OTHER REQUIREMENTS FOR FORMATION OF A VALID CONTRACT Flashcards
(32 cards)
WHAT IS CONSIDERATION?
Consideration is sometimes defined as ‘the price paid for a person’s promise (Dunlop Pneumatic Tyre Co v Selfridge & Co Ltd [1915])
Other definitions use the idea of ‘benefit’ and ‘detriment’
WHO IS THE PROMISOR?
The person making the promise
WHO IS THE PROMISEE?
The person to whom the promise was made
WHEN IS A PROMISE LEGALLY BINDING?
In English law, a promise is not usually legally binding unless the promisee has given something in exchange for the promise i.e money, promise to perform a service, handing over goods
WHEN IS A PROMISE LEGALLY BINDING?
In English law, a promise is not usually legally binding unless the promisee has given something in exchange for the promise i.e money, promise to perform a service, handing over goods
WHEN IS AN AGREEMENT UNENFORCEABLE?
Consideration is a necessary element of every contract; an agreement in which there is no consideration is generally unenforceable
WHAT IS AN EXAMPLE OF A BARE GIFT?
Where a person agrees to buy a gift for another person. The intended recipient of the gift has not provided any consideration in exchange for that promise
WHEN DOES AN AGREEMENT NOT NEED TO BE SUPPORTED BY CONSIDERATION?
If it is contained in a deed which:
- Indicates 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 the witnessed signature of the promisor is clear evidence of their intention to keep their promise.
WHAT ARE THE TWO TYPES OF CONSIDERATION?
- Executed consideration
- Executory consideration
WHAT IS EXECUTED CONSIDERATION?
Executed consideration is when a party performs their part of the contract at the time of entering into the contract
WHAT IS EXECUTORY CONSIDERATION?
Executory consideration is when the parties exchange promises to do something in the future. It is the promises themselves which form the consideration and the agreement is binding once they have been exchanged
WHAT ARE THE FOUR RULES THAT GOVERN CONSIDERATION?
- Consideration must move from the promise
- Consideration must not be past
- Consideration need not be adequate
- Consideration must be sufficient
WHAT IS MEANT BY ‘CONSIDERATION MUST MOVE FROM THE PROMISE’?
In order to sue, a claimant must usually show that they supplied consideration for that promise.
This rule can be seen as an aspect of privity of contract - leading case Tweddle v Atkinson [1861]
WHAT IS MEANT BY ‘CONSIDERATION MUST NOT BE PAST’?
Promises in a valid contract are made in exchange for each other and this cannot apply if one is made after the event
WHAT IS THE TEST FOR DECIDING IF SOMETHING IS ‘PAST’?
Whether or not the act occurs before the promise is made.
WHICH CASES ILLUSTRATED THE RULE ON ‘PAST CONSIDERATION’?
Roscorla v Thomas [1842] & Re McArdle [1951]
WHAT IS THE MAJOR EXCEPTION TO THE PAST CONSIDERATION RULE?
The doctrine of implied assumpsit - if one party, at the request of the other, performs a service of a kind that is normally paid for, the court will usually assume that the service was meant to be paid for and will enforce a later promise to pay
WHAT IS THE RULE IN LAMPLEIGH V BRAITHWAITE [1615] IN RESPECT OF ‘PAST CONSIDERATION’?
The consideration appeared to be past but was not, because the court treated the original request and subsequent promise as one transaction
The rule was further considered in Pao On v Lau Yiu Long [1980] which confirmed that the principle applied, provided that:
- 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, or other benefit received, was otherwise lawful
WHAT IS MEANT BY ‘CONSIDERATION NEED NOT BE ADEQUATE’?
Consideration does not need to be economically adequate in the sense that it must be of equal value to the thing given in exchange
WHAT IS MEANT BY ‘CONSIDERATION MUST BE SUFFICIENT’?
Rather than requiring that the promise gives an ‘adequate’ consideration, the law instead looks for the provision of ‘sufficient’ consideration.
This is usually expressed by the maxim that ‘consideration need only be sufficient and not adequate’.
In Thomas v Thomas [1842] sufficient consideration was identified as something which has ‘some value in the eyes of the law’
WHAT IS THE USUAL MEASURE OF WHETHER THE CONSIDERATION IS SUFFICIENT?
Consideration is usually defined by reference to the benefit gained by the promisor or the detriment suffered by the promise. This is a thing ‘of value’ and the usual measure of whether this is sufficient is whether this has economic value
WHAT IS THE GENERAL RULES IN RESPECT OF SUFFICIENCY OF CONSIDERATION IN SITUATIONS WHERE THE PROMISEE IS DOING SOMETHING THEY ARE ALREADY LEGALLY OBLIGED TO DO AS CONSIDERATION FOR A NEW CONTRACT?
It is no consideration to do something you must do anyway. Under contract law, the situations in which this could arise can be grouped as:
- Existing public duties
- Existing contractual duties
- Existing duties to repay a debt
- Existing contractual duties to a third party
WHY ARE EXISTING PUBLIC DUTIES NOT DEEMED TO BE SUFFICIENT CONSIDERATION?
A promise to perform a public duty imposed by law is not normally sufficient consideration, as consideration cannot consist of doing what the law already requires
WHEN WILL AN EXISTING PUBLIC DUTY BE DEEMED TO BE SUFFICIENT CONSIDERATION?
If the person gives something over and above their existing public duty, this may amount to consideration.
In Glasbrook Bros v Glamorgan County Council [1925], the court held that by sending a larger force than they considered necessary, the police had exceeded their existing duty and therefore the colliery owner had to pay up as promised.
