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COMPARATIVE CONTRACT LAW

PART II: THE LAW OF CONTRACT(CONTINUED)COMPARATIVE LAWLLMKILAWFALL 2013DR MYRA WILLIAMSON

CONSIDERATION

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ROADMAP - CONTRACT LAW OfferAcceptanceIntention to create legal relationsConsiderationCapacityOther aspects:

ConsentVoid and voidable contractsPerformance of contractBreach and remedies

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CONSIDERATION: AN OVERVIEW• Unless a contract is made by deed,

consideration is a universal requirement of contracts in the common law

• A bare promise (nudum pactum in Latin) is not legally binding

• A promise without consideration is a gift

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TERMS TO KNOW #1 – DEED Deed – What is it?A signed (and sometimes sealed) instrument in writing that gives legal rights It is like a contract but it is enforceable without considerationA deed is a document that says “This is a deed…”It is usually executed in front of witnesses (this is called being in solemn form)Some type of transactions MUST be done by deed

• For example conveyances (buying and selling real estate), mortagages, leases

For present purposes it is important to simply note that a deed is enforcebale without consideration

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TERMS TO KNOW #2: CONSIDERATION Consideration: what is it?

“…some right, interest, profit or benefit accruing to one party, or some forbearance, detriment, loss or responsibility given, suffered or undertaken by the other.”

• Currie v Misa (1875)

Consideration means any benefit to the promisor or detriment to the promisee

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CONSIDERATION Each party to the contract must receive something of value

To put it simply: “consideration” is the price for which the promise of the other is bought

Eg. I promise to give you my watch. You don’t give me anything in return. If I break my promise and decide not to give you my watch, you can’t go to court to make me give it to you. There would be no legally-binding contract because you didn’t give me consideration for my promise

CIVIL LAW?• Although consideration is a key requirement of a contract

in the common law countries, there is no exact equivalent• The closest equivalent in the civil law is the requirement

of ‘cause’• I will distribute a reading which shows some differences

between ‘consideration’ and ‘cause’• Please consider how the Kuwaiti law compares with both

the common law and the other civil law jurisdictions in the reading

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GENERAL RULES OF CONSIDERATION

a)It must be real/genuineb)It need not be adequatec)It must be legald)It must move from the promiseee)It must be possiblef)It must not be past

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A) CONSIDERATION MUST BE REALGeneral principlesThe court will not enforce vague or sham promises or promises in which there is no benefit at allThere must be some real benefit OR real detrimentMany cases are authority for this proposition – we will look at just two cases :

White v Bluett (1853)

Shadwell v Shadwell (1860)

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A) CONSIDERATION MUST BE REAL CONTINUED… White v Bluett (1853)Facts: Mr Bluett had lent his son money. Mr B died. The executor (Mr White) sued the son – asking him to pay the money back to the estateSon argued that father had told him he need not pay back the money if he would stop complaining about how he was going to distribute the money in his willThe consideration = the promise to stop complainingHeld: The promise to “cease complaining that he was not as well-treated as his brother” was not sufficient (ie. Not good enough) consideration“not complaining” was not a tangible (or real) benefit so there was no contract

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A) CONSIDERATION MUST BE REAL CONT’D… Shadwell v Shadwell (1860)Facts: Uncle promised to pay nephew £150 a year if he married Ellen NichollThe nephew married Ellen NichollSome payments were made – uncle diedNephew sued executor of uncle’s estate for the restHeld: by marrying, the nephew had incurred responsibilities and had changed his position; the uncle had obtained benefit in seeing his nephew marryThe consideration was real – nephew won

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B) CONSIDERATIONS DOESN’T NEED TO BE ADEQUATE“adequate” = fair or a good price; enough Parties are free to make whatever types of contracts they likeThey can name the price for their goods – whatever price they likeThe rule is: The price does not need to be “fair” or “adequate” but it must have some value in the eyes of the lawA person cannot complain to the court simply because they have paid too much – ie. If they made a bad bargainThe court applies the rule caveat emptor which means “let the buyer beware”This rule means that the court is not going to interfere if a person pays too much or too little – the parties have to look out for their own interests when entering into contracts

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B) CONSIDERATION NEED NOT BE ADEQUATE CONT’D…

Cases which are authority for the proposition that consideration need not be adequate:

•Bainbridge v Firmstone (1838)•Chappell & Co Ltd v Nestle Co Ltd (1960)

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b) Doesn’t need to be adequate cont’d…• Bainbridge v Firmstone (1838)• The facts:

• Bainbridge allowed Firmstone to weigh two boilers owned by Bainbridge on the condition that they were returned in the same condition

• F took them apart and returned them without putting them back together

Held: there was consideration“there is a detriment to the plaintiff in parting with the possession of the boilers even for so short a time”Plaintiff (B) was successful

