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Contractlaw-consideration

revision notes for contract law for the topic consideration

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consideration Contract

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Consideration

1

Question 2 2021 Zone A

Mia is planning to hold a party at her house to launch her new interior design business. She speaks to her neighbour, Goldeep, to warn her about potential noise on the evening of the party. Goldeep promises that she will not complain about the noise if Mia agrees not to insist on full repayment of the £200 that Goldeep owes Mia. Mia agrees that Goldeep need only pay her £100. Mia contacts Andrew, the owner of Party People, a local business that supplies catering services. Mia asks Andrew if his company can provide buffet food and cocktails on the night of her party. Andrew’s business has been going through a slump and he is in serious financial difficulties. The party offers Andrew the opportunity to attract new clients for his business and so he undertakes to provide the service at a reduced price of £1,000. A week before the party, Andrew realises that it will be impossible to provide both food and cocktails for the price agreed. Andrew telephones Mia in a panic, shouting, ‘There’s no way I can do this for the price promised. Unless you pay me double, I will not be doing the job!’ Realising that she would need to pay £2, for the same services elsewhere, Mia agrees to pay Andrew the additional money. The day after the party, Mia changes her mind about paying the extra £1,000 to Andrew. She also regrets her decision to forego the £100 that Goldeep owes her.

Answer Guideline

 Mia needs an advice pertaining: (1) The reduced payment of 100 pounds by Goldeep (2) The extra payment demanded by Andrew ( 2000 Pounds)  The promises made by Mia will be only enforceable if Goldeep and Andrew have provided consideration for the promises.

Consideration  Lush J in Currie v Misa (1875) "... some right, interest, profit or benefit accruing to one party, or some forebearance, detriment, loss or responsibility given, suffered or undertaken by the other."  Sir Frederick Pollock, approved by Lord Dunedin in Dunlop v Selfridge Ltd [1915] "An act or forebearance of one party, 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."  Thomas v Thomas (1842) ‘something of value in the eyes of the law, moving from the claimant, it may be some detriment to the claimant or some benefit to the defendant.  ’ Patrick S. Atiyah, “Consideration: A Restatement”, in P. Atiyah, Essays on Contract “reason for enforcement of a promise”, the reason being “the justice of the case”.  On the fact, the above promise will be only valid if it comes within the realm of the definition of consideration

Goldeep

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 Mia told Goldeep that she will not insist on full repayment of 200 pounds and would accept 100 pounds instead.  In return of the promise, Goldeep told Mia that she will not complain about the noise

Forbearance to Sue  One had to construe whether promise not to complain would amount to consideration.  Wade v Simeon (1846) Plaintiff had claimed two sums of money from defendant, totaling £10, in exchange for promise not to bring legal action. Held that since plaintiff knew claim was ungrounded, he acted in bad faith and thus no consideration. Where a party promises not to enforce an invalid claim and he knew that such a claim was invalid at the time of his promise, forbearance is no consideration.  By analyzing the case above, it should be noted that (1) To give up a claim that the prosecutor wrongly but in good faith believes

to be well founded is good consideration

(2) Giving up a claim that is known to be bad discloses no good

consideration

(3) Giving up a good claim amounts to a good consideration.

 On the fact, by drawing analogy to the reasoning above, if it is an offence to make noise at night. Goldeep’s promise of not making complain will amount to a good consideration.  However if the court does not accept the analogy above, one may have to decide the status of the part payment of debt here

Part Payment of Debt  This issue revolves around part payment of debt.  General Rule: Payment of a lesser sum will not constitute the debt.

