2. Consideration

Question 1

Leeds United Football Club Ltd v Chief Constable of West Yorkshire Police [2012]

Answer 1

Area: Public duty imposed by law and going “above and beyond”

As seen in Glasbrook Bros v Glamorgan County Council [1925], extra police security which is deemed in excess of that considered necessary by the police authorities can amount to sufficient consideration for a private promise to pay.

However, in this case, the Court sided with LUFC in arguing that the policing of the surrounding areas, in addition to the ground, was part of the general duty of the police to keep the peace.

Question 2

In what case did the Supreme Court comment that the area of law relating to consideration for part payments of debt as being “ripe for examination”?

Answer 2

MWB Business Exchange v Rock Advertising Ltd [2016]

Question 3

Glasbrook Bros v Glamorgan County Council [1925]

Answer 3

Whilst a public duty imposed by law will not normally be sufficient consideration (as per Collins v Godefroy [1831]), this position changes if the claimant can show that he has done something more than the duty imposed on him by law.

In this case, mine owners had asked the police for a level of security of excess of that considered necessary by police authorities, but the mine owners had promised to pay for this. However, the mine owners later refused to pay and alleged that the police were simply carrying out their public duty imposed by law. However, as the police protection was above and beyond what was necessary, the extra protection was deemed to be sufficient consideration.

Question 4

What is the doctrine of promissory estoppel?

Answer 4

Promissory estoppel can provide a means of making a promise binding, even without consideration. It is most commonly used in relation to part payment of debts.

Defined by Lord Denning in Combe v Combe [1951]:

• One party makes a promise to the other (by words or conduct);
• The promise was intended to affect the legal relations between the parties and was intended to be acted upon;
• The other party has relied on the promise and acted on it; then

The promisor cannot go back on his promise (even though the promisee has not provided any consideration for it).

Question 5

What are the 3 relevant cases for assessing if sufficient consideration has been provided in relation to a pre-existing duty imposed by law?

Answer 5

1. Collins v Godefroy [1831]
2. Glasbrook Bros v Glamorgan County Council [1925]
3. Leeds United Football Club Ltd v Chief Constable of West Yorkshire Police [2012]

Question 6

What does it mean that consideration must be sufficient but need not be adequate?

Answer 6

The law requires the parties to have entered into a bargain where each side has provided something of value that the courts can see. The courts are not generally interested in whether this is a fair bargain or not. The term “sufficiency” describes something that the courts can see of value that makes the bargain binding. Hence the law requires consideration to be something of sufficient value, but not necessarily the full or adequate market value.

Question 7

What case provided the three 3 conditions for “past consideration” to be sufficient?

Answer 7

Pao On v Lau Yiu Long [1980]

Question 8

Pinnel’s Case [1602]

Answer 8

The basic common law rule relating to part payment of a debt.

If a debtor offers to pay less, as full and final settlement, the debtor must provide an additional benefit to the creditor that amounts to consideration and effectively makes a new agreement (for the lesser sum). This benefit will usually be to pay earlier than the debt due date but can be anything of benefit:

“the gift of a horse, hawk or robe etc in satisfaction is good for it shall be intended that a horse, hawk or robe etc might be more beneficial to the claimant than money, in respect of some circumstance, or otherwise the claimant would not have accepted in satisfaction”.

Question 9

What are the three exceptions to the general rule of Stilk v Myrick [1809]?

Answer 9

The general rule is that promises to pay more for performance of pre-existing contractual duties is not binding as no new sufficient consideration has been provided. However, it may be binding if:
1. Contained in a deed (as then consideration is not necessary).
2. The other party does something extra/in excess of their existing contractual duties (Hartley v Ponsonby [1857])
3. The party promising extra gains a “practical benefit” or avoids a “disbenefit” (Williams v Roffey Bros & Nicholls (Contractors) Ltd [1990])

Question 10

Simantob v Shavleyan [2019]

Answer 10

A modern day application of the “gift of a horse, hawk or robe” from Pinnel’s Case [1602].

