Lecture 3 - Consideration

8/10/2019 Lecture 3 - Consideration

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Consideration

Lecture 3


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THECONTRACTINGPROCESS

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Creation of the Contract

1. Intention to enter legal relations (Week 2)2. Agreement (offer + Acceptance) (Week 2)

3. Consideration (Week 3)

Validity of Contract

4. Consent (Week 3)

5. Capacity (Week 4)

6. Legality (Week 4)

7. Form (Week 4)


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THECONTRACTINGPROCESS

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Construction and Termination of Contract

(Week 5)8. Terms

9. Discharge of Contractual Obligations

10. Termination by Agreement11. Breach of Contract

- Remedies for Breach of Contract


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It is normally required in every simple contract (asopposed to a formal contract see above)

Something of valuenot

Something Valuable

Chappel v Nestle (1960) (p316)

The nature of the bargain (was it a good or badprice?) is not a legal concern

WHAT ISCONSIDERATION?


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WHEN ISCONSIDERATIONREQUIRED?Simple Contracts Yes, Consideration is required. To evidence

that the parties are serious about a bargain (meaning a

commercial transaction)

Formal Contracts (sometimes called Deeds) No,

Consideration is not required. The fact that the parties have

written down their agreement and formally signed it itself

indicates that this is a serious transaction

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WHO MUST GIVECONSIDERATION TO

WHOM?

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Consideration is what makes a contract different from amere agreement. It shows the transfer of value anddemonstrates the transaction is a commercial bargain

Offeror Offeree

Offer

Acceptance

Consideration


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WHAT ISSUFFICIENTCONSIDERATION?

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This question has a commercial aspect and a legal aspect

From a commercial perspective is the considerationsufficient? (i.e. did you get enough $? See Thomas vThomas (1842) (not in book) widow paying 1 a year argued insufficient but was legally sufficient)

Sufficient as a legal question (does it satisfy therequirements of consideration)

Must have some legal value (see below Withholding LegalAction) Forbearance to Sue (p321) must be genuinedispute


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CONSIDERATION FOR AGOOD/SERVICE

VSCONSIDERATION FOR APROMISECarlill v Carbolic Smokeball(not in book in this context)

The price paid for the smoke ball product was consideration for the purchase of theactual physical good the smoke ball.

What about the promise by the Smoke Ball Company to pay 1000? Was this aunenforceable gift from the company or an enforceable contract? Did Mrs Carlilltransfer value to the Smoke Ball Company making this promise enforceable? Yes she

suffered the inconvenience of having to use the smokeball according to the instructions

Therefore - Consideration can also be :

any act of the plaintiff from which the defendant derives a benefit or advantage, or any

labour, detriment or inconvenience sustained by the plaintiff, provided such act isperformed or such inconvenience suffered by the plaintiff with the consent, eitherexpress or implied, of the defendant.

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PASTCONSIDERATION ISNO

CONSIDERATION

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Consideration must be present or future (there are different ways topay for a promise)

Consideration CANNOT be something done, performed or said inthe past (Roscorla v Thomas [1842] (p 313) buying horse

confirmed horse was healthy and free from vice (problems) afterpurchase horse turned out to be vicious promise NOTenforceable)

Anderson v Glass (p314) promise to pay increased wages for pastwork and future work only promise for future work isenforceable.


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DIFFERENTTYPES OFCONSIDERATION

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Executory Consideration is a payment for a promise that

has yet to be made (An exchange of promises is an example ofexecutory consideration as seen with Bilateral Contract)

Executed Consideration is a payment for a promise that ismade immediately it flows immediately when the contract is

accepted (For example, an offer to pay $300 for finding a lost dog

requires executed consideration).


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WHAT ISNOT CONSIDERATION?

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Vague or uncertain promises do not constituted a legally valid form ofconsideration

White v Bluett (1853) (not in book) complaining son promises to stopcomplaining

Placer Development Ltd (PDL) v Commonwealth (1969) (not in book) PNG

timber exporter rate determined by the Commonwealth from time to time

It cannot be something impossible

It cannot be unlawful (illegal) (Parkinson v College of Ambulance[1925] (not in book) Money for knighthood corruptarrangement


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WHAT ISNOT CONSIDERATION? It cannot be the discharge of an existing Public duty

(i.e. Police providing information on criminals to obtain arewards or rescue workers rescuing miners in stuck in a mine)

Acts in excess of a public duty however can

be consideration (i.e. Glasbrook Brothers v

Glamorgan County Council(1925) (p317)

police agreed to protect coal mine during

strike above their obligations and then

company refused to pay 2200 yes this was

Consideration

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WHAT ISNOT CONSIDERATION?

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It cannot be an existing contractual or legal obligation Stilk v Myrick (1809) (p 318)

Captain offered to pay crew extra to finish voyage after 2 crew membersdeserted. Contract stated that the crew would do all they could in case of

emergency. Crew did not do more than they already had to do. Pay increase

not enforceable no consideration no contract.

Hartley v Ponsonby(1857) (p 318)

Similar facts but half crew deserted, ship was

unseaworthy and captain promised 40 if the crew would

sail to Liverpool via Bombay. Pay increase wasenforceable.


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THERULE IN FOAKES V BEER (1884) (P320)

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The rule is that a promise to accept a lesser sum in satisfaction of a debt is

not enforceable.

Exceptions to the rule:

The promise is binding if:

the promisor promised to pay the lesser sum at a time earlier than originally

promised;

the promisor promised to pay the lesser sum at a place different to that

originally promised;

the promisor promised to pay the lesser sum and to do something else; or

there is an estoppel.


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Common Law and Equity Were in the past 2 separate legal systems

Common Law based on precedent and formality

Equity based on principles and fairness

2 Systems were united in the 19th Century courts can now

exercise Common law and Equitable powers

Promissory Estoppel is an equitable rule so underlying its

existence and development is the idea of fairness

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PROMISSORY ESTOPPEL

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If you look closely at the title you will note two familiar

words PROMISE and STOP.

Promissory estoppel is an equitable remedy that will stop a

person who has made some promise from going back onthat promise because it would be very unfair or unjust to

allow them to do so even if there is no consideration


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PROMISSORY ESTOPPEL

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Promissory estoppelis an exception to the rules about consideration.

If the below requirements are fulfilled a contract will be enforceable even if therewas no consideration (Waltons Stores (Interstate) Ltd v Maher (1988) (p 325))

Plaintiff assumed a particular relationship existed

Defendant caused plaintiff to hold such an assumption

Plaintiff acts or abstains from action based on such an assumption

The defendant knew or intended the plaintiff to take or abstain from such actions

Plaintiffs actions will occasion harm or detriment if assumption not fulfilled

The defendant has failed to act to avoid that detriment whether by fulfilling theassumption or expectation

See also Giumelli v Giumelli (1999) Son left school to work on farm forfamily property family disapproved of second wife and did not want totransfer property ordered payment of damages.


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Documents

Lecture 3 - Consideration