UCL FACULTY OF LAWS LAW OF CONTRACT 2012-13

2. Consideration

1. Definition (i) Classical definition Currie v Misa (1875) L.R. 10 Ex 153 (ii) Modern approach *Williams v Roffey Bros & Nicholls (Contractors) Ltd [1991] 1 QB 1 Edmunds v Lawson [2000] 2 WLR 1091 2. When must consideration be furnished? a. The relevant time Eastwood v Kenyon (1840) 11 A & E 438 Roscorla v Thomas (1842) 3 QB 234 b. Past consideration is no consideration Re McArdle [1951] Ch 669 Lampleigh v Braithwait (1615) Hob 105; 80 ER 255. Re Caseys Patents [1892] 1 Ch 104 *Pao On v Lau Yiu Long [1980] AC 614 3. Who must give consideration? Consideration moves from the promisee Tweddle v Atkinson (1861) 1 B & S 393 Edmunds v Lawson (as above) 4. What constitutes the requisite value? Treitel v Atiyah The truth is that the courts have never set out to create a doctrine of consideration. They have been concerned with much more practical problems of deciding in the course of litigation whether a particular promise should be enforcedWhen the courts found a sufficient reason for enforcing a promise they enforced it; and when they found that for one reason and another it was undesirable to enforce a promise, they did not enforce it. It seems highly probable that when the courts first use the word consideration they meant no more than that there was a reason for the enforcement of the promise. Atiyah: Consideration: A Restatement in Atiyah: Essays on Contract Clarendon Press 1986, 179, 181-2. a. Consideration should be sufficient not adequate (i) Tangible returns Thomas v Thomas [1842] 2 QB 851 Chappell & Co Ltd v Nestle Co. Ltd. [1960] AC 87 A contracting party can stipulate for what consideration he chooses. A peppercorn does not cease to be good consideration if it is established that

the promisee does not like pepper and will throw the corn away. Per Lord Somervell 114. Lipkin Gorman v Karpnale Ltd [1992] 2 AC 548 De La Bere v Pearson Ltd [1908 1 KB 280 (ii) Intangible returns White v Bluett (1853) 23 L.J. Ex 36 Hamer v Sidway 124 NY 538, US case b. Performance of Existing duty as Consideration? (i) Existing duty under law Collins v. Godefroy (1831) 1 B. & Ad. 950; 109 ER 1040 Ward v. Byham [1956] 2 All E.R. 318 Glasbrook Bros. Ltd. v. Glamorgan C. C. [1925] A.C. 270 Harris v. Sheffield United F.C. [1987] 2 All E.R 838 (ii) Existing duty to Third Party Shadwell v. Shadwell (1860) 9 C.s.N.S. 159 Pao On v. Lau Yiu Long [1980] A.C. 614 Contracts (Rights of Third Parties) Act 1999 (iii) Existing duty to Promisor Stilk v. Myrick (1809) 2 Camp. 317; 170 ER 1168. Hartley v Ponsonby (1857) 7 E & B 872 *Williams v Roffey Bros & Nicholls (Contractors) Ltd [1991] 1 QB 1 consideration there must still be, but, in my judgment, the courts nowadays should be more ready to find its existence so as to reflect the intention of the parties to the contract where the bargaining powers are not equal. (per Russell LJ, 18). *South Caribbean Trading Ltd v Trafigura Beheer BV [2005] 1 Lloyds Rep 128 c. Forbearance of existing rights as consideration? (i) Part payment of a debt Pinnels Case (1602) 5 Co Rep 117a; 77 ER 237. *Foakes v Beer (1884) 9 App Cas 605 Williams v Roffey Bros & Nicholls (Contractors) Ltd [1991] 1 QB 1 *In Re Selectmove Ltd [1995] 1 WLR 474. Musumeci v Winadell Pty Ltd (1994) 34 NSWLR 723 (Supreme Court, New South Wales, Australia) (ii) Forbearance to sue Cook v Wright (1861) 1 B & S 559 Wade v Simeon (1846) 2 CB 548

Further Reading: Luther: Campbell, Espinasse and the Sailors: Text and Context in the Common Law (1999)19 Legal Studies 526 Fuller: Consideration and Form (1941) 31 Col LR 799 Raz: Promises in Morality and Law (1982) 95 Harvard Law Review 916 Stephen A. Smith: Contract Theory (2004) Clarendon Press 209-233 http://www.oxfordscholarship.com/view/10.1093/acprof:oso/9780198765615.0

01.0001/acprof-9780198765615 OSullivan: In Defence of Foakes v Beer [1996] Cambridge Law Journal 219. 10 pages Atiyah: Consideration: A Restatement reproduced in Atiyah: Essays on Contract (Clarendon Press 1986), 179. http://www.oxfordscholarship.com/view/10.1093/acprof:oso/9780198254447.0 01.0001/acprof-9780198254447 Treitel: Consideration: A Critical Analysis of Professor Atiyahs Fundamental Restatement (1974) 50 Australian Law Journal 439. Steyn: Contract Law: Fulfilling the Expectations of Honest Men (1997)113 LQR 433 Gay Choon Ing v Loh Sze Ti Terence Peter [2009] SGCA 3 per Andrew BL Phang JA (coda).