The COA held that an agreement to discharge a debt in part settlement was valid because it was also accompanied by an agreement by the debtor to waive their right to raise a potentially valid legal defence, to dispute her liability under the debt. The waiving of this legal right was held to constitute the equivalent of a “horse, hawk or robe” and therefore was sufficient consideration to support this new agreement.

Question 11

Tweddle v Atkinson [1861]

Answer 11

Area: Consideration must move from the promisee AND privity of contract

Facts: The fathers of a couple, engaged to be married, agreed between themselves to pay the groom some money as a wedding gift. One of the fathers died before paying the money to the groom (Mr Tweddle) and his executors refused to pay. Mr Tweddle sued the executors of the estate.

Outcome/importance: Mr Tweddle’s case failed. Even though he was named in the agreement, he had not himself given consideration for the agreement.

This case made it clear that a person seeking to enforce a promise must have supplied for consideration for it (i.e. the consideration did not move from the promisee). Mr Tweddle was also unable to enforce the contract due to the traditional privity of contract rules.

Question 12

Williams v Roffey Bros [1990]

Answer 12

The law surrounding consideration where the claimant is under a pre-existing contractual duty to the defendant.

In this case, the COA found that the claimant (a sub-contractor) was entitled to recover bonus payments that were promised to him if he were to complete the work on time, despite already being contracted to do the work. The law was expressed as follows:

1. If A has entered into a contract with B to do work for or to supply goods or services to B in return for payment; and
2. at some stage before A has completely performed their obligations under the contract, B has reason to doubt whether A will, or will be able to, complete their side of the bargain; and
3. B thereupon promises A an additional payment for A to complete their obligations on time; and
4. as a result of this promise, B obtains a PRACTICAL BENEFIT OR AVOIDS A DISBENEFIT; and
5. B’s promise was not given as a result of economic duress or fraud on the part of A; then

the benefit to B is capable of being consideration for B’s promise , so that the promise will be legally binding.

Question 13

How did Lord Denning comment on how promissory estoppel is to be used, in the case of Combe v Combe [1951]?

Answer 13

“The principle stated in the High Trees case … does not create new causes of action where none existed before. It only prevents a party from insisting upon his strict legal rights, when it would be unjust to allow him to enforce them, having regard to the dealings which taken place between the parties”.

It is now settled that the doctrine can be used only as a defence, that is “as a shield not as a sword”.

Question 14

In which case did the House of Lords comment the following on the doctrine of promissory estoppel:

“I desire to add that the time may soon come when the whole sequence of cases based on promissory estoppel since the war, beginning with Central London Property Trust Ltd v High Trees House Ltd, may need to be reviewed and reduced to a coherent doctrine by the courts”.

Answer 14

Woodhouse v Nigerian Produce [1972]

Question 15

Central London Property Trust Ltd v High Trees House Ltd [1947]

Answer 15

The claimants leased a block a flats from the defendant, at the rate of £2500 p.a. Due to the war, the occupancy rates drastically fell and so in 1940, the parties agreed to reduce the rent by 50%. Neither party stipulated how long this reduced rent was to apply for. The defendants paid the reduced rate for 5 years, as the flats gradually became full again in 1945. The claimant syed the defendant for payment of the full rental from July 1945 onwards.

Lord Denning held that the arrangement was only intended to last whilst war conditions affected the letting of the flats and therefore the claimant’s claim should succeed.

However, the doctrine of promissory estoppel was developed by obiter comments of Lord Denning, when commenting on a potential claim by the Claimants to claim back full rent for the war years. Lord Denning said such an action would fail. If a promisor had made a promise to the promisee, intending that the promise be acted upon by the promisee, then the promisor would be estopped from going back on his promise.

Question 16

What two cases illustrate the traditional rule that “consideration must move from the promisee”?

Answer 16

Tweddle v Atkinson [1861]

and

Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co Ltd [1915]

Question 17

Foakes v Beer [1884]

Answer 17

The defendant paid off a CCJ by instalments, as agreed and ultimately in full. The claimant later sued for interest, despite agreeing that no proceedings would be brought against the defendant if he paid the judgment debt in the agreed manner.

