Consideration & Intent to Create Legal Relations & Capacity Flashcards
(32 cards)
What is consideration in contract law?
Consideration is something given in exchange for a promise.
What are the two types of consideration?
Executory consideration: Promises exchanged for future performance (e.g. bilateral contracts).
Executed consideration: An act is performed in response to a promise (e.g. unilateral contracts
What are the four key rules governing consideration?
Consideration must not be past
Consideration must move from the promisee
Consideration need not be adequate
Consideration must be sufficient
Why must consideration not be past?
Because it must be given in exchange for the promise. An act done before the promise cannot have been done in return for the promise
What are the exceptions to the past consideration rule?
three conditions must be met:
a) The act was done at the promisor’s request
b) There was an understanding of payment
c) The payment would have been enforceable if promised in advance
What does ‘consideration must move from the promisee’ mean?
Only the person who provides consideration can enforce the contract
When is an existing contractual obligation not good consideration?
When a party promises to do what they are already contractually bound to do with the same party, unless they exceed their obligation
When is an existing obligation good consideration?
If there is:
A practical benefit to the other party
No economic duress
Conditions met under Williams v Roffey [1991], including reliance and benefit
What is the principle from Hartley v Ponsonby (1857)?
If a party exceeds their existing duty, they provide fresh consideration.
What does Williams v Roffey Bros establish about factual consideration?
Even performance of an existing duty can be good consideration if it provides a practical benefit and is not obtained under duress.
Will performing a public duty amount to good consideration?
Generally no. But going beyond that duty can qualify
Can performance of a contractual obligation to a third party be good consideration?
Yes, it is sufficient if it benefits the new promisor
Why is part payment of a debt not generally good consideration?
Because the debtor is only doing what they are already obliged to do
What are exceptions to the rule for part-payment of debt?
New element added
Payment by a third party
Possibly: Promissory estoppel
What is promissory estoppel?
An equitable doctrine preventing a party from going back on a promise not supported by consideration when the promisee has relied on it
Can promissory estoppel be used as a cause of action?
No. It is a shield not a sword
What are the requirements for promissory estoppel to apply?
- Clear and unequivocal promise
- Reliance by the promisee
- It must be inequitable for the promisor to go back on the promise
Does promissory estoppel suspend or extinguish rights?
Usually suspends. Rights may be revived after reasonable notice
When will promissory estoppel not be allowed?
If the promise was extracted unfairly or by pressure,
What does ‘intention to create legal relations’ mean?
An intention by the parties to enter into a legally binding agreement. It is a required element for contract formation.
How is intention to create legal relations assessed?
Objectively. The court looks at the conduct and circumstances, not internal intentions
What is the presumption in commercial agreements?
There is a presumption that legal relations are intended. This can only be rebutted with clear evidence.
What is the effect of the phrase ‘subject to contract’?
It creates a strong inference that no binding contract exists until formally executed.
What is the presumption in domestic agreements?
That there is no intention to create legal relations
