & Co also agreed to obtain the same pricing terms from customers to whom they resold the tyres; sold them to Selfridge on these terms; Selfridge broke the pricing agreement and sold tyres at discount price; Dunlop sued Selfridge and sought injunction
• Dunlop failed due to privity; CONSIDERATION: Lord Dunedin: An act of forbearance 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

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CONSIDERATION, more introductory cases

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• Shadwell v Shadwell (1860) D (P's uncle) promised P £150 yearly during D's life until P's annual income from P's profession as chancery barrister reached 600 guineas.In “consideration” (return) P was to marry one Ellen Nicholl. P married EN (whom she has promised to marry anyway) and the uncle fulfilled his promise until after his death. After his death, his estate refused to continue the annual payments to P. Performance of an existing contractual duty owed to a 3rd party is a sufficient consideration for a promise, it does not seem to matter if promisee cannot prove that s/he has suffered a detriment or that the promisor has earned a benefit. Marriage is a boon to a man/exposes him to risk of loss.
  
• Dickinson v Abel (1969) Where A had promised to pay £10,000 to B if A succeeded (as he did) in buying Blackacre from X. This was said to be “nothing but a conditional promise without consideration” because B had not been requested to do anything to promote the sale by X to A. Conditional promise, could not be charged tax. The distinction between consideration and condition depends, in such cases, on whether “a reasonable man would or would not understand that the performance of the condition was requested as the price or exchange for the promise.”
  
• Pitts v Jones (2007) share sale, oral promise to indemnify; good consideration even though P did not consciously realise that by signing documents they were subjecting themselves to a detriment and were giving consideration for J's undertaking. J's undertaking was therefore a contractual agreement.
  

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RULES OF CONSIDERATION

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1. consideration must move from the promisee
2. consideration must not be past
3. consideration must be sufficient but need not be adequate (For example, contract to sell a car for £1 is economically bad but is good consideration.)

• Can sue for breach of promise if promise is made with good consideration.
  
• Receive something in return of your promise. A valuable consideration is either some right, interest, profit or benefit to one party or some forbearance, detriment, loss of responsibility to the other.i) A good consideration can be a benefit to the promissor or a detriment to the promisee. (In ordinary bilateral contract, benefit and detriment exist).
  
• Not all conditions constitute ‘good’ consideration. (birthday example).
  

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Tweddle v Atkinson (1861) [consideration must move from the promisee]

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• Tweddle-son and Guy-daughter intending to marry; Tweddle-father agreed with Guy-father in writing that both should pay money to husband, Tweddle-son; Guy-father died before paying money to Tweddle-father; Guy-father's executors refused to pay money to Tweddle-son who sued executors of the estate
• Tweddle-son's claim failed even though he was named in the agreement he had not himself given consideration for the agreement; consideration is the promise to pay money to Tweddle-son, exchanged between Tweddle-father and Guy-father; also could not enforce contract due to privity; also marriage is a boon

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CONSIDERATION MUST NOT BE PAST

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• EXECUTORY CONSIDERATION: promises exchanged to perform acts in the future, such as ordering pizza and promising to pay on delivery; bilateral
• EXECUTED CONSIDERATION: one party performs an act in order to fulfil a promise made by the other, reward contracts, unilateral
• PAST CONSIDERATION: consideration for a promise must be given in return for that promise; ie clean windows and after done promised to pay £10, cannot enforce promise, windows not cleaned for that promise

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Wigan v English and Scottish Law Life Assurance (1909) [consideration must be causally related to the promise]

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• X owed money to C; X's life insurance to be forfeited in case of suicide to interests of 3rd parties; C gave X more time, unaware of impending suicide or assignment of policy to secure the debt; C attempted to claim benefit under policy when he learned of it
• mere existence of a debt from A to B is not sufficient consideration for the giving of a security from A to B in respect of it. Such security may well be given in return for extra time to pay, or for forbearance to sue. None of those things existed here, therefore the security was voluntary.
  

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Re McArdle (1951) [past consideration]

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• son and wife lived in mother's house; on her death house was to pass to son and three other children; son's wife paid for repairs and improvements to the property; mother then made her 4 kids sign agreement to pay her daughter-in-law back from proceeds of her estate; mother died and kids refused to pay
• daughter-in-law's claim unsuccessful; she had already performed the act before the promise to pay had been made; her consideration was past and promise to pay unenforceable
• ROSCORLA v THOMAS (1842): horse purchase, guarantee is made in respect of something after it had been sold then there is no consideration for that guarantee and it is not binding.