The House of Lords applied the rule from Pinnel’s Case [1602] and found that the claimant was entitled to claim this additional interest. The debtor had not provided some additional benefit/new element and therefore insufficient consideration for a new agreement. The defendant was simply complying with their pre-existing legal obligation. (Note that this decision has caused controversy and has been criticised for being harsh).

Question 19

Re Selectmove [1995]

Answer 19

A company claimed that HMRC had agreed that they could pay off their tax bill by way of instalments. HMRC argued that this was not agreed and, in any event, such an agreement would not be binding, since the company was doing less than what was required of it. The company argued that the instalment plan was the “practical benefit” to the HMRC (as per Williams v Roffey Bros [1990], in that it ensured that the company continued in business and thus more likely to meet its debts.

The Court held that the decision in Williams v Roffey Bros [1990] had no effect on the rules as to part payment of debts, which were set out in Foakes v Beer [1884] (which confirmed the approach from Pinnel’s Case [1602]).

(Is this an arbitrary distinction between promises to pay more v promises to pay less??)

Question 20

Hartley v Ponsonby [1857]

Answer 20

A decision in contrast with the decision of Stilk v Myrick [1809].

As per Stilk v Myrick [1809], the claimant’s performance of a pre-existing contractual duty will not usually amount to consideration to support another contract (i.e. a bonus for getting the ship back safely).

However, in this case, the ship’s crew had done something in excess of their existing contractual obligations and so there was sufficient consideration to support a new contract.

Question 21

Collins v Godefroy [1831]

Answer 21

If a person is legally obliged to do something because of some duty imposed by law, then the promise to carry out that obligation cannot amount to consideration to support a new contract.

In this case, the claimant was subpoenaed to attend a court hearing to provide evidence on the defendant’s behalf and alleged that the defendant had promised to pay him for his trouble. It was held that there was consideration to support the defendant’s promise, as the claimant was already under a duty to attend the court.

Question 22

Chappell & Co Ltd v Nestle Co Ltd [1960]

Answer 22

Area: Consideration need only be sufficient, not adequate

Facts: As part of a promotion, Nestle were selling records (the copyright of which were owned by Chappell) for sale at 1s & 6p, plus three wrappers, from their sixpenny chocolate bars. Chappell sued to prevent the promotion, since they would receive a much lower royalty from it.

Outcome/importance: The wrappers were held to be part of the consideration, even though they were thrown away when received.

As Lord Somervell commented:

“It is said that, when received, the wrappers are of no value to Nestle. This is irrelevant. A contracting party can stipulate for what consideration he chooses. A peppercorn does not cease to be good consideration if it is established that the promisee does not like pepper and will throw away the corn”.

This upholds the principle from Thomas v Thomas [1842].

Question 23

Ajayi v Briscoe [1964]

Answer 23

In order to go back to the original agreement/bring the promissory estoppel to an end, the promisor must give the promisee reasonable notice. This notice must give the promisee a reasonable opportunity to resume his position. It may be that the promise is irrevocable if the promisee cannot resume his position.

Question 24

Currie v Misa [1875]

Answer 24

Area: (Old fashioned) Definition of consideration

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

Question 25

What is the doctrine of implied assumpsit?

Answer 25

The doctrine is an exception to the general rule that past consideration is not good consideration. This is where one party requests a service from the other, and that service is typically something that someone would expect to pay for. The court and the parties expect payment to be made for it and the contract will be enforceable, even if the price was not agreed at the time of the contract. Examples of services you might ask for, before agreeing costs at the outset, are taxi journeys or a haircut. The leading case illustrating this is Lampleigh v Braithwaite [1615]

Question 26

What are the three conditions required for promissory estoppel?

Answer 26

1. A clear and unequivocal promise; 2. The promisee acts upon the promise; 3. It must be inequitable for the promisor to renege on their promise.