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B) CONSIDERATION NEED NOT BE ADEQUATE CONT’D…• Chappell & Co Ltd v Nestle Co Ltd (1960)

• Facts: Nestle was giving away records to people who bought 3 chocolate bars and sent in the wrappers with an extra “1s 6d” (ie 1 shilling and 6 pennies). The chocolate bars cost 6 pennies each

Copyright Act stated that 6.25% to be paid on the “ordinary selling price” of the recordsChappell & Co owed the copyright to the music (“Rocking Shoes” by the King Brothers)

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Chappell & Co Ltd v Nestle Co Ltd (1960)

Chappell sued Nestle for failing to pay the correct amount of royalties (ie commission on sales of the records)The case turned on whether the chocolate wrappers were part of the “consideration” for the sale of the recordsHeld: Majority of the House of Lords held that the chocolate wrappers were part of the consideration; Nestle had to pay Chappell & Co much more in royalties This statement: “the wrappers will help you to get smash hit recordings” meant Nestle saw the wrappers as considerationIt didn’t matter that the wrappers were “worthless” to Nestle*

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ROAD MAP

Where are we at now?Consideration:a)It must be real/genuineb)It need not be adequatec)It must be legald)It must move from the promiseee)It must be possiblef)It must not be past

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C) CONSIDERATION MUST BE LEGALThe consideration must be legal – this is obviousExample: • If A agrees with B to break into C’s house and steal

something for B, provided that B pays A the sum of $10. • There is an agreement but it is not a contract because

there is no consideration. • The purported “consideration” involves something illegal

(breaking into a house) so that is not valid consideration and therefore the contract would be void.

Authority:• Pearce v Brooks (1866)• Foster v Driscoll (1929)

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C) CONSIDERATION MUST BE LEGAL CONT…• Pearce v Brooks (1866)Facts: The owner of a brougham (a closed four-wheeled carriage with an open driver’s seat in front) hired it out to a prostitute for use by her knowing it would be used in her businessShe failed to keep up the payments; Plaintiff sued the prostituteHeld: Since the pl. knew that the brougham would be used for an illegal purpose, there was no consideration. The contract was void.Consideration must be legal.

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Pearce v Brooks (1866) - vocabulary

A “brougham”:

“Prostitute”: “Void”:void means that the contract has no legal effect – agreements of this kind do not confer any legal rights on the parties (see Barker at p.103)

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C) CONSIDERATION MUST BE LEGAL CONT…Foster v Driscoll (1929)Facts: A contract was entered into for the shipment of whiskey from England to the US during the period of prohibition (when alcohol was not allowed).Held: the English Court of Appeal would not enforce the contract because the “consideration” involved doing something that was against the law of the other country (ie importing whiskey)Consideration here = the whiskeyWhiskey was not legal in the US which is where it was headingContract was void

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D) CONSIDERATION MUST MOVE FROM THE PROMISEEThe consideration must move from the promisee (the person to whom the promise was made)It is not enough that consideration has been given – it must have been given by the promiseeSo, if a third party provides the consideration that would not be good enoughPrivity of contract and consideration are separate (Barker Law Made Simple is a bit misleading on this point)

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D) CONSIDERATION MUST MOVE FROM THE PROMISEE CONT…Authority: Tweedle v Atkinson (1861)Facts: a contract was made between the fathers of a married couple. Each father was supposed to pay a sum of money to the husband. One of the fathers died. The husband sued the executor (Atkinson) of the estate.Held: Tweedle (the husband) could not succeed because no consideration had been given by himThere was consideration – but it had not come from the promiseeAs far as Tweedle was concerned, the promise was a gratuitous one

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E) IT MUST BE POSSIBLEThe law will not enforce that which is outside the realm of human endeavour A promise to do the impossible is not considerationeg. A promise to make pigs fly eg a promise to go the centre of the Earth

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F) IT MUST NOT BE PASTA benefit that was conferred in the past cannot be considered as consideration for a present promise

If someone did something for you in the past, that can’t be used as consideration for a contract that is made at a later point in time

The consideration has to be given or promised at the time of making the contract

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SUMMARY OF CONSIDERATION• Consideration is something of value given by both

parties to a contract that induces them to enter into the agreement

• It is an essential element of a contract• If there is no consideration, there is no contract • Remember the 6 rules that relate to consideration –

use them as a checklist• If the problem involves consideration, apply those

rules and see whether there was “consideration”

COMPARING COMMON LAW WITH CIVIL LAWSee the reading handed out in classIt is an extract from Alain A. Levasseur Comparative Law of Contracts – Cases and Materials It provides some background on the difference between common law and civil law legal systems on this requirementCommon law requires “consideration” but the civil law requires a “lawful cause” or a “lawful reason”. It does not require consideration per se.Please read the extract and I will write a post on the Blog.Please try to find the relevant part of the Kuwaiti law which requires a ‘cause’ and compare it to the common law requirement of consideration.