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Lampleigh v Braithwait (1615) [past consideration: EXCEPTION]

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• Brathwaite had killed another man and asked Lampleigh to secure a pardon which after considerable effort and expense he succeeded in so doing; subsequently Brathwaite promised to pay Lampleigh £100 and then failed to pay and Lampleigh sued
• Claim successful even though on basis of past consideration his efforts were in the past in relation to the promise to pay; court considered that original request by Brathwaite in fact contained an implied promise that he would reward and reimburse Lampleigh for his efforts, therefore previous request and subsequent promise were part of same transaction and enforceable

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Re Casey's Patents, Stewart v Casey (1892) [past consideration: exception]

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• The plaintiff was asked manage promoting some patents. After the plaintiff had completed much of the work the patent owners stated: "In consideration of your services as practical manager in working our patents, we hereby agree to give you one-third share of the patents"
  
• The past consideration was sufficient. As there was an understanding of renumeration, there was an obligation to pay; the consideration was sufficient
  

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Pao On v Lau Yiu Long [1980] [past consideration rules for exception]

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• C threatened not to proceed with sale of shares unless D agreed to renegotiation on other peripheral issues; D wanted to avoid litigation and anxious to reach agreement of sale of shares so agreed; C tried to enforce agreement but D resisted on basis of duress
• RULES FOR PAST CONSIDERATION:

1. the act must have been done at the promisor's request
   
2. the parties must have understood that the act was to be remunerated further by a payment or the conferment of some other benefit and payment (an implied promise to pay to be quantified at a later date)
   
3. payment or conferment of a benefit must have been legally enforceable had it been promised in advance
   

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Thomas v Thomas (1842) [sufficiency and adequacy of consideration]

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• husband expressed wish that his wife should be allowed to remain in their house after his death but not written in his will; after his death his executors allowed wife to stay at rent of £1 per year then later tried to dispossess her
• payment of 'peppercorn' rent was sufficient consideration for the contract to be enforceable; husband's wish alone however would not have been sufficient consideration for the contract to be enforceable

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SUFFICIENT IN LAW

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• REAL
• TANGIBLE
• VALUABLE (it must have some actual value)

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Chappell v Nestle Ltd (1960) [sufficiency and adequacy of consideration]

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• Nestle were offering a record (copyright owned by Chappell) for sale at 1s 6d plus 3 wrappers from their chocolate bars; record normally sold for 6s 8d. Permission to use the copyright was not obtained; Chappell sued to prevent the promotion since they would receive a much lower royalty from it
• wrappers were held to be part of the consideration even though they were thrown away when received; wrappers were part of consideration since the idea was to increase sales with promotion and that was the value; LORD SOMERVELL "It is said that when received the wrappers are of no value to Nestle. This is irrelevant. 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."

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CONSIDERATION, more cases on adequacy and sufficiency

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• NEED NOT BE ADEQUATE
• Esso Petroleum v Commissioners of Custom and Excise (1976) sale of World Cup coins, are they taxable? There was an intention to create legal relations. The coins were offered in a commercial context which raised a presumption that they did intend to be bound. However, the coins were not exchanged for a money consideration and therefore the coins were not for resale. HofL: No, making the contract to buy petrol is consideration, therefore no tax.
  
• MUST BE SUFFICIENT
• Ward v Byham (1956) unmarried couple has child, father kicked mother out of house and paid wife £1 per week but then she got remarried so father stopped payment; found for mother that she had provided consideration by going above and beyond her existing legal duty in ensuring happiness of child; The contract depends on terms, and the equity on what is necessary to avoid that which is unconscionable.
  
• Blackpool & Fylde Aero Club v. Blackpool Borough Council [1990] invitation to tender, missed one of the tenders; judge said that a request to tender might in appropriate circumstances, give rise to an implied obligation to consider that tender.
• New Zealand Shipping v Satterthwaite [1975] "The Eurymedon" stevedores were independent contractors who were engaged to load and unload the ship by the ship owner. A stevedore damaged the machine whilst unloading it; were sued; stevedores had provided consideration in the form of services of unloading the machine, protected by contract limitation clause; there is nothing to prevent consideration owed to a 3rd party being valid consideration for a new promise to another party.
  
