Consideration, Privity, Agency and Capacity

Question 1

what is capacity?

Answer 1

the legal power to make a contract

Question 2

whose capacity to enter contracts is limited by law?

Answer 2

minors (under 18) and people with a mental incapacity

Question 3

what are ‘necessaries’

Answer 3

they are defined under the Sales of Goods Act 1979 as ‘goods suitable to the condition in life of the minor and their actual requirements at the time of sale’

Question 4

do contracts for ‘necessaries’ bind minors?

Answer 4

yes- not just the supply of necessary goods but also contracts of service for a minor’s benefit

Question 5

apart from contracts for necessaries, what contracts and minors bound by?

Answer 5

contracts of service while are beneficial to tgem e/g/ contracts of employment when a minor trains and gets experience

Question 6

what are the three main types of corporation?

Answer 6

registered companies, statutory corporations and limited liability partnerships

Question 7

what are registered companies?

Answer 7

corporations are registered under the Comapnies Act (CA) 2006

Question 8

what are statutory corporations?

Answer 8

they are created by statute and include local authorities

Question 9

what are limited liability partnerships?

Answer 9

created by the Limited Liability Partnerships Act 2000 and benefit from the unlimited capacity

Question 10

what is consideration?

Answer 10

the ‘something in return’ for a promise- can be a promise (executory consideration) or an act (executed consideration) e.g. what one party does or promises to do for the other party’s promise

Question 10

how do Currie v Misa define consideration?

Answer 10

what is provided by way of consideration should be either a benefit to the person receiving it, or a detriment to the person giving it

Question 11

how does consideration relate to adequacy and sufficiency?

Answer 11

consideration doesn’t need to be adequate (doesn’t have to reflect the value of the promise) but it must be sufficient (have some value in eyes of the law)

Question 12

what is the principle that past consideration is no consideration?

Answer 12

Roscorla v Thomas 1842- Roscorla bought horse from D, after, the D assured Roscorla the horse was ‘free from vice’ but this was untrue so Roscorla sued D for breach- didn’t hold up in court as Roscorla had already bought the horse when D made a promise.

Question 13

what 3 conditions must be satisfied for a past act to be good consideration?

Answer 13

act must be done at promiser’s request, parties must be understood from outset that act was to be rewarded some way, the payment or conferment of other benefit must have been legally enforceable had it been promised in advance

Question 14

what are the 3 types of existing duties

Answer 14

imposed by law/public duty, contractual obligation owed to a third party, contractual obligation owed to the other contracting party

Question 15

is the performance of an existing duty imposed by law sufficient consideration in exchange for a promise of payment?

Answer 15

NO but Williams v Williams claims it is sufficient consideration as long as there is nothing in the transaction which is contrary to public policy

Question 16

what is the general rule about consideration in relation to existing contractual duty owed to a third party?

Answer 16

performance of an act they were bound to is sufficient consideration for a separate contract with someone else (Arcos, Collins and Berry example)

Question 17

what is the general rule about consideration in relation to existing contractual duty owed to the other party

Answer 17

not sufficient consideration- performing existing contractual duty is not sufficient consideration in exchange for a promise by. the other party to pay more money (but if you exceed the duty, it is)

Question 17

is part payment of debt consideration?

Answer 17

no- debtor is usually bound to pay the full amount of an undisputed debt

Question 18

what is the exception to the rule on consideration and part payment of debt?

Answer 18

where the debtor can show that they gave something different for the creditor’s agreement to accept the lesser sum in settlement e.g. goods instead of cash

Question 19

what is promissory estoppel?

Answer 19

a creditor may be prevented from going back on a promise to accept part payment if in all circumstances it would be unfair for the creditor to do so

Question 20

what is promissory estoppel in simple terms?

Answer 20

if you have made a promise not to enforce your legal rights and the promisee has relied on that promise even though they have not provided anything in return, then if you try to enforce your legal rights you will be estopped if it would inequitable in all circumstance to do so

Question 21

what are the conditions for promissory estoppel to apply?

Answer 21

must be a clear promise to waive a strict legal right (implied or by conduct), promisee must act on the promise, can only be used as a defence not to give rise to a cause of action, must be inequitable for the promisor to go back on their promise

Question 22

what is doctrine of privity?

Answer 22

only parties to a contract can acquire rights under it and only parties to a contract can be subject to liability under it

Question 22

what is agency?

Answer 22

relationship which arises were an agent acts on behalf of another (principal) and how power to affect the principal’s legal position with regard to a third party

Question 23

what are examples of agents?

Answer 23

travel agents, insurance brokers, auctioneers

Question 23

what are the ways to create agency?

Answer 23

agent must have authoirty either actual authority (principal gives authority to agent) or apparent authority (no actual authority from principal but agent could still form a binding contract from authority given to the third party made by the principal

Question 24

what are the 3 conditions to satisfy authority?

Answer 24

at some stage, principal must have represented that the agent had authority; the third party must rely on this representation, believing that the agent has authority; and the third party must alter their position e.g. by entering into a contract

Question 25

what are the effects of agency?

Answer 25

authorised agent- has no rights under resulting contract as they are entering on behalf of someone else
unauthorised agent- (agent didnt actually have any authroity to enter the principal into the contract) principal cannot sue third party or be sued by the third party, agent cannot be sued, third party may sue agent in deceit

Question 26

what is disclosed agency?

Answer 26

where the agent is purporting to act as an agent- agent cannot bind the principal to a deal or be liable on the deal (but can be liable on the tort of deceit)