Elements in a Contract 5
Having identified the first two
elements in a contract, offer and acceptance, let’s move on to the third,
consideration. Consideration can be in the form of abstaining from performing
an act, it could be in the form of performing an act or acts stipulated by the
offeror as in the case of Carlill v Carbolic Smoke Ball Co. (1893), it could be
inferred or implied by conduct as in the case of Brogden v Metropolitan Railway
Co. (1877) and it could be part consideration provided in lieu of completing
the terms stipulated in a contract, Dahlia v Four Millbank Nominees (1978).
In Currie v Misa (1875) it was held
that consideration from the perspective of the law may consist of some right,
benefit, interest or profit accruing to the party or some loss, sufferance, detriment,
or responsibility incurred by the party.
Consideration must be distinguished
from an outright gift and therefore it has to be either expressly or impliedly
requested for by the promisor. In Dahlia v Four Millbank Nominees (1978) for
example, the offeror requested for some form of consideration. If the plaintiff
had taken it upon himself to arrange for a bank draft to be delivered to the
defendant, without the defendant asking for it, then that might not have been
deemed as consideration but might have instead been perceived as a good-will
gesture.
Consideration must move from the
offeree or from the promisee to the offeror or the promisor. In Tweddle v
Atkinson (1861) the parents of the bride and groom agreed to pay a certain sum
to the groom upon his marriage to the bride. The bride’s father died before the
payment could be made and the groom brought a claim against his estate. The
court ruled that because consideration did not move from him, he was unable to
claim, i.e. a party who has not provided consideration for the promise cannot
enforce the promise.
Past consideration is not good
consideration. In Roscola v Thomas (1842) the seller of a horse made an
assertion after the offer and acceptance had been concluded or after the
agreement had passed, that the horse was free from vice. Following the sale,
the buyer brought an action against the seller but his action was unsuccessful
because the assertion was made after the sale was concluded.
In Eastwood v Kenyon (1840) the
guardian of a young girl educated her on the promise that the young lady would
repay the debt once she’d come of age. The young lady, once she’d come of age,
did make some repayments but soon after married, after which, her husband
promised to repay the loan on her behalf. The husband failed to do so and the
guardian brought an action against him. It was held that while the husband had
a moral obligation to honor his promise there was no legal obligation to do so.
In R v Clark (1927) (High Court of
Australia) there was a reward for information given leading to the arrest of
several murderers. Clark gave the information but at the time he did so he had
forgotten about the reward that was offered. He later tried to claim the reward
but was denied by a court because at the time that he had given the information
he gave no thought to the reward.
In Re McArdle (1951) the plaintiff
had made some renovations and repairs to her father-in-law’s bungalow. The
father-in-law had left the property first to his wife for life and subsequently
on trust for her husband and his four siblings. The siblings later, once the
work had been completed, promised to pay the plaintiff a certain amount for the
work that had been done. The payment was not made and the plaintiff brought an
action against the defendants but was unsuccessful because past consideration
is not valid consideration or is no consideration.
Past consideration however is
consideration or is regarded as good consideration when it is done at the
request of the offeror or the promisor. In Lampleigh v Braithwaite (1615) the
defendant had committed murder and was found guilty and sentenced to hang
accordingly. The defendant asked the plaintiff to get him a pardon and the
plaintiff was successful in doing so. The defendant then promised the plaintiff
£100 for his efforts but later refused to pay. It was held that the plaintiff
was entitled to his reward because the act was done at the request of the
defendant.
Past consideration is also good
consideration when there is an understanding between the parties that the act
that is done is to be remunerated. In Re Casey Patent’s (1892) the plaintiff
did some patenting work for the defendant and upon the completion of the work
the defendant promised to give the plaintiff one-third of the share in the
patents. The defendant later failed to comply and the plaintiff sued. The
plaintiff was successful in his claim because the work was done on the
understanding or the premise that the plaintiff would be given some form of
remuneration.