• Re Selectmove Ltd (1995) Selectmove Ltd. had failed to submit payroll deductions from employees to the Crown; made payment arrangement of arrears with tax collector who came to collect and found company in difficulty; however Crown then claimed total sum.
  
• Even in a case where there may be a practical benefit to accepting a lesser amount in payment of a debt, this is not sufficient consideration to find a binding contract. Selectmove’s attempt to use the notion in Williams v Roffey Bros [1990] failed as it was held that it was only applicable only where the existing obligation which is pre-promised is to supply one with goods or services, not where it is an obligation to pay money.
  
• Foakes v Beer remains good law and not undermined by Williams v Roffey bros…this decision prevents law from Williams v Roffey Bros of applying to creditor/debt situations.
  

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PERFORMANCE OF AN EXISTING DUTY

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• USUALLY NOT GOOD/VALID CONSIDERATION but EXCEPTIONS:

1. where a public duty is exceeded
2. where a contractual duty is exceeded
3. where there is an existing contractual duty owed to a 3rd party
4. where the rule in Williams v Roffey applies

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Collins v Godefroy (1831) [consideration, performance of an existing public duty]

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• police officer promised sum of money by D in a trial in return for officer giving evidence since it was important to D that officer did so; officer had already been subpoenaed to do so
• promise to pay unenforceable since there was no consideration given by police officer for it; he was already under legal duty to attend court

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Stilk v Myrick (1809) [consideration, performance of an existing contractual duty]

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• team of 11 sailors agreed to crew a ship from London to Baltic and back; 2 sailors deserted in the Baltic; remaining 9 refused to work and pressed captain for higher wages; captain agreed but ultimately refused to pay, sailors sued
• promise to pay unenforceable since sailors were already contractually bound to return the ship to London; no consideration given by sailors in return for captain's promise to pay additional wage
• CONTRA Hartley v. Ponsonby (1857) more than half the crew deserted, remaining crew entitled to promise of extra pay a they had gone beyond their existing contractual duty and/or voyage had become too dangerous/different thus frustrating original contract, leaving them to renegotiate ALSO unreasonable for ship to continue with only half the original crew

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Glasbrook Bros v Glamorgan CC (1925) [consideration, exceeding an existing public duty]

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• during miners' strike, owner of a pit asked the police for extra protection and promised to pay for it; after strike, pit owner refused to pay, claiming police were already bound by public duty to protect pit
• promise to pay enforceable; since poliec had done more than they would ordinarily have done (in sending additional officers), this was good consideration for pit owner's promise to pay

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Hartley v. Ponsonby (1857) [consideration, exceeding an existing contractual duty]

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• same facts as Stilk v Myrick except 36 sailors, 17 deserted leaving 19
• promise to pay enforceable; court considered the greater proportional reduction in crew members made the return voyage much more dangerous and unreasonable since ship was shorthanded; sailors' promise to return under more dangerous conditions had exceeded existing contractual obligations and therefore this represented good consideration for promise of extra pay

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Scotson v Pegg (1861) [consideration, performance of an existing contractual duty owed to a 3rd party]

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• Scotson contracted to deliver coal to X or to X's order; X sold coal to Pegg and ordered Scotson to deliver the coal to Pegg; Pegg promised Scotson that he would unload it at a fixed daily rate; Pegg did not fulfill this promise; Scotson attempted to enforce Pegg's promise; Pegg argued promise was not binding because Scotson had not provided consideration as Scotson was bound by his contract with X to deliver the coal
• held that delivery of the coal to Pegg (in other words, performance of existing contractual duty owed to X by Scotson) was good consideration to enforce Pegg's promise to pay

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Williams v Roffey Bros & Nicholls (Contractors) Ltd [1991] [consideration, extra benefit]

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• D was firm of builders contracted to renovate block of flats; their own contract contained penalty clause for late completion so it was in their interests to finish work on time; they sub-contracted carpentry work to C for £20,000; C fell behind schedule because they claimed they had not quoted a high enough price for the work; D promised to pay C an additional sum of £10,300 to complete carpentry on time; When work was completed, D refused to pay claiming new agreement with C was void for lack of consideration since C already fulfilling contractual obligation)
• CoA held C had provided consideration by completing work on time and therefore D's promise to pay additional £10,300 was binding even though at first glance proposition seemed incompatible with rule from Stilk v Myrick
• This was a case where the plaintiff, by agreeing merely to complete the work already contracted for, suffered no detriment but he did provide a benefit. "If both parties benefit from an agreement it is not necessary that each also suffers a detriment."
  
