Consideration Flashcards

Question

The Eurymedon

Answer 1

The consideration provided by the stevedores for the cargo-owner’s promise to extend the benefit of the exemption clause was their promise to perform their existing contract with the carrier: ‘the promisee obtains the benefit of a direct obligation which he can enforce.’ (Lord Wilberforce at 168.)

Answer 2

The claimant had threatened not to complete the main contract for the purchase of shares unless subsidiary agreements were met including a guarantee and an indemnity. The defendant was anxious to complete the main contract as there had been a public announcement of the aquisition of shares and did not want to undermine public confidence in the company and the consequent affect on share prices. The defendant could have sued for specific performance of the agreement but this would have delayed matters and damaged the company's reputation. The defendant had taken legal advice on all these matters before agreeing to the guarantee and indemnity. The claimant then sought to enforce the guarantee and the defendant sought to have the agreement set aside for economic duress. Held: There was no economic duress. The Privy Council identified 4 factors to consider in assessing whether economic duress was present: 1) Did the person claiming to be coerced protest? 2) Did that person have any other available course of action? 3) Were they independently advised? 4) After entering into the contract, did they take steps to avoid it? In the present case the defendant did not protest at the time. It was simply commercial pressure far short of duress.

Answer 3

D, main contractor on project to refurbish a block of flats, sub-contracted the carpentry work in the flats and the roof to C, a carpenter, under fixed price contract for £20,000. By end March, C had completed the roof and a few flats. C in financial difficulty because agreed price too low to operate properly and profitably, and because C failed to supervise his workmen properly. D worried C would not complete on time, in turn making D late under the main contract and incur a contractual penalty. Therefore, on 9 April, D promised C an extra money. However, before C ceased work on the flats. D then engaged other carpenters to finish the work, incurring one week’s penalty under the main contract. Two issues arose. Was there any consideration to support D’s promise to pay extra? CA: yes. Stilk v Myrick not overruled, in that consideration still required in principle.

Answer 4

Part payment of a debt is not good consideration for a promise to forgo the debt.

Answer 5

The claimants lent money to the defendant Lieutenant Temple. The claimants sought return of the money from the claimant but were unable to get any response so they contacted his father. Some correspondence went between the claimant and the father's solicitors. The claimants asked how much the father would be prepared to pay to settle the son's accounts. An amount was agreed which was a substantial, amount although not the full amount due. The claimant promised to send the promissory note relating to the son's debt to the father once they received payment. The father paid, but the claimant retained the promissory note and sued the son to enforce the balance.Held: The payment made by the father was sufficient to discharge the full balance.

Answer 6

The rule in Pinnel’s Case was affirmed by the House of Lords in Foakes v Beer.

Answer 7

The Crown demanded £25,000 in tax from Selectmove Ltd as they had underpaid Selectmove agreed with a tax collector that payment could occur in £1000 monthly instalments After accepting 7 monthly instalments, the Crown sought a winding up order of Selectmove as they owed ~£18,000 in tax Was there consideration in the agreement to pay in mothly instalments, as the Crown obtained a practical benefit in that they would get paid Held: No consideration, Although a practical benefit may be found as consideration where there is a promise of extra money for existing duties, as per Williams v Roffey [1990], such a benefit cannot be found in the case of a part payment of a debt

Answer 8

Landlord gave tenant notice to repair within six months; T responded saying would commence repairs but suggesting L might like to buy out the lease and that proposed to defer commencing repairs until heard from L regarding buy-out; L responded indicating possible interest; T responded quoting a price of £3000; L responded in a way that HL prepared to consider a rejection terminating the negotiation; repairs completed within six months from that date; L sought to eject T for failure to comply within six months from date when notice originally served. HL: in equity, notice to repair must considered as suspended until negotiations terminated; therefore repairs in time.

Answer 9

W had obtained a judgment by consent against three partners of whom C was one. The partners' liability was joint. The consent order provided for the three partners to pay the judgment debt by monthly instalments. C had paid a third of the debt by instalments. His partners had become bankrupt. W served a statutory demand on C for the balance of the judgment debt. C applied to set aside the demand relying on an alleged agreement by W that if C continued to pay his share of the judgment W would not look to him but only to his partners for the balance. Court: held that promissory estoppel could aid Mr Collie