 Pinnel’s Case (1602)

If one person owes a sum of money to another and agrees to pay part of this in full settlement, the rule at common law is that part-payment of a debt is not good consideration for a promise to forgo the balance.  Foakes v Beer (1884): The House of Lords reaffirmed the decision in Pinnel’s case.  On the fact, promise to pay less will not be valid unless a fresh new consideration given without relying on the act of paying the existing sum to which debtor already bound to do so.  There are 2 exceptions set by Pinnel’s case (1) Payment via Horse, Hawk or Robe (Different Mode) (2) Accord and Satisfaction  There is also an exception sent by Hiramchand & Punamchand v Temple (1911) which is payment via third party  On the fact, none of the exceptions are applicable.  As such, Goldeep may rely on the Doctrine of Promissory Estoppel

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(3) Clearly Goldeep has relied on the promise of Mia as he had paid lesser sum to Mia. Proving detriment is no longer mandatory. (4) The doctrine is being used as a shield as Mia might be initiating action against Goldeep and Goldeep merely using it as a defence. (5) There is no fraud on the part of Goldeep  Effect of Promissory Estoppel: (Tools Metal v Tungsten Electric)(1955) (1) Where the debtor's contractual obligation is to make periodic payments, the creditor's right to receive payments during the period of suspension may be permanently extinguished , but the creditor may revert to their strict contractual rights either upon giving reasonable notice , or where the circumstances which gave rise to the promise have changed as in

High Trees.

(2) In D & C Builders, which concerned liability for a single lump sum , Lord Denning expressed obiter that the court would not permit the promisor to revert to his strict legal right and that the estoppel would be final and permanent if the promise was intended and understood to be

permanent in effect.

The preferred approach is to look at the nature of the promise.

If as in High Trees and Tool Metal, it is intended to be temporary in application and to reserve to the promisor the right subsequently to reassert his strict legal rights, the effect will be suspensive only; if on the other hand, it is intended to be permanent (as envisaged in D & C Builders), then there is no reason why in principle or authority the promise should not be given its

full effect so as to extinguish the promisor's right.

 On the fact, this is a lump sum payment. Therefore Mia could not able to claim back the rest of the money (100 pounds) from Goldeep as the creditor’s right will be permanently extinguished.  MWB Business Exchange Centres Ltd v Rock Advertising Ltd (2016)(Court of Appeal) Rock Advertising (Rock) was the licensee of managed office space owned by the licensor (MWB). It had fallen into arrears with its monthly licence fees. MWB served a notice to terminate the licence. Rock argued that an oral agreement had been reached between MWB’s credit controller and a director of Rock to reschedule the monthly licence fees (so that Rock would pay at a lower rate for a number of months and would then pay at a higher rate for the remainder of the licence). The licence agreement had a standard clause which stated that: “all variations to this licence must be agreed, set out in writing and signed on behalf of both parties before they take effect.” Issues (1) Did the anti-oral variations clause in the licence mean that the oral variation to reschedule the monthly licence fees was of no effect? (2) If an oral variation could still be effective, was it supported here by sufficient consideration provided by Rock? The Court held that:

Consideration

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 The clause in the licence did not prevent oral variations to it. The court endorsed the obiter comments from a case a couple of months earlier that such a conclusion was consistent with the principle of party autonomy (i. the freedom of contracting parties to agree whatever terms they wish and the freedom of those parties to vary those terms as they may decide).  Even though Rock’s promise to pay was essentially a promise to pay what was already due, there were practical benefits in Rock’s promise that could constitute fresh consideration (i. MWB not being left with an empty property and recovering the arrears over time without the need for court proceedings).

(1) The first is a factual question. Parties will only normally enter into an agreement where they see some practical benefit to it. (2) Second, the Court of Appeal recognised that there were questions as to where this left the rule in Foakes v Beer_._ That is important because Foakes v Beer is a decision of the House of Lords and so the rule can only be changed by the Supreme Court. Arden LJ suggested that there was no issue because there has always been an exception to the rule, which was explained by Lord Coke in Pinnel’s Case: “the gift of a horse, hawk, or robe in satisfaction is good for it shall be intended that a horse, hawk or robe etc might be more beneficial to the plaintiff than the money. ” The doctrine of practical benefit was, Arden LJ suggested, simply a more modern equivalent of that long standing exception. In Pinnel’s Case Lord Coke was talking about substitute performance – something different to what was originally agreed. Here, the parties are talking about the same or lesser performance; it is simply that the situation has developed in a way that renders that performance more beneficial, at

least to one of them, than was originally thought.

