Contract law: consideration and privity

Question 1

What is executed consideration?

Answer 1

(been performed) An act in return for a promise.

Question 2

What is executory consideration?

Answer 2

(yet to be performed) A promise for a promise.

Question 3

What is a promisor?

Answer 3

A person who makes a promise to another.

Question 4

What is a promisee?

Answer 4

The person to whom the promise is made.

Question 5

What is promissory estoppel?

Answer 5

An equitable doctrine which can prevent a person going back on a promise which is not supported by consideration.

Question 6

What is consideration?

Answer 6

Something that passes from one party to another- each party must have something of tangible value.

Question 7

What are the rules of consideration?

Answer 7

• Consideration need not be adequate but must be sufficient.
  -Past consideration is not good consideration.
• Consideration must move from the promisee.
• Performing on existing duty cannot be the consideration for a new contract.
• A promise to accept part payment of a pre-existing debt in place of a whole debt is not consideration.

Question 8

Describe “consideration need not be adequate but must be sufficient”.

Answer 8

• Adequacy means both parties to the contract agree the value of things being exchanged is acceptable as shown in Chappell v Nestle Co LTD 1960
• Sufficiency means the consideration must be real and some value as shown in Ward V Bytham 1956.

Question 9

Describe “Past consideration is not good consideration”.

Answer 9

Consideration has no value where it has already been done at the time the agreement is made because it is not the price for which promise of bought as it had been completed before the agreement has made as shown in RE Mcardle 1951.

Question 10

Describe “Consideration must move from the promisee”.

Answer 10

A person cannot sue under a contract unless he has provided consideration for it as shown in Tweddle V Atkinson 1861.

Question 11

Describe “Performing on an existing duty cannot be the consideration for a new contract”.

Answer 11

A pre-existing duty is something you are alredy required to do as shown in Collins v Godefroy 1831

Question 12

Describe “ A promise to accept part payment of a pre-existing debt in place of a whole debt is not consideration”.

Answer 12

As shown in Pinnel’s rule 1602 payment of a debt on the due date in a smaller amount means the creditor may still claim the balance owed, even if he agreed to accept the smaller sum as final settlement.

Question 13

What is Privity?

Answer 13

The principle that only those who are parties to a contract are bound by it and can benefit from it as shown by Dunlop V Selfridge 1915.

Question 14

Describe the relationship between privity and consideration?

Answer 14

• The rule of privity is based on the rule that consideration must move from the promisee as shown in Tweddle v Atkinson 1861.
• The privity rule is seen as causing injustice, and so the courts have tried to find ways of avoiding the rule.

Question 15

-What are the general exceptions to privity?

Answer 15

• Agency- The agent is authorised to make a contract on behalf of another, they are treated as being the same person so they are bound by it.
• Collateral contracts- the courts may try to avoid the rule of privity by finding a second contract alongside the main agreement as shown in Shanklin Pier LTD V Detel products LTD 1951

Question 16

Describe “intention to create legal intention”

Answer 16

• Once offer and acceptance hve taken place and an agreement is formed, there is a contract.
• There must be an intention to create legal relations and make a contract legally binding.
• This is presented in a business agreement but not where the agreement is social or domestic.