An act done before the giving of a
promise to make a payment or to confer some other benefit could be
consideration for the promise where
1. The act was done at the promisor's request,
2. The parties understood that the act was to be remunerated
either by payment or the conferment of a benefit, and
3. The payment or conferment of benefit was legally
enforceable.
Consideration however must not be
something that is illegal. In Wyatt v Kreglinger and Fernau (1933) the
plaintiff’s pension was dependent on him taking no further part in the wool
trade. It was held that the stipulation was void because it was contrary to
public interest.
Consideration must be sufficient but
need not be adequate, i.e. it does not need to correspond exactly or precisely,
in monetary terms, to the offer or to what’s being offered but it must be in
the form of monies or monies worth.
In Thomas v Thomas (1842) a dying
husband transferred the ownership of his seven houses to his brother but
informed him prior to his death, in front of two witnesses that, he wanted his
wife to be permitted to live in one of those houses.
His brother Samuel complied with his
wishes and after his brother’s death he allowed his brother’s wife (Eleanor) to
stay in one of the houses and had a written agreement drawn up whereby his brother’s
widow was to remain in the house on the conditions that she kept the house in
good repair and paid a rent of £1 per annum. The agreement continued for some
years until Samuel’s death whereby the executors refused to continue with the
arrangement. It was held that the rent of £1 per annum was sufficient
consideration and that Eleanor could continue to remain in the house.
In Chappell v Nestlé (1960), Nestle
ran a promotion whereby any person who sent in 3 wrappers and a postal order
for 1 shilling and 6 dimes would be sent a record. Chappell a copyright owner
in one of the records disputed Nestle’s offer and argued that the records would
normally retail at 6 shillings or more.
The matter before the courts was to
decide if the wrappers formed part of the consideration and if they did there
was no possible means to ascertain their value and Chappell would be successful
in obtaining an injunction preventing Nestle from distributing the records. The
court held that the wrappers were indeed part of the consideration and Chappell
was successful in obtaining an injunction to stop Nestle from distributing the
records.
Consideration however must have some
economic value. In White v Bluett (1853) the defendant owed his father some
money but his father had promised him that he would write off the debt if his
son stopped complaining as to how the property was distributed among the
children.
Upon his death, the executor sued
for the outstanding debt. It was held that not complaining was not sufficient
consideration and the plaintiff was successful. Consideration must have some
economic value, i.e. it must be in the form of monies or monies worth.
The performance of an existing duty
will not amount to consideration. In Collins v Godfrey (1831), the plaintiff
had been subpoenaed for jury duty. While he didn’t actually go on duty, he was
on standby for 6 days. He later brought an action against the defendant for
expenses incurred. His claim failed. The court held that an existing public
duty does not amount to consideration.
In instances of debts, the rule of
thumb is that part payment will not amount to sufficient consideration. In
Pinnel’s Case (1602) the defendant paid off part of his debt and hoped that he
would be discharged. The plaintiff brought an action for the outstanding debt
and was successful in his claim.
In Foakes v Beer (1884) the
defendant owed the plaintiff a certain amount of money and made an arrangement
with the plaintiff to pay it off in installments but no mention was made of the
interest. The defendant eventually paid off the full debt as promised but the
plaintiff brought an action for the outstanding interest. Pinnel’s rule was
applied and the plaintiff was successful.
A promise not to sue can also be
sufficient consideration. In Alliance Bank Ltd v Broom (1864) the plaintiff, a
bank, asked the defendant to provide some security for his overdraft. The
defendant promised to do so but never provided the security and the plaintiff
sued. The defendant argued that there was no consideration for his promise to
provide security but the courts held that the bank’s implied promise not to sue
should the defendant provide the appropriate or relevant security was
consideration enough.
In Miles v New Zealand Alford Estate
Co. (1886) however, the plaintiffs purchased some land from the defendant and
they were unhappy with their purchase and they informed the defendant of this.
The defendant promised to make amends by making certain payments but failed to
do so. The plaintiffs brought the matter before a court and argued that they
had provided adequate consideration by not suing but the court found in favor
of the defendant and found that not suing was not sufficient consideration in
this particular instance.
