Requirements for a valid contract

1. Offer2. Acceptance3. Intention4. ConsiderationAll MUST be present for the contract to be

valid

• Other requirements:• Capacity• Free Consent• Certainty of object• Possibility of performance

Consideration Definition

Benefit to promisor or detriment to promiseeCurrie v Misa (1875)

Types of consideration: 1.Executory – a promise for a promise in the future2.Executed – a promise for an act that is wholly performed at the time of contract (usually seen in reward situations)3.Past Consideration – promise of payment comes after the act

Examples

Are these consideration?

1. “I Promise you $10 if it rains tomorrow!”

2. “I promise you $10 if you pass your exam!”

Consideration

You cannot sue for breach of contract if there is no consideration.

•Eg. If A promises to give B $100, B cannot sue A if A changes his/her mind.

•A gift is not a contract, unless done by deed.

Rules of consideration (1)

1. Consideration does not have to be equivalent

Chappell & Co. Ltd v Nestle Co. Ltd. (1960)

2. Consideration must be sufficient. Not:

Natural love and affection - Bret v J S (1600):

Promise to do the right thing – White v Bluett (1853)

Rules of consideration (2)

3. Past consideration is not good consideration

Re McArdle (1951) - Wife of son repaired house for father-in-law who died. Document was signed by next of kin to pay after sale of the house. Never paid.

Lampleigh v Braithwait [1615] & Re Casey’s Patents (1892) – Good consideration

Consideration was by request

Roscorla v Thomas (1842) – Not good consideration

Receipt for horse after sale

Rules of consideration (3)

4. Already required to do so under contract - Stilk v Myrick (1809

Exception; unsafe voyage: Hartley v Ponsonby [1857]

Both cases involved extra payment for crew members who jumped ship

Existing Contractual Duty

Williams v Roffey (1990)

When a party to an existing contract later agrees to pay an extra "bonus" in order to ensure that the other party performs his obligations under the contract, then that agreement is binding if the party agreeing to pay the bonus has thereby obtained some new practical advantage or avoided a disadvantage.

In this case there were benefits to Roffey including

(a) making sure Williams continued his work

(b) avoiding payment under a damages clause of the main contract if Williams was late

(c) avoiding the expense and trouble of getting someone else. Therefore, Williams was entitled to payment.

Third party consideration

Price v Easton (1833)John promises to pay Mary $20 if her son

washes his car. After Mary’s son washes John’s car, he decides not to pay.

Can Mary sue John?

Tweddle v Atkinson (1861) – Fathers of a couple getting married promised to give the newlyweds a joint cash gift. Both fathers died. Groom sued wife’s father’s estate.

Existing Statutory Duty

Collins v Godefroy (1831)

Godefroy promised to pay Collins if Collins would attend court and give evidence for Godefroy. Collins had been served with a subpoena. Collins sued for payment. 

Existing Public DutyEngland v Davidson (1840)

 £50 reward to 'whoever would give such information as should lead to the conviction of the offender or offenders' 

Held: The duty of a police officer is the prevention of crime - police officers are not under a duty to provide information

Glasbrook Brothers Ltd. V Glamorgan County Council (1925) – Request for police protection during strike

Harris v Sheffield United Football Club (1987) – Large sums of overtime had to be paid to police officers to police football match

US Comparison: Existing Public Duty

Gray v Martino (1918) – US

Martino offered Gray, a police officer, a reward if he could determine the identity of persons who had stolen her jewellery. She refused to pay after receiving the information

Held: Public policy forbids outside remuneration for official duties performed by a public servant.

Part-payment of debt

Pinnel’s Case (1602)If you are bound to pay a certain sum of money,

paying a lesser sum does not discharge the debt even though the creditor agrees.

If the Creditor changes his/her mind later and decides to sue for the balance, he will be successful, because you have not provided the consideration promised in the first place!

Confirmed in Foakes v Beer (1884)

Part-payment of debt: Exceptions1. Early payment

2. Substituted performance

3. Payment of lesser sum in dispute of value of work performed

4. Promissory estoppel

Promissory EstoppelWhen one party depends on the promise or

conduct of another and acts in his/her detriment in reliance on that promise.

First established in: Hughes v Metropolitan Railway (1877)

Clearly laid down in: Central London Property Trust Ltd v High Trees House Ltd [1947]

Fully restated and defined by Lord Denning in: Combe v Combe [1951]

Intention The parties to a contract must intend to

have a contract and be legally bound by it

Intention may be expressed, or implied by conduct

The Courts assume:1. Parties to domestic & social agreements do

not intend to be legally bound2. Parties to business agreements intend to be

legally bound

Harvey v Facey [1893]Harvey: Will you sell us Bumper Hall Pen?

Send lowest cash price.

Facey: Lowest cash price for Bumper Hall Pen is £900

Harvey: We agree to buy Bumper Hall Pen for £900 asked by you.

Was there intention?

“Fun” transactionAn informal contract can contain formal

intention

Simpkins v Pays (1955)