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Fundamentals of Law Consideration

Fundamentals of Law Consideration. Two Types of Enforceable Agreement Deeds Formal contracts that do not require consideration Simple contracts Do require consideration. Deed Maker of deed must sign, seal and deliver the document Independent witness

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Fundamentals of Law Consideration

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  1. Fundamentals of Law Consideration

  2. Two Types of Enforceable Agreement Deeds Formal contracts that do not require consideration Simple contracts Do require consideration

  3. Deed Maker of deed must sign, seal and deliver the document Independent witness Special attestation clauseSIGNED SEALED AND DELIVERED )by the said JOE BLOGGS )in the presence of: )

  4. 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

  5. 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

  6. 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 Dunlop Contract Wholesaler (brought tyres from Dunlop, sold to retailers) Contract Selfridges (broke promise to wholesaler not to discount)

  7. 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)

  8. 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

  9. 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)

  10. 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

  11. 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”

  12. 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)

  13. 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)

  14. 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

  15. 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

  16. 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)

  17. Fundamentals of Law Promisory estoppel

  18. 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)

  19. 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)

  20. 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

  21. The Assumption The promisee on reasonable grounds assumed that a particular legal relationship Existed; or Would exist

  22. 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)

  23. Reliance The promisee acted (or refrained from acting) on the faith of the assumption.

  24. 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)

  25. Remedy Minimum orders to prevent detriment Not necessarily the same remedy as for breach of contract

  26. Fundamentals of Law Capacity to Contract

  27. 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

  28. 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

  29. 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

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