CONTRACT LAW REVIEW NOTES
CONSIDERATION AND PROMISSORY
ESTOPPEL
- In order for a promise to be binding as a contract, there must be consideration given
for the promise.
- Unless: the promise is contained in a deed.
- And promises can have some legal effects in the absence of consideration/deed
-> promissory estoppel
The basic idea: Something of value given in return for a promise (the ‘price of the
promise’)
- Thomas v Thomas
• “something which is of value in the eye of the law”
- A Burrows, Restatement of the Law of Contract
• “Consideration means that, in exchange for a promise by one party, a counter-
promise or performance is given by the other party.”
E.g. 1: A promises to pay B $1,000. In reliance on this promise, B buys an expensive CD
E.g. 2: A promises B that A will pay B $100 if B washes A’s car
E.g. 3: A promises B $10,000 if B promises to act as A’s financial advisor
E.g. 4: A “I promise to pay you $100.” B “Great, let me buy you a drink.”
Nexus (casual connection)
(i) Consideration must move from the claimant
To enforce a promise made to the promisee, promisee herself must provide
consideration for it.
- Tweddle v Atkinson
• 3rd party can’t enforce the promise. (E.g. A pay B $1,000 if C washes A’s hair)
(ii) Consideration must be requested by the promisor
Consideration must be given in return for (in response to the promise) the promise to
be enforced.
- Combe v Combe
• no consideration if promiseee incurs a detriment/ confers a benefit merely in
reliance on the promise
• Her forbearance resulted from his promise to pay, not given in return for it
(iii) Past consideration is not good consideration
(a) Court look at actual sequence of events, rather than contractual words
- Re McArdle
• Consideration held to be past as work was completed before promise made
,(b) Exception: doctrine of implied assumpsit
(Promisor’s promise & promisee’s past actions are part of the same overall
transaction)
- Lampleigh v Brathwaite (1615)
- Pao On v Lau Yiu Long** [1980]
• A claimant must show that:
1) she performed the act at the promisor’s request
2) it was clearly understood (implied) at the time of the request that she would be
rewarded for the act
3) the eventual promise is one which would have been enforceable if it had been
made at the time of the act
2. Value
(i) Definition
- Currie v Misa (Lush J)
• “…may consist either in 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.”
(ii) Consideration only needs to be sufficient, not adequate
Example. I promise to pay you $500,000 if you promise to give me your pen.
- Chappell & Co Ltd v Nestle Co Ltd [1960]
(iii) value
X Motive X Conditional Gifts X Intangible benefits
Sufficiency of consideration: some classic problems
Problem of insufficient consideration often occurs in the context of agreements to
end the contract and variation of contract
Agreement to end the contract:
A agrees to sell his car to B for $100,000. Before the time for performance arises, A
and B agree not to go ahead with the sale.
3. Pre-existing duty
Whether X gives good consideration, where X promises to do something that he was
already legally bound to do? Depends if existing duty is imposed by:
(i) general law (ii) contract with a third party (iii) existing contract with the promisor
(i) Public law
(a) Promise to perform/ performance of an existing public duty is no consideration.
- Collins v Godfrey
, (b) Exception:
When enforcement wouldn’t undermine public policy, court may find that more was
promised than his pre-existing duty
- Glasbrook Bros v Glamorgan CC
- Ward v Byham
(ii) Pre-existing contractual duties owned to 3rd party
Generally good consideration
- Shadwell v Shadwell (1860)
- New Zealand Shipping v Satterthwaite (1975)
(iii) Pre-existing duties owed to the other party
Enforceability of Via consideration? Via PE?
Promise to accept less - legal benefit Yes
- Practical benefit
No: ReSelect
Yes: MWB v Rock
Promise to give more - Legal benefit No
- Practical benefit:
Yes: Williams v Roffey
(a) Same for more
Whether a promise of “same for more” is enforceable depends on whether
promisee’s reciprocal promise for “same for more” is valid consideration
- Stilk v Myrick: Already contractually obliged, prevent duress
• Traditional rule – no consideration
(b) Exceptions
Promisee gives something more
- Hartley v Ponsonby
• Did more than they were obliged -> consideration for promise of more pay
Practical benefit to promisor is valid consideration
- Williams v Roffey Bros & Nicholls
Practical benefit: W’s continued performance, avoid substitute $, avoid main contract
penalty, incentive for W continue performance
1. If B promise A an additional payment in return for A’s promise to perform
his contractual obligation on time
2. As a result, B obtains a practical benefit/ obviates a disbenefit
3. B’s promise not given under economic duress or fraud by A
4. Then the benefit to B is capable of being consideration for B’s promise
5. Promise is legally binding
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