Fundamentals of Law (BL502) Fundamentals of Law Consideration

Fundamentals of Law (BL502) Two Types of Enforceable Agreement  Deeds  Formal contracts that do not require consideration  Simple contracts  Do require consideration

Fundamentals of Law (BL502) Deed  Maker of deed must sign, seal and deliver the document  Independent witness  Special attestation clause SIGNED SEALED AND DELIVERED) by the said JOE BLOGGS) in the presence of:)

Fundamentals of Law (BL502) Consideration  Every simple contract must be supported by consideration  The law will not enforce a gratuitous or bare promise  Lack of consideration can be overcome by the equitable doctrine of estoppel

Fundamentals of Law (BL502) What is Consideration  Consideration must flow from both sides of the contract  Can be:  A promise to do something  A promise not to do something  Doing something  Refraining from doing something  A benefit for the promisor  A benefit for a third person at the promisor’s direction  A detriment to the promisee  Anything of real value to the promisor

Fundamentals of Law (BL502) Consideration Must Move From Promisor  Only the person who has “paid” for the promise can enforce it  Dunlop v Selfridge (S&OR p101)  Privity of Contract DunlopWholesaler (brought tyres from Dunlop, sold to retailers) Selfridges (broke promise to wholesaler not to discount) Contract

Fundamentals of Law (BL502) Joint Promisee Rule  If a promise is made to two or more people jointly only one promisor need give consideration  All promisors must be parties to the contract  Coulls v Bagot Executor and Trustee Co (S&OR p 102)

Fundamentals of Law (BL502) Privity of Contract - Exceptions  Statutory exceptions  Insurance Contracts entered into with the intention of benefiting another  Where one party acts as agent for another person  Exemption clauses  Contractual benefits held on trust for another  Contractual benefits may be assigned

Fundamentals of Law (BL502) Consideration May Not Be Past  A promise can be executed or executory but cannot be past  A promise must be paid for but if consideration has already been given then there is nothing being paid for the new promise  Roscorla v Thomas (S&OR p103)  Settling unsettled aspects of a past transaction may be consideration  Re Casey’s Patents: Stewart v Casey (S&OR p104)

Fundamentals of Law (BL502) Consideration May Be Inadequate  Consideration must be sufficient i.e. have some value in the eyes of the law  Need not be equal in value to the promisor’s promise  The very nature of contract law is to let the parties make their own bargain  However, doctrine of unconscionable conduct has developed to overcome resulting injustices

Fundamentals of Law (BL502) Consideration Must Be Sufficient  $1 for a Rolls Royce  “I promise to be an honest public servant”  “I’ll give up my legal claim against you”  “I will pay you less than I owe you if you forget the rest”  “In love and affection”  “I promise to carry out my contractual obligations”

Fundamentals of Law (BL502) Consideration Must Be Sufficient (Cont)  Illusory promises are not consideration  E.g. “in consideration of natural love and affection”  Too uncertain to be enforced  Dunton v Dunton (S&OR p 106)

Fundamentals of Law (BL502) Consideration Must Be Sufficient (Cont)  Settling disputes  Forbearance to sue is good consideration provided  The claim was reasonable  The promisee had an honest belief that the claim had a reasonable chance of success  The promisee has not concealed any facts that might affect the validity of the claim  Wigan v Edwards (S&OR p106)

Fundamentals of Law (BL502) Consideration Must Be Sufficient (Cont)  Promising to perform an existing contract is not consideration  To be binding, there must be a promise to do something additional to contracted duty  Stilk v Myrick (S&OR P 107)  Rule may be undergoing change  Williams v Roffey Bros. & Nicholls (S&OR p108)  A practical benefit is conferred  No duress  Followed in NSW

Fundamentals of Law (BL502) Consideration Must Be Sufficient (Cont)  Renegotiating a debt  Pinnel’s Case (S&OR p109) ( approved by House of Lords in Foakes v Beer)  Exceptions  Composition with creditors  Payment by third party  Ways around  Deed  Payment in kind

Fundamentals of Law (BL502) Consideration Must Be Sufficient (Cont)  Promise to perform a contractual duty to a third party is sufficient consideration  Performance of a public duty is not sufficient consideration  Collins v Godefroy (S&OR p110)

Fundamentals of Law (BL502) Fundamentals of Law Promisory estoppel

Fundamentals of Law (BL502) Promisory estoppel  A strict application of the rules of contract formation can lead to unjust results  Courts used equitable jurisdiction to intervene and prevent unfairness  Estoppel is used to stop a person from denying something that they have represented  Central London Property Trust v High Trees House (obiter dicta by Lord Denning) (S&OR p111)

Fundamentals of Law (BL502) Promissory estoppel  Is not part of contract law  Applies where  No consideration exists  Formalities of making a contract have not been satisfied  Walton Stores v Maher (S&OR p114)

Fundamentals of Law (BL502) Promisory estoppel - Elements  One party to a contract makes a promise by words or conduct  The promise leads the promisor to believe that the promisee will not enforce legal rights  Promisor acts in reliance on promise  Promisor alters its position to its detriment  It would be unfair to allow promisee to go back on promise

Fundamentals of Law (BL502) The Assumption  The promisee on reasonable grounds assumed that a particular legal relationship  Existed; or  Would exist

Fundamentals of Law (BL502) The Promisor Makes a Representation  The promisor either  Induced the assumption; or  Being aware that the promisee had made the assumption, deliberately remained silent in circumstances where the promisor could reasonably have been expected to speak  The promise must be precise and unqualified  Legione v Hately (S&OR p113)

Fundamentals of Law (BL502) Reliance  The promisee acted (or refrained from acting) on the faith of the assumption.

Fundamentals of Law (BL502) Detriment  The promisee will suffer a detriment if the promisor is permitted to reneg on the promise  Mere failure by the promisor to carry out the promise will not of itself amount to detriment  Je Maintiendrai v Quaglia & Quaglia (S&OR p114)

Fundamentals of Law (BL502) Remedy  Minimum orders to prevent detriment  Not necessarily the same remedy as for breach of contract

Fundamentals of Law (BL502) Fundamentals of Law Capacity to Contract

Fundamentals of Law (BL502) Contracts with Minors  Anyone under 18 years of age  Contracts with minors can be  Valid – legally enforceable  Voidable – legally enforceable until repudiated by the minor  Void – no legal effect

Fundamentals of Law (BL502) Contracts with Minors (Cont)  Valid contracts  Supply of necessaries  Contract for the supply of goods and services that are suitable to the condition in life of the minor and tom his actual requirements at the time of sale and delivery  Onus is one person seeking to enforce contract against minor  Nash v Inman (S&OR p116)  Reasonable price not contract price  Beneficial contracts of service

Fundamentals of Law (BL502) Contracts with Minors (Cont)  Benefical contracts of service  E.g. apprenticeships  Must be for the benefit of the minor  Ratification by Minor after turning 18  Contract becomes valid and enforceable  Statutory modification  NSW & SA