Answer 10

A new block of flats let to tenant (D) at rent of £2500 per year; by outbreak of war in 1939, he sublet the block of flats. As the war occured, the tenant was unable to derive the income that he had anticipated. The landlord agreed a rent reduction, the promise to forego a financial entitlement. In 1944 the flats are being let out to more people. The landlord says that the circumstance in which the reduced financial position is no longer there so go back to original financial terms. CLP said no it was a promise for future. Court - landlord won. Held (Denning J): L won. As a matter of interpretation, the rent reduction was ‘intended simply as a temporary expedient to deal with the exceptional conditions then prevailing, under which the block of flats was only partially let. Denning said - had the Landlord claimed the balance of the original rent for the period before the block fully let, that claim would have failed. Why not, since no consideration for promise to forgo that sum? If you have a promise that is “intended to be binding, intended to be acted on and in fact acted on, is binding so far as its terms properly allow”. He is putting forward the idea a promise that there can be no consideration considering as the promise has been relied upon. This is an application from Hughes v Metropolitan Railway. Denning says this is a form of a more general idea of estoppel. Net effect: L’s promise not to enforce right to full rent for the time being binding and once L exercised right to end the suspension, full rent payable only for the future. Right to balance of rent in the interim period extinguished. Probably goes no further than Hughes in terms of suspension/extinction of rights but, because it is concerned with a promise to forgo part of a contractual payment entitlement, it raises the question of the relationship with the rule in Pinnel’s Case, solidified by Foakes v Beer, where existing contractual relationship, part payment is not acceptable.

Answer 11

He could change his mind because he did it quickly, there had been no time for the promisee to rely on the promise. Therefore there was no reliance so no estoppel

Answer 12

C owned patents covering certain materials; granted D licence to deal in some protected materials, D paying royalties and ‘compensation’ if quantity of materials used exceeded specified quota. On outbreak of WWII, C voluntarily agreed to forgo compensation right. 1945: C revoked waiver and claimed compensation as from 1 June 1945, but held revocation invalid because reasonable notice not given. Therefore, claimed compensation as from 1 January 1947. HL: notice reasonable, suspension over, and rights under original agreement once more enforceable.

Answer 13

Liability for partnership debts. 3 partners in this case, claimant is one of them, the defendant is the creditor of which the partnerships owes those debts. Each partner is each reliable jointly (for the whole lots) of the debts. The creditor said to him, if you pay your one-third shire of debts, I will let you off your liability to the rest. Therefore, there is a promise to reduce the claimants financial obligations. The claimant paid the one-third. Unfortunately, the other two partners became bankrupt, the creditor then turned round and requested the 2/3rd money. Said - you promise one-third, I relied on this and paid, you cannot make me pay the rest = this is promissory estoppel. Court held there is no consideration, Foakes v Beer and Pinnel case stands in the way so need to find something else. The court said that it is possible that promissory estoppel serves a vehicle for supporting the case. However, there is another argument that why would any creditor let the partner off the money. The basis on which hightrees was decided was what the individual promised. The landlord actually won the case because his version of what was actually promised had been found to be correct. Therefore, before one gets lost in promissory estoppel always ask, “was such a promise made in the first place?”. So as far as promissory estoppel is concerned is where there is a clear promise and does promissory estoppel work, they will say yes. But we don't have those cases yet. A major restriction of promissory estoppel is where one person says I have rights against you and I will give them up. What promissory estoppel clearly cannot do is to support promises which create new rights or increase obligations. Why cant you apply this to consideration, why worry about consideration. YOU CAN NOT DO THIS. Promissory estoppel can not be substituted in the creation of an original contract. Moreover, in the promise to vary a contract which you are seeking to enforce, increases an obligation, William v Roffey (pay carpenter more money), could you use promissory estoppel here? NO YOU CAN NOT. It is in this sense, that promissory estoppel is a shield and not a sword. Can not use promissory estoppel to enforce new rights, it is only used to give up rights. Post Williams v Roffey where there is a promise to give up a right is normally given by consideration, i.e. a practical benefit which is good consideration so the territory for promissory estoppel is confined to where there is no consideration. We just need it to get round the rule of the Pinnels case, estoppel is a substitute for consideration, the promise which is being supported MUST be a promise to REDUCE or GIVE UP a right.

Answer 14

Wife’s forbearance from applying for court maintenance order not consideration for husband’s promise to pay certain sum as maintenance because as a result of the promise and not in return for it (see above). Was husband estopped from going back of promise? CA: no. Denning

Answer 15

A party promises to pay a witness if the witness gives testament, the witness is under a legal obligation to appear. If they don't appear then the police will knock on their door. The witness gives evidence and then seeks to enforce the promise made in doing so. Court held no, as there is no consideration. Therefore, if you promise to do something that the law requires you to do, that is not good consideration.

Answer 16

Request to police to guard colliery during strike and promise to pay. Held: enforceable. Police under duty to protect property but guard provided went beyond that duty.

Answer 17

Promise by father of illegitimate child to mother of weekly allowance if she proved child well looked after and happy; mother under legal duty to look after child. CA: enforceable because in addition look after well she made the child happy. In promising to look after child AND make them happy this was going beyond her existing duty.