• Consideration was provided by the claimant conferring a benefit on the defendant by helping them to avoid the penalty clause.
  

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Roffey Bros refinement

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1. if A has entered into contract with B to do work for B in return for payment by B, and,
2. at some stage before A has fulfilled obligation under contract B has reason to doubt A will be able to complete his side of bargain, and
3. B promises A additional payment in return for A's promise to perform obligation on time
4. as a result, B obtains in practice a benefit or obviates a disbenefit
5. B's promise not given as result of duress or fraud on part of A, then,
6. benefit to B is capable of being consideration for B's promise, promise legally binding

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Pinnel's Case (1602) [consideration, part payment of a debt]

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• Cole owed money to Pinnel; At Pinnel's request Cole paid portion of this one month before full sum was due; Cole claimed agreement that part payment would discharge the full debt
• Pinnel was unsuccessful in claiming the balance of the unpaid debt; court held in general part payment of an original debt did not provide good consideration for the promise to waive the balance; HOWEVER, Pinnel gained some benefit by part payment having been made early, this was sufficient consideration to enforce his promise to forego balance of the debt

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Pinnel's Rule and exceptions

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part payment of an original debt does not provide good consideration for a promise to waive the balance

EXCEPTIONS

1. before it is due / early part payment
2. by different means (ie if creditor agrees to accept some property in lieu of money, even if it is worth less than the debt, consideration need not be adequate)
3. in a different place to that originally specified

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Foakes v Beer (1884) [consideration, part payment of a debt]

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• Foakes owed Beer money; they agreed Foakes could pay in instalments; Beer agreed that no further action would be taken if the debt was paid by the agree date; Later Beer demanded an additional interest payment, Foakes refused to pay
• Beer succeeded in claim for interest payment; agreement reached amounted to part payment of a debt and under the rule in Pinnel's case this was not good consideration for a promise not to enforce the full amount due.

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WAIVER, VARIATION, and ESTOPPEL

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• parties to a contract may at any time vary (alter) its terms, but such variation must in general have all the characteristics of a contract, that is to say it must be an agreement supported by consideration

• a party may effectively waive a right which he has under a contract even if there is no consideration for the waiver.

• a party who has indicated that he will not enforce his rights under a contract may in some circumstances be estopped from doing so.
  

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Hughes v Metropolitan Railway (1877) [estoppel in equity]

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• A landlord gave a tenant 6 months notice to carry out repairs failure to do so would result in forfeiture of the lease. The landlord and tenant then entered into negotiations for the tenant to purchase the freehold of the property. Tenant did not carry out repairs thinking he was buying the place. Tenant attempted to evict for failure to repair when purchase negotiations broke down.
  
• If a promise is implied in negotiations and one party relies on that promise then it is inequitable to allow the other party to act as though the promise does not exist
  

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Central London Property Trust, Ltd. v. High Trees House, Ltd. [1947] [promissory estoppel]

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• D leased block of flats in 1937 to C...due to war, occupancy was really low; in 1940, parties agreed in writing to reduce rent in half; did not stipulate period for which reduced rent was to apply; D paid reduced rate for five years, flats filled up and by 1945 were all full; C sued for payment of full rental costs from July 1945 onward
• court considered Hughes v Metropolitan Railway Co (1877) which concerned doctrine of waiver - parties should be prevented from going back on a promise to waive certain rights; DENNING held full rent payable from time flats fully occupied in mid-1945; stated obiter if Central London had tried to claim full rent from 1940 they would not have been able to; would have been estopped from reneging on promise upon which D had relied as long as the circumstances which led to that promise continued

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Collier v. P. & M.J. Wright (Holdings) Ltd. [2007]

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• D obtained judgment for £50,000 against 3 partners including C; they were jointly and severally liable for whole debt; D allegedly agreed to accept one third of the sum due from each; C paid his instalment, the other 2 declared bankruptcy so D attempted to enforce whole judgment against Collier
• Collier might have a case in promissory estoppel but rule in Pinnel reaffirmed
• if (1) a debtor offers to pay part only of the amount he owes; (2) the creditor voluntarily accepts that offer, and (3) in reliance on the creditor’s acceptance the debtor pays that part of the amount he owes in full, the creditor will, by virtue of the doctrine of promissory estoppel, be bound to accept that sum in full and final satisfaction of the whole debt. For him to resile will of itself be inequitable. In addition, in these circumstances, the promissory estoppel has the effect of extinguishing the creditor’s right to the balance of the debt.” (per Arden L.J. in Collier at [42].)
  