Factually, determining whether performance has changed is straightforward; determining whether it was more useful is, obviously, a question more likely to lead to disputes. Legally, if the Court of Appeal’s approach does not fit within an exception to the rule in Foakes v Beer, there

is the obvious risk of a legal argument as to which approach should apply.

 MWB Business Exchange Centres Ltd v Rock Advertising Ltd (2018)(Supreme Court) Lord Sumption, delivering the leading judgment, said that the inclusion of a so-called ‘NOM’ (no oral modification) clause rendered any such amendment ineffective. This case raised the prospect of the Supreme Court for the first time considering the concept of ‘practical benefit’ as developed in Williams v Roffey (1991).

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 Williams v Roffey Bros (1990): The defendants were building contractors who entered an agreement with the Plaintiff to refurbish a block of 27 flats. The defendants engaged the claimant to do the carpentry work for an agreed price of £20,000. 6 months after commencing the work, the claimant realised he had priced the job too low and would be unable to complete at the originally agreed price. He approached the defendant who had recognised that the price was particularly low and was concerned about completing the contract on time. The defendant agreed to pay the claimant an additional £575 per flat. The claimant continued work on the flats for a further 6 weeks but only received an additional £500. He then ran out of money and refused to continue unless payment was made. The defendant engaged another carpenter to complete the contract and refused to pay the claimant the further sums promised arguing that the claimant had not provided any consideration as he was already under an

existing contractual duty to complete the work.

The Court in Williams v Roffey Bros stated that the Plaintiff has given a good consideration by conferring practical benefit to the defendant in the absence of duress. For practical benefit to be applicable: 1) There must be Practical Benefit 2) There must be No Duress  On the fact, practical benefit could be: (1) Having the party without any hindrance. (2) Peace of mind  However it seems there was duress since the facts indicates that Andre told Mia the folowing: There’s no way I can do this for the price promised. Unless you pay me double, I will not be doing the job!’

Duress

 Illegitimate commercial pressure if exercised by one of the contracting parties can be used as a means of setting aside the contract between two parties (Atlas Express v Kafco Ltd (1989))  Econmic duress can be summarized to embody a situation where one party uses his superior economic power in illegitimate way so as to coerce the other party to agree to a particular set of terms.  Requirements for Economic Duress: (1) A coercion of the will which vitiates the consent Occidental Worldwide Investment v Skibs (The Sibeon & The Sibotre) (1976)  The defendants chartered two vessels from the claimant.

Consideration

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 The defendants told the claimants that they would go bankrupt if they did not lower the cost of charter.  This was completely untrue.  The claimants feared that they would lose valuable customers and they were also were owed substantial amounts of money by the defendant which they feared they would lose if the defendants did become insolvent.  The claimants therefore agreed to renegotiate the contract to lower the cost of charter.  They later sought to have the renegotiated contract set aside.  Held:  Whilst recognising that it would be possible to render a contract voidable for economic duress, it was not established in this case.  To amount to economic duress there had to be a coercion of the will so as to vitiate consent. Commercial pressure was not sufficient.  Kerr J appears to place much emphasis on whether the party relying on duress had made any protest at the time of the alleged threat of economic duress or shortly thereafter.  He also looked at the possibility on whether or not the person alleging economic duress had treated the settlement as closing the transaction in question and as binding upon him or whether he made clear that the issue was still open Note: This was the first case where economic duress was recognized as giving rise to a cause of action. More recent cases look to absence of choice rather than coercion of the will vitiating consent. Universe Tankships v International Transport Workers Federation, The Universe Sentinel (1983)  The ITWF blacked a ship, The Universe Sentinel, to prevent it from leaving port.  They made several demands in relation to pay and conditions and also demanded the ship owners pay a large sum of money to the Seafarers International Welfare Fund.  The ship owners agreed in order that the ship could leave port and then sought to recover the sum paid to the welfare fund.  Held:  The money had been extracted under economic duress and could be recovered.  The House of Lords held that earlier case law had been wrong to look at coercion of the will so as to vitiate consent. During an analogy with the defence in criminal law where it is recognised that a defendant acting under duress has