Question 27

Stilk v Myrick [1809]

Answer 27

Area: Performance of an existing duty (that a party is already bound to do), then this is not sufficient to amount to consideration for a new agreement. Facts: A team of 11 sailors agreed to crew a ship from London to the Baltic and back. 2 sailors deserted in the Baltic. The remaining 9 refused to work and pressed the captain for higher wages. The captain initially agreed but ultimately refused to pay. The sailors sued the captain. Outcome/importance: The promise to pay was unenforceable since the sailors were already contractually bound to return the ship to London. Therefore, there was no consideration given by the sailors in return for the captain’s promise to pay additional wages. Since consideration is defined in terms of a detriment or forbearance, then it seems logical that you cannot suffer any detriment in relation to a new promise if that detriment is something that you were going to have to do anyway.

Question 28

Ward v Byham [1956]

Answer 28

Consideration does not need to be a monetary sum. In this case, a mother’s promise to keep her illegitimate child “well looked after and happy” in return for maintenance money from the father was held to be sufficient consideration.

Question 29

Thomas v Thomas [1842]

Answer 29

Area: Consideration need only be sufficient, not adequate Facts: A husband expressed a wish that his wife should be allowed to remain in their house after death. This was not written in his well. After his death, his executors allowed his wife to stay at a rent of £1 per year. Outcome/importance: The payment of “peppercorn” rent was sufficient consideration for the contract to be enforceable. The husband’s wish alone, however, would not have been sufficient consideration. As long as the consideration has some value (sufficient to render the promise enforceable), the courts will not concern themselves with its adequacy (i.e. whether or not it represents a good bargain).

Question 30

What case confirmed the common law approach of Pinnel's Case [1602], nearly 200 years later?

Answer 30

Foakes v Beer [1884]

Question 31

D & C Builders Ltd v Rees [1965]

Answer 31

With regards to promissory estoppel, the promisee's conduct can make it not inequitable to allow the promisor to withdraw the promise. Here, the defendant debtor and extracted the promise by the claimant to accept a part payment of the debt by putting undue pressure on the claimant (i.e. "take this or you will get nothing"). The defendant debtor was also aware of the claimant's cash flow problems. As a result, the claimant was practically forced to agree and so it was not inequitable for the promisor to withdraw his promise.

Question 32

What authority did Lord Denning rely on when developing the doctrine of promissory estoppel in Central London Property Trust Ltd v High Trees House Ltd [1947]?

Answer 32

Lord Denning relied on the decision in Hughes v Metropolitan Railway Co [1877] and the comments of the Law Revision Committee report from 1937, which recommended that a creditor's promise to accept payment as full settlement should be binding.

Question 33

What case illustrates the general rule that past consideration is not good consideration?

Answer 33

Re McArdle [1951]

Question 34

Lampleigh v Braithwaite [1615]

Answer 34

Area: The doctrine of implied assumpsit being an exception to the general rule that past consideration is not good consideration Facts: Braithwaite had killed another man and asked Lampleigh to secure a pardon. Lampleigh went to considerable effort and expense to secure the pardon for B, who subsequently promised to pay L £100. B failed to pay and L sued. Outcome/importance: Lampleigh’s claim was successful, even though, on the basis of past consideration, his efforts were in the past in relation to the promise to pay. The court, however, considered that the original request by B contained an implied promise that he would reward and reimburse L for his efforts. Therefore, the previous request and subsequent promise were part of the same transaction and were enforceable. This has remained good law for over 400 years.

Question 35

W J Alan & Co Ltd v El Nasr Export and Import Co [1972]

Answer 35

With regards to promissory estoppel and the promisee having to rely on the promise, the promisee does not have to necessarily act to their detriment. In this case, Lord Denning maintained that all the promisee needs to do is to act differently from how they normally would have done.

Question 36

Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co Ltd [1915]

Answer 36

Area: (More up to date) Definition of consideration “An act or forbearance 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”.

Question 37

The "Post Chaser" [1982]

Answer 37

For there to be a promissory estoppel, it mist be inequitable for the promisor to renege on their promise. In this case, it was confirmed that the only requirement was that inequity be shown to exist. In this case, the promise was withdrawn very quickly and caused no detriment to the promisee, despite them having acted on it. Therefore, it was not inequitable to allow the promisor to go back on it.