If anything, the plaintiff should have at the very least
inspected the land or asked for the advice of someone knowledgeable in the area
prior to making the purchase.
If the party had done more than what
was required or expected of him in the contract than that would be deemed to be
sufficient consideration.
In Hartley v Ponsonby (1857) half
the crew in a ship deserted while the ship was sailing to Mumbai. The captain
of the ship promised the remainder of the crew extra wages should they be
willing to carry on. The remainder of the crew agreed and upon reaching Mumbai
the captain of the ship refused the crew the additional wages. The plaintiff
sued.
It was held that by agreeing to take
on the additional duties, the plaintiff had taken on duties that were not in
his contract and was thus entitled to the extra wages.
In the earlier case of Stilk v
Myrick (1809) however, two sailors abandoned ship during a voyage and the
captain of the ship promised the rest of the crew additional wages should the
remainder of the crew take on their duties and help the ship complete its
journey. Once the journey was completed the captain did not pay the additional
wages and the plaintiff brought an action in court.
It was held that the plaintiff was
not entitled to the additional wages because he had merely done what he was
contracted to do, i.e. complete the journey.
Hartley v Ponsonby (1857) can be
distinguished from Stilk v Myrick (1809) in that, in the former, the number of
persons that had deserted the ship were so substantial that it would have
jeopardized the entire voyage, and in the latter, the number of persons that
had deserted the ship were so small that the additional duties may have been
minimal.
In Glasbrook Brothers v Glarmorgan
County Council (1925) the defendants owned a colliery and requested for
protection from the police during a strike. Once the strike was over the police
submitted a bill for the work that they had put in. The defendants refused to
pay and an action was brought against the defendants. The plaintiffs were
successful because in providing the additional resources that was required the
police had gone over and above their duty.
If one party promises additional
payments to complete an existing duty, than it would be deemed to be sufficient
consideration, unless it is tainted with illegality.
In William v Roffey (1990) the
plaintiff was a sub-contractor who ran into financial difficulties while
performing his duties under a contract and as a result didn’t look likely to
complete his duties, which in turn would have resulted in a loss of income for
the defendants.
The defendants in order to keep the
plaintiff afloat promised an additional payment because the initial payment was
too low and further amended the working conditions to accommodate the new
promise. The plaintiff agreed and completed his duties but the defendants
refused to make the additional payment.
It was held that the plaintiff was
entitled to the additional payment because it allowed the defendants to
complete the duties they were required to perform under a contract and as a
result the defendants were remunerated accordingly.
With regards to third parties, when
a party to a contract promises to provide a service or perform a duty, which it
is already bound to do under an existing contract; the party can still receive
or derive some form of remuneration from a third party.
In Shadwell v Shadwell (1860) the
plaintiff was engaged to be married when his uncle wrote to him promising him
£150 a year, until he was earning a specified sum from his practice. The
plaintiff duly got married but he never reached the stipulated amount of
earnings. The amount was not paid regularly and upon his uncle’s death the
plaintiff sued for the arrears.
The court held that the plaintiff
was entitled to the arrears because he had acted to his detriment by getting
married, despite the fact that he was already engaged at the time of the
agreement, and that he had incurred additional expenses by doing so.
In Scotson v Pegg (1861) the
plaintiff brought and action against the defendant for failing to unload the
coal that he had delivered. The plaintiff was in actual fact contracted to
another party to deliver coal to any person that the contracting party nominated.
The defendant argued that he was not liable because the
plaintiff was already contracted to deliver the coal to him under the terms of
an existing contract.
The plaintiff was successful in his
claim and it was held that the plaintiff had acted to his detriment by
delivering the coal and the defendant benefited from it regardless of the fact
that the plaintiff was already obligated to do so under the terms of an
existing contract.
Copyright © 2019 by Dyarne Ward
and Kathiresan Ramachanderam
Comments
Post a Comment