Consideration

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2021 Zone B Question 2

‘The doctrine of consideration should play no role in the modification, as opposed to the formation, of contracts.’ Critically evaluate the statement above

Answer Guide

 Consideration is one of the requirement to establish a valid contract as per Lord Wilberforce in the case of Eurymedon (1975)  Consideration is defined as: Lush J in Currie v Misa (1875) "... some right, interest, profit or benefit accruing to one party, or some forebearance, detriment, loss or responsibility given, suffered or undertaken by the other." Sir Frederick Pollock, approved by Lord Dunedin in Dunlop v Selfridge Ltd [1915] "An act or forebearance of one party, 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." Thomas v Thomas (1842) ‘something of value in the eyes of the law, moving from the claimant, it may be some detriment to the claimant or some benefit to the defendant. ’ Patrick S. Atiyah, “Consideration: A Restatement”, in P. Atiyah, Essays on Contract “reason for enforcement of a promise”, the reason being “the justice of the case”.

Formation of Contract  The role of consideration in formation contracts is impeccable as it might serve a cautionary function preventing parties from being too easily subject to legal sanctions as a result of promises they have made.  White v Bluett  White v Bluett (1853) Bluett Sr. lent his son, the respondent in this case, a sum of money and died before his son had repaid this to him. Bluett Sr. and Jr. had agreed on this and completed a promissory note to this effect. Bluett’s will was executed by White. In the course of executing the will, White sued Bluett’s son for the outstanding payment. The son argued, as a defence, that Bluett Sr. had stated that repayment was not necessary to render the promissory note ineffective if the son stopped complaining about the manner in which Bluett Sr. spread his estate among the other members of the family. The court held that there was no consideration given by the son which would absolve him of having to repay the debt to his father’s estate. The court also believed that the son had no right to complain as the father was free to distribute his property as he wished. As a result, ceasing from complaining was not consideration and was ultimately an intangible promise.

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 Although the contribution of consideration in regards to formation of contract cannot be doubted, but the interference of it in regards to modification of contracts are subject to criticism

Modification of Contract

 It should be noted that contrary to the situation in formation of contracts, in modification of contracts, there is already an existing legal contract and mutually recognised obligations between the parties.  As such there is no danger as to being subject to legal sanctions in casual promises since the existence of contract indicates parties would like to engage in legal obligations.  Foakes v Beer (1883) The respondent, Beer, loaned the appellant, Dr Foakes, £2090 19s. When he was unable to repay this loan she received a judgment in her favour to recover this amount. The pair then entered an agreement whereby ‘in consideration’ of an initial payment of £500 and ‘on condition’ of six-monthly payments of £250 until the whole amount was repaid, she would not enforce her judgment against him. Foakes made these regular payments until the entire amount was repaid. However, he had not paid any interest on the judgement debt, which Beer was entitled to under statute. This interest totalled £302 19s 6d. The House of Lords held that the respondent’s promise not to enforce the judgment was not binding as Dr Foakes had not provided any consideration. Their Lordships approved the rule in Pinnel’s Case. Lord Selborne said that there had to be ‘some independent benefit, actual of contingent, of a kind which might in law be a good and valuable consideration’. However, Lord Blackburn expressed some dissatisfaction with this, noting that by accepting less a creditor could in some cases gain a practical benefit.

