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Requirements for a valid contract

Offer

Acceptance

Intention

Consideration

All 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 promisee

Currie v Misa (1875)

Types of consideration:

Executory – a promise for a promise in the future

Executed – a promise for an act that is wholly performed at the time of contract (usually seen in reward situations)

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)

Consideration does not have to be equivalent

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

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)

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)

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 Duty

  • England 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: Exceptions

Early payment

Substituted performance

Payment of lesser sum in dispute of value of work performed

Promissory estoppel

Promissory Estoppel

  • When 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:

Parties to domestic & social agreements do not intend to be legally bound

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” transaction

An informal contract can contain formal intention

Simpkins v Pays (1955)