Contract Formation Flashcards
(52 cards)
No exchange =
no enforceable contract
Consideration must be sufficient but need not be
adequate
A promise to accept less than your legal rights is
unenforceable
Why was valid consideration to accept less payment found in MWB v Rock?
because the landlord obtained a practical benefit and was not under economic duress
Executory consideration
where contracting parties make promises to each other to perform something in the future after the contract has been formed
Executed consideration
at the time of the formation of the contract, the consideration has already been performed
Valuable consideration may be something
promised or something done
the moral obligation to fulfil a promise is insufficient to
create a legally binding contract
Exception to the past consideration rule
An exception to the past consideration rule exists where some prior service was provided by the promisee at the promisor’s request and it was always agreed that payment would be made for that act or service
3 conditions for the exception to the past consideration rule to apply
- The act must have been done at the promisor’s request.
- The parties must have understood that the act was to be rewarded either by a payment or some other benefit.
- The payment, or conferment of other benefits, must have been legally enforceable had it been promised in advance.
Consideration must move from the promisee
A person who receives the promise can only enforce it if they have provided consideration for the promise.
It is not the court’s duty to assess the relative value of
each party’s contribution to a contract
What does “consideration must be sufficient” mean?
it must have some value in the eyes of the law
Factual consideration
nothing new is promised but the party in receipt of the promise still gets something out of the reshaped deal
Hartley v Ponsonby - existing obligations in a contract
fresh legal consideration was provided by the sailors exceeding their existing contractual obligation
Carrying out a public duty imposed by the law will not amount to
sufficient consideration
Part payment of a debt is not
good consideration: the debtor remains liable even where the creditor has agreed to release them from further liability.
The rule in Foakes v Beer re. existing obligations is only applicable if
the promise of the creditor to accept a lesser sum is unsupported by fresh consideration from the promisee
If the creditor requests to introduce a new element, this will amount to
good consideration e.g. payment at a different place, or at a different time or by providing a different thing in place of money
Consideration - payment of a lesser sum by a third party
Where a third party enters into an agreement with a creditor, by which the creditor accepts payment by the third party of a lesser sum than the debt in full satisfaction of the debtor’s obligation, the creditor cannot sue the debtor for the difference.
Practical benefit only applies to promises to pay
MORE not LESS
Promissory estoppel operates as a
shield, not a sword
What is promissory estoppel?
an equitable doctrine (awarded at the court’s discretion) that effectively allows a contract to be enforced despite not being supported by consideration
When does promissory estoppel apply?
When it would be inequitable for the promisor to go back on their promise