 Stilk v Myrick (1809) The claimant was a seaman on a voyage from London to the Baltic and back. He was to be paid £5 per month. During the voyage two of the 12 crew deserted. The captain promised the remaining crew members that if they worked the ship undermanned as it was back to London he would divide the wages due to the deserters between them. The claimant agreed. The captain never made the extra payment promised. The Court held that the claimant was under an existing duty to work the ship back to London and undertook to submit to all the emergencies that entailed. Therefore, he had not provided any consideration for the promise for extra money. Consequently, he was entitled to nothing.  Analysis over the above cases shows that in both cases the claimant failed because of lack of consideration. However in both cases promises have been

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intended that a horse, hawk or robe etc might be more beneficial to the plaintiff than the money. ” The doctrine of practical benefit was, Arden LJ suggested, simply a more modern equivalent of that long standing exception. In Pinnel’s Case Lord Coke was talking about substitute performance – something different to what was originally agreed. Here, the parties are talking about the same or lesser performance; it is simply that the situation has developed in a way that renders that performance more beneficial, at

least to one of them, than was originally thought.

Coerced Modification  It should be noted that the law must be more proactive in detecting and providing effective means of redress for coerced modification rather than a modification that is mutually agreed upon.  Williams v Roffey Bros (1990): The defendants were building contractors who entered an agreement with the Plaintiff to refurbish a block of 27 flats. The defendants engaged the claimant to do the carpentry work for an agreed price of £20,000. 6 months after commencing the work, the claimant realised he had priced the job too low and would be unable to complete at the originally agreed price. He approached the defendant who had recognised that the price was particularly low and was concerned about completing the contract on time. The defendant agreed to pay the claimant an additional £575 per flat. The claimant continued work on the flats for a further 6 weeks but only received an additional £500. He then ran out of money and refused to continue unless payment was made. The defendant engaged another carpenter to complete the contract and refused to pay the claimant the further sums promised arguing that the claimant had not provided any consideration as he was already under an

existing contractual duty to complete the work.

The Court in Williams v Roffey Bros stated that the Plaintiff has given a good consideration by conferring practical benefit to the defendant in the absence of duress. For practical benefit to be applicable: (1) There must be Practical Benefit (2) There must be No Duress  It should be noted that Williams v Roffey Brothers is a positive development in law and a much celebrated and criticised development.  Although the criticism tends to focus on the definition of practical benefit, it must be noted that when two parties agreed to modify a contract, the law should not be a hurdle in the absence if duress.

Duress

Consideration

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 Duress is an Illegitimate commercial pressure if exercised by one of the contracting parties can be used as a means of setting aside the contract between two parties (Atlas Express v Kafco Ltd (1989))  Econmic duress can be summarized to embody a situation where one party uses his superior economic power in illegitimate way so as to coerce the other party to agree to a particular set of terms.  Requirements for Economic Duress: (1) A coercion of the will which vitiates the consent Occidental Worldwide Investment v Skibs (The Sibeon & The Sibotre) (1976)  The defendants chartered two vessels from the claimant.  The defendants told the claimants that they would go bankrupt if they did not lower the cost of charter.  This was completely untrue.  The claimants feared that they would lose valuable customers and they were also were owed substantial amounts of money by the defendant which they feared they would lose if the defendants did become insolvent.  The claimants therefore agreed to renegotiate the contract to lower the cost of charter.  They later sought to have the renegotiated contract set aside.  Held:  Whilst recognising that it would be possible to render a contract voidable for economic duress, it was not established in this case.  To amount to economic duress there had to be a coercion of the will so as to vitiate consent. Commercial pressure was not sufficient.  Kerr J appears to place much emphasis on whether the party relying on duress had made any protest at the time of the alleged threat of economic duress or shortly thereafter.  He also looked at the possibility on whether or not the person alleging economic duress had treated the settlement as closing the transaction in question and as binding upon him or whether he made clear that the issue was still open Note: This was the first case where economic duress was recognized as giving rise to a cause of action. More recent cases look to absence of choice rather than coercion of the will vitiating consent. Universe Tankships v International Transport Workers Federation, The Universe Sentinel (1983)  The ITWF blacked a ship, The Universe Sentinel, to prevent it from leaving port.