3. Promissory Estoppel Reading: A.T. Denning, Recent Developments in the Doctrine of Consideration (1952) 15 Modern Law Review 1 Stephen A. Smith: Contract Theory (2004) Clarendon Press 233-244. Williams v Roffey Bros [1991] 1 QB 1 (CA) per Glidewell LJ Promissory Estoppel 1. Meaning of Promissory Estoppel 2.Development of Promissory Estoppel Jorden v Money (1854) 5 HL Cas 185; 10 ER 368 *Hughes v. Metropolitan Railway Co. (1877) 2 App. Cas. 439 *Central London Property Trust v. High Trees House Ltd. [1947] K.B.130 3. Limitations of the Promissory Estoppel Doctrine Existing contractual relationship Durham City Fancy Goods v Michael Jackson (Fancy Goods) Ltd [1968] 2 QB 839 The Henrik Sif [1982] 1 Lloyds Rep 456 Clear and Unequivocal promise Woodhouse Israel Cocoa v Nigerian Produce Marketing Co Ltd [1972] AC 741 Reliance by promisee Societe Italo Belge pour le Commerce et Lindustrie v Palm and Vegetable Oils Msia (The Post Chaser) [1982] 1 All E.R. 19 WJ Alan & Co v El Nasr [1972] 2 All ER 127 Inequitable for promisor to resile D & C Builders v Rees [1966] 2 QB 617 Suspensory Effect

Central London Property Trust v. High Trees House Ltd. [1947] K.B.130 Tool Metal Manufacturing v Tungsten Electric co [1955] 2 All ER 657 WJ Alan & Co v El Nasr [1972] 2 All ER 127 Shield and not a sword Combe v Combe [1951] 2 KB 215 Much as I am inclined to favour the principle in High Trees, it is important that it should not be stretched too far, lest it should be endangered. Per Denning LJ, 219. Promises prohibited by legislation Evans v Amicus Healthcare Ltd [2003] EWHC 2161 Promissory Estoppel and Consideration: erosion of the rule in Foakes v Beer? Collier v P & MJ Wright (Holdings) Ltd [2007] EWCA Civ 1329 4. Proprietary Estoppel Crabb v Arun DC [1975] 3 All ER 365 Cobbe v Yeomans Row Management [2008] 1 WLR 1752 Thorner v Major [2009] UKHL 18 5. Estoppel by Convention Amalgamated Investment and Property Co v Texas Commerce International Bank Ltd[1982] QB 84 Petromec Inc v Petroleo Brasiliero (no. 2 ) [2004] EWHC 127 Johnson v Gore Wood & Co [2001] 2 WLR 72 H L Extra Reading: Lord Denning: The Discipline of Law (1979) Butterworths Ch.4 Barnes: Estoppels as Swords [2011] LMCLQ 372 4. Intention to Create Legal Relations 1. Domestic Arrangements Balfour v. Balfour [1919] 2 K.B. 571 Agreements such as these are outside the realm of contracts altogether. The common law does not regulate the form of agreement between spouses. The consideration that [one] really obtains for them is that natural love and affection which counts for so little in these cold courts. The terms may, be repudiated, varied or renewed as performance proceeds or as disagreements develop and the principles of the common law as to exoneration and discharge and accord and satisfaction are such as to find no place in the domestic code. Per Atkin LJ, 579. Maple Leaf Marco Volatility Master Fund v Rouvroy [2009] EWCA Civ 1334. Merritt v. Merritt [1970] 2 All E.R. 760 Hamer v Sidway, above Jones v Padavatton [1969] 2 All ER 616 John Sadler v George Reynolds [2005] EWHC 309 (QB) 2. Social Arrangements

Coward v Motor Insurers Bureau [1963] 1 QB 259 Albert v MIB [1972] AC 301 Hadley v Kemp [1999] EMLR 589 Parker v. Clark [1960] 1 All E.R. 93 Simpkins v. Pays [1955] 3 All E.R. 10 3. Commercial Relations Edwards v. Skyways Ltd. [1964]1 All E.R. 494 Esso Petroleum Ltd v Commissioners of Customs and Excise [1976] 1 All ER 117 Rose and Frank Co v Crompton Bros [1925] AC 445 The arrangement is not entered intoas a formal or legal agreement, and shall not be subject to legal jurisdiction in the Law Courtsbut it is only a definite expression and record of the purpose and intention of the three parties concerned, to which they each honourably pledged themselves, with the fullest confidence-based on past business with each other-that it will be carried through by each of the three parties with mutual loyalty and friendly co-operation.

Note special position re agreements expressed to be subject to contract: British Steel Corporation v Cleveland Bridge & Engineering Co Ltd [1984] 1 ALL ER 504 RTS Flexible Systems Ltd v Molkerei Alois Mller GmbH & Co KG (UK Production) [2010] UKSC 14 (Supreme Court) Further Reading: M. Freeman, Contracting in the Haven: Balfour v Balfour Revisited in R. Halson, Exploring the Boundaries of Contract (1996), 68 Stephen A. Smith: Contract Theory (2004), 212-215 Hepple: Intention to Create Legal Relations [1970] CLJ 122 Simpson: Innovations of Nineteenth Century Contract Law (1975) 91 LQR 247, 263-5.

Dr Fiona Smith October 2012 LLB Intermediate 2012/13