Question 38

What contracts do not require “consideration”?

Answer 38

The only exception to this rule is when the promise contained in a formal deed. This is a formal legal document which sets out that it is a deed and has been signed, witnessed and delivered by the person making it. A contract made by deed does not require consideration, because it is a very specific formal document. The signature is taken as clear evidence of the person’s intention to keep their promise, without the need for further consideration.

Question 39

What does it mean that the doctrine of promissory estoppel is equitable?

Answer 39

This means that each case turns on its own facts and so any attempt to impose strict rules on the doctrine might be seen to be missing the point.

Question 40

With regard to promissory estoppel, what approach do the courts take when considering if it would be inequitable for the promisor to renege on their promise?

Answer 40

The doctrine of promissory estoppel clearly indicates that where a party to a contract promises to accept a variation in strict contractual performance, and the other party acts on this, the courts will prima facie adjudge the promisor to have acted inequitably should they attempt to go back on his promise. The "Post Chaser" [1982] - It was confirmed that the only requirement was that inequity be shown to exist. In this case, the promise was withdrawn very quickly and caused no detriment to the promisee, despite them having acted on it. Therefore, it was not inequitable to allow the promisor to go back on it. D & C Builders Ltd v Rees [1965] - The promisee's conduct can make it not inequitable to allow the promisor to withdraw the promise.

Question 41

In what case did Lord Denning provide the modern day definition of promissory estoppel?

Answer 41

Combe v Combe [1951]

Question 42

What are the two cases which provide definitions of “consideration”?

Answer 42

Currie v Misa [1875] and Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co Ltd [1915]

Question 43

Re McArdle [1951]

Answer 43

Area: Leading case on “past consideration” not being good consideration Facts: Mr and Mrs McArdle had died and had left their house to their children after their death. One of the children had paid for some decorating and improvement work. After the improvements had been completed, the other McArdle children promised they would contribute to the price of this. They later changed their mind and refused to make any payments as contribution. The sibling who had paid for the work, sued her brothers and sisters. Outcome/importance: The claim failed, with the COA held that a promise to pay a contribution was not enforceable as it was made in return for past consideration (as the repairs had already been carried out when the promise to pay had been made). It follows from this that if a guarantee is made in respect of something after it has been sold, then there is no consideration for that guarantee and it is not binding.

Question 44

Pao On v Lau Yiu Long [1980]

Answer 44

Area: The Court providing guidelines with regards to the doctrine of implied assumpsit/when past consideration WILL be sufficient This case established some guideline principles of the doctrine, confirming that it would apply as long as: • The act was performed at the request of the promisor; • It was understood between them that some reward could be expected; • The later payment promise/other benefit was lawful (i.e. would have been legally enforceable had it been promised in advance).

Question 45

MWB Business Exchange v Rock Advertising Ltd [2016]

Answer 45

With regards to part payment of a debt, the COA in this case went against the traditional common law approach from Foakes v Beer [1884] and Re Selectmove [1995]. The COA found that rescheduling a debt was of practical benefit to the creditor as it ensured payment would eventually me made. This practical benefit was sufficient to satisfy the requirement under Pinnel's Case [1602] and was therefore sufficient consideration. HOWEVER, this decision was overturned by the Supreme Court and confirmed the approach in Foakes v Beer [1884] and Re Selectmove [1995] and acknowledged that promissory estoppel was still the correct approach in this area. Important to note that the Supreme Court did describe this area of law being "ripe for examination".

Question 46

What is the leading case for promissory estoppel?

Answer 46

Central London Property Trust Ltd v High Trees House Ltd [1947]

Question 47

Woodhouse v Nigerian Produce [1972]

Answer 47

An ambiguous promise cannot support a promissory estoppel. Any promise must be clear and unequivocal. Additionally, the House of Lords commented that the area of promissory estoppel is ripe for review: "I desire to add that the time may soon come when the whole sequence of cases based on promissory estoppel since the war, beginning with Central London Property Trust Ltd v High Trees House Ltd, may need to be reviewed and reduced to a coherent doctrine by the courts".