Consideration

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(2) Sufficient causation between the threat and the threatened party entering the contract/making a payment (3) The lack of any reasonable alternative to giving in to the threat. With respect to the first requirement. most cases of economic duress have involved a threat to breach a pre-existing contract. In Pakistan International the central legal issue was whether a threat to do something that a party was otherwise legally entitled to do (so called ‘legal act duress’) was capable of constituting duress It was held that such a threat would be illegitimate if it amounted to the kind of reprehensible or unconscionable conduct that would amount to undue influence. However, when, as in this case, the defendant genuinely believed that its failure to pay commissions earned in the past did not constitute a breach of contract on their part, there was no illegitimate threat.  It should be noted that the recent decision of Supreme Court making distinction as to legitimate and illegitimate pressure is welcomed since it shows the court is indifferent towards legitimate pressure  Hence the application of Williams v Roffey brothers after the 2021 decision will be even more better in fulfilling the aspiration of modification of contracts without any hurdle.

Other Jurisdictions

 Antons Trawling v Smith (New Zealand) Mr Smith was employed by Antons Trawling as the master of a fishing vessel operated by Antons and engaged in catching orange roughy off the coast of the North Island of New Zealand. Antons held a small quota for orange roughy in respect of which a commercial fishery had yet to be established. The Court of Appeal found that Antons had promised Mr Smith a ten percent share of any additional quota awarded to Antons as a result of Mr Smith demonstrating to the Ministry of Agriculture and Fisheries (MAF) the existence of orange roughy in commercial quantities so as to justify the setting of a larger quota. The Court found as a fact that Mr Smith had indeed demonstrated to MAF that a (small) commercial fishery in orange roughy was sustainable, and that MAF had, as a consequence, awarded Antons a small increase in its quota. Antons, however, denied that Mr Smith was entitled to ten percent of that increase as he had provided no consideration for their promise. Mr Smith had merely performed his pre-existing duty owed to Antons in establishing a commercial fishery and thus, according to Stilk v Myrick, which had been followed in New Zealand,[65] provided no consideration for their promise. The Court of Appeal, eliminated the requirement of consideration altogether from agreements to vary contracts. In a laconic final paragraph, Baragwanath J concluded: We are satisfied that Stilk v Myrick can no longer be taken to control such cases as Roffey Bros, Attorney-General for England and Wales and the present case where there is no

Consideration

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element of duress or other policy factor suggesting that an agreement, duly performed, should not attract the legal consequences that each party must reasonably be taken to have expected. On the contrary, a result that deprived Mr Smith of the benefit of what Antons promised he should receive would be inconsistent with the essential principle underlying the law of contract, that the law will seek to give effect to freely accepted reciprocal undertakings. The importance of consideration is as a valuable signal that the parties intend to be bound by their agreement, rather than an end in itself. Where parties who have already made such intention clear by entering legal relations have acted upon an agreement to a variation, in the absence of policy reasons to the contrary they should be bound by their agreement. In his concluding paragraph, Baragwanath J identifies four elements which must be present in order to render a promise binding in law in the absence of consideration.

(1) First, the parties must have made their intention to be bound clear by

entering into legal relations β The phraseology used would suggest that the only way of proving an intention to be bound is through the conclusion of a prior contract. The decision in Antons is therefore confined to agreements to vary existing contracts and will not apply to the conclusion of new contracts

(2) Secondly, a variation will only be enforced in the absence of

consideration where it has been acted upon β In Antons itself, Mr Smith took steps to prove a commercial fishery in orange roughy and therefore clearly acted upon the varied contract. The carpenters in Williams v Roffey continued to work on the flats and therefore, likewise, acted on the variation

(3) Thirdly, a promisee would appear to be able to rely on this rule only

where the agreement has been duly performed. β It confirms that a mere promise to perform in return for an additional payment will not lead to the conclusion of a binding agreement.

