UCL FACULTY OF