Contract - Consideration

Question 1

How is consideration defined?

Answer 1

An act or forbearance of one party or the promise thereof

Question 2

Jeff promises to sell his used television to Kristen for £100 in exchange for Kristen’s promise to pay £100. What is the consideration for each party?

Answer 2

Jeff - promise to sell TV
Kristen - Promise to pay £100

Question 3

Jeremy tells his daughter Martha, “I’ll give you £100 if you stop smoking”. What is the consideration of each party?

Answer 3

Jeremy - £100
Martha - Stopping smoking (forbearance)

Question 4

What is the difference between executory and executed consideration?

Answer 4

Executory - future
Executed - performed

Question 5

What does “consideration must move from the promisee” mean?

Answer 5

Consideration must be provided by the parties themselves, not by a third party.

Question 6

When can a third party enforce a term of a contract under the Contracts (Rights of Third Parties) Act 1999?

Answer 6

If they are named in the contract and the term to be enforced for their benefit

Question 7

When can a party who ahs not provided any consideration enforce a contract?

Answer 7

When it was executed as a deed.

Question 8

When is consideration considered to be sufficient?

Answer 8

It must have some value, even if very small.

Question 9

What does sufficient but not adequate mean with regards to consideration?

Answer 9

With regards to whether there is an enforceable contract The courts are not concerned whether it is a good deal, just whether there is consideration.

Question 10

What is illusory consideration and what is an example?

Answer 10

Illusory compensation is compensation that has no value in the eyes of the law and therefore is not sufficient consideration to form a contract.

Example - a promise to stop complaining is NOT sufficient consideration.

Question 11

A group of factory workers are promised £100 to complete an important order on time. On completion they are not given the promised money. Would their claim be successful and why?

Answer 11

They would be unsuccessful in any attempt to claim the amount owed as they have done nothing more than the job they are contracted to do.

Performance of an existing duty owed to the person making the promise is not sufficient consideration

Question 12

When would performance of an existing contractual duty be considered to be sufficient consideration?

Answer 12

If performance of an existing contractual duty confers a practical benefit on the party offering additional consideration.

If the performance of an existing contractual duty is owed to a third party, rather than the person making the promise.

Question 13

If the owner of a public house offered to pay a police officer £50 per night to keep the peace around the public house while the officer was on duty, would they have a contract?

Answer 13

No - the police officer has an existing statutory duty to keep the peace and therefore no consideration has been given.

Question 14

What is the difference between existing statutory duties and existing contractual duties?

Answer 14

Statutory duties are general whereas contractual duties are with specific parties.

Question 15

Is past consideration sufficient in consideration for a contract?

Answer 15

Acts that were performed or promises that were made prior to the contract being formed will not be sufficient consideration.

Question 16

What is the exception to the past consideration being insufficient?

Answer 16

If the past consideration was given on the implied understanding of payment.

Question 17

What are the conditions for the “implied understanding of payment” exception to apply to past consideration?

Answer 17

• The act must have been done at the promisor’s request;
• The parties must have understood that the act was to be remunerated either by a payment or some other benefit; and
• The payment or other benefit must have been legally enforceable had the promise been made in advance.

Question 18

Why can a creditor sue for the remainder of a debt if they have agreed to accept a lower amount in full and final payment?

Answer 18

Because they have received no consideration and therefore no contract has formed.

Question 19

What are the exceptions to the general part-payment rule?

Answer 19

1 - Debt is disputed in good faith
2 - Unliquidated claims
3 - Payment at a different place or earlier payment
4 - A third party makes the payment
5 - The payment is by different means at the request of the party receiving the lesser amount
6 - A composition with creditors

Question 20

What is promissory estoppel?

Answer 20

Promissory estoppel is an equitable principle that gives legal effect to an agreement unsupported by consideration. It prevents a party going back on their promise to do something on the basis that they are ‘estopped’ from doing so

Question 21

What are the requirements for promissory estoppel to apply?

Answer 21

• There must be a clear and unequivocal promise (express or implied) by the promisor not to rely on existing legal rights; for example, by accepting payment of a lesser amount than the original contract price;
• The promisee must have altered their position in reliance on the promise; and
• It must be inequitable for the promisor to go back on their promise.

Question 22

Can promissory estoppel used to make a claim?

Answer 22

No - it is only a defence.

(Shield not sword)

Question 23

Is promissory estoppel permanent?

Answer 23

No, it is only suspensory.

The original rights are revived after the conditions that caused the estoppel no longer exist or after reasonable notice has been given.