(4) Finally, only those contractual variations which do not contravene

considerations of public policy will be enforceable β Baragwanath J gives only one example of a policy factor which would preclude a variation from otherwise attracting legal consequences: duress  Economic duress, as identified by Baragwanath J in Antons and Glide well LJ in Williams v Roffey, arguably provides a more effective means of policing contractual variations than the focus on the presence (or otherwise) of consideration  THE PRINCIPLES OF EUROPEAN CONTRACT LAW - Parts I and II revised 1998 (Parts I and II revised 1998, Part III 2002) CHAPTER 2 – FORMATION Section 1 - General Provisions Article 2:101 (ex art. 5) - Conditions for the Conclusion of a Contract (1) A contract is concluded if: (a) the parties intend to be legally bound, and (b) they reach a sufficient agreement without any further requirement.

Consideration

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2020 October Zone A Question 2

Ruth is a metal worker involved in the following events:

(a) She contracts to repair the local church bells for £10,000. When she begins repairing them she discovers that there are voids in the bells that were not previously discoverable. She tells the vicar that the extra work involved will cost her an extra £5,000. The vicar reluctantly agrees to pay this and holds a sponsored hymn singing to raise the extra money.

(b) The fence around the local Dog Rescue Kennels has blown down and needs £ worth of repair work. Ruth agrees to do the work for the cost of the materials only which is £50.

(c) Ruth contracts with Lady Godiva to make a new set of gates for her Manor House. The design and price of £5,000 are agreed. Ruth likes Lady Godiva and so adds Lady Godiva’s family crest to the design. Before the gates are delivered Lady Godiva pays Ruth £5,000. However, when she sees the gates she is very pleased with the crest and rings Ruth to promise her an extra £500.

(d) Lord Bulldog rears pheasants on his estate which are then shot by paying guests. Lord Bulldog asks Ruth to repair the cages in which the pheasants are reared. She estimates the work needed at about £200. However, she dislikes Lord Bulldog and does not approve of shooting as a sport so tells him she will do it for £2,000 to which Lord Bulldog agrees.

Having completed all the work above, the Vicar refuses to pay the extra £5,000 when his sponsored hymn singing only raises £5. Ruth regrets her generosity towards the local Dog Rescue Kennels and demands that they pay the “proper” price for the job and not just £50. Lady Godiva also now regrets promising to pay extra to Ruth and declines to do so and Lord Bulldog, having discovered the true cost of the work, now refuses to pay any more than £200. Advise Ruth.

Answer Guideline

Part A

 Ruth needs an advice pertaining the extra payment that Vicar promised  The promise will only be enforceable if there is consideration by Ruth.

Consideration

 Lush J in Currie v Misa (1875) "... some right, interest, profit or benefit accruing to one party, or some forebearance, detriment, loss or responsibility given, suffered or undertaken by the other."  Sir Frederick Pollock, approved by Lord Dunedin in Dunlop v Selfridge Ltd [1915]

Consideration

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"An act or forebearance of one party, 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."  Thomas v Thomas (1842) ‘something of value in the eyes of the law, moving from the claimant, it may be some detriment to the claimant or some benefit to the defendant.  ’ Patrick S. Atiyah, “Consideration: A Restatement”, in P. Atiyah, Essays on Contract “reason for enforcement of a promise”, the reason being “the justice of the case”.  On the fact, the above promise will be only valid if it comes within the realm of the definition of consideration  For the initial promise of £10,000, the consideration will be building the church bell.  However Ruth will probably say that for the extra money promised, the consideration is the same (building the church bell).  This will be classified as pre-existing contractual duty.