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REQUIREMENTS FOR DOCTRINE OF PROMISSORY ESTOPPEL

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• must be a clear or unequivocal promise or representation (Woodhouse AC Israel Cocoa v Nigerian Produce Marketing (1972))
• which is intended to affect the legal relationship between parties and
• which indicates that the promisor will not insist upon his strict legal rights against the promisee in relation to the promise;
• the promise or representation must have influenced the conduct of the promisee in some way (often said promisee must have acted in reliance upon that promise (W.J. Alan & Co Ltd v El Nasr Export and Import (1972)
• it must be inequitable for the promisor to go back on the promise (D & C Builders v Rees (1966))
• the doctrine can only be used as a defence; since it is an equitable doctrine, the general maxim that 'equity is a shield, not a sword' applies; it does not create new rights (Combe v Combe (1951))
• the doctrine temporarily suspends rights; it does not extinguish them (Tool Metal Manufacturing v Tungsten Electric (1955))
• since it is an equitable doctrine, it is available only at the discretion of the court

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ESTOPPEL, MORE CASES

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• Jordan v Money (1854) estoppel at common law is about statements of fact; promissory estoppel is about promises; bond debt and creditor issue in this case
  
• Combe v Combe (1951) A husband promised to make maintenance payments to his estranged wife but failed to do so. The wife brought an action to enforce the promise invoking promissory estoppel. It is a shield not a sword, not a cause of action.
  
• Waltons Store Ltd v Maher (1988) Walton Stores negotiated to lease land from the Mahers. Maher to make new building, 40% complete, Waltons attempted to withdraw. to avoid detriment through Waltons' unconscionable behaviour, Waltons was estopped from denying the contract. But not only the reliance interest was protected. The award given protected the expectation interest (as if the contract had been concluded). if the plaintiff acts to their own detriment, in reliance on the allusions of the unconscionable party, equity law has the capability to intervene.
  
• Baird Textile Holdings v Marks & Spencer plc (2001) M&S stopped using Baird for supply of cloth after 30 years; an argument of estoppel could not succeed because estoppel is not capable (in English law as yet) of creating its own cause of action.
  
• Tool Metal Manufacturing v Tungsten Electric (1955) TMM could not enforce the compensation payments during the war years but could enforce them on termination of the war. TMM were estopped from going back on their promise to waive the payments in equity. Generally promissory estoppel will merely suspend legal rights rather than extinguish them.
  
• D & C Builders v Rees (1966) mean wife behaved unequitably to take advantage of financial situation of builders; Mrs Rees could not rely on estoppel as there was no true agreement to accept less and because Mrs Rees had taken advantage of the builder's position and mislead them as to her financial position; she did not behave equitably so cannot claim estoppel.
  
• W.J. Alan & Co Ltd v El Nasr Export and Import (1972) cocoa beans, sold in Kenyan shilling, equal value to British pound, then pound value dropped; Detrimental reliance is not a requirement of promissory estoppel. It only needs to be established that the promisor has changed their position.
  
• The Post Chaser (1981)Société Italo-Belge Pour le Commerce et l'Industrie S.A. v Palm and Vegetable Oils (Malaysia) SDN BHD sale of palm oil, failure to notify of ship's sailing with cargo; no reliance interest, the complete elements of promissory estoppel were absent and thus he found for Société Italo-Belge.Estoppel only takes effect where equity demands.There must be action taken on the representation by the representer but no detriment to the representee is needed.Estoppel is only a defence for the defendant.
  
• Collier v. P. & M.J. Wright (Holdings) Ltd. [2007]
  
• Woodhouse AC Israel Cocoa v Nigerian Produce Marketing (1972) clear and unambiguous acceptance of promise to accept on those terms, sale of coffee beans, Kenyan shilling equal to sterling pound then sterling pound value dropped