Pre-Existing Contractual Duty  Stilk v Myrick (1809) The claimant was a seaman on a voyage from London to the Baltic and back. He was to be paid £5 per month. During the voyage two of the 12 crew deserted. The captain promised the remaining crew members that if they worked the ship undermanned as it was back to London he would divide the wages due to the deserters between them. The claimant agreed. The captain never made the extra payment promised. The Court held that the claimant was under an existing duty to work the ship back to London and undertook to submit to all the emergencies that entailed. Therefore, he had not provided any consideration for the promise for extra money. Consequently, he was entitled to nothing.  By following Stilk v Myrick, since Ruth is obliged to build the Church bell under pre- existing contractual duty for 10 000, it will not be considered as a valid consideration  Hartley v Ponsonby (1857): Half of a ship's crew deserted on a voyage. The captain promised the remaining crew members extra money if they worked the ship and completed the voyage. The captain then refused to pay up. Held: The crew were entitled to the extra payment promised on the grounds that either they had gone beyond their existing contractual duty or that the voyage had become too dangerous frustrating the original contract and leaving the crew free to negotiate a new contract.  On the fact, there is no evidence to suggest that Ruth has done anything over and above.  However one may still rely on the doctrine of practical benefit established under Williams v Roffey Brothers.  Williams v Roffey Bros (1990): The defendants were building contractors who entered an agreement with the Plaintiff to refurbish a block of 27 flats. The defendants engaged the claimant to do the carpentry work for an agreed price of £20,000. 6 months after commencing the work, the claimant

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Contractlaw-consideration

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Contract Law REVISION 2021

Consideration

Sharavanaa Mahendran sara@atc2u.edu.my

Question 2 2021 Zone A

Mia is planning to hold a party at her house to launch her new interior design business.

She speaks to her neighbour, Goldeep, to warn her about potential noise on the evening

of the party. Goldeep promises that she will not complain about the noise if Mia agrees

not to insist on full repayment of the £200 that Goldeep owes Mia. Mia agrees that

Goldeep need only pay her £100. Mia contacts Andrew, the owner of Party People, a

local business that supplies catering services. Mia asks Andrew if his company can

provide buffet food and cocktails on the night of her party. Andrew’s business has been

going through a slump and he is in serious financial difficulties. The party offers Andrew

the opportunity to attract new clients for his business and so he undertakes to provide the

service at a reduced price of £1,000. A week before the party, Andrew realises that it will

be impossible to provide both food and cocktails for the price agreed. Andrew telephones

Mia in a panic, shouting, ‘There’s no way I can do this for the price promised. Unless you

pay me double, I will not be doing the job!’ Realising that she would need to pay £2,000

for the same services elsewhere, Mia agrees to pay Andrew the additional money. The

day after the party, Mia changes her mind about paying the extra £1,000 to Andrew. She

also regrets her decision to forego the £100 that Goldeep owes her.

Answer Guideline

 Mia needs an advice pertaining:

(1) The reduced payment of 100 pounds by Goldeep

(2) The extra payment demanded by Andrew (2000 Pounds)

 The promises made by Mia will be only enforceable if Goldeep and Andrew have

provided consideration for the promises.

Consideration

 Lush J in Currie v Misa (1875)

"... some right, interest, profit or benefit accruing to one party, or some forebearance, detriment,

loss or responsibility given, suffered or undertaken by the other."

 Sir Frederick Pollock, approved by Lord Dunedin in Dunlop v Selfridge Ltd [1915]

"An act or forebearance of one party, 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."

 Thomas v Thomas (1842)

‘something of value in the eyes of the law, moving from the claimant, it may be some detriment to

the claimant or some benefit to the defendant.

 ’Patrick S. Atiyah, “Consideration: A Restatement”, in P.S. Atiyah, Essays on

Contract

“reason for enforcement of a promise”, the reason being “the justice of the case”.

 On the fact, the above promise will be only valid if it comes within the realm of the

definition of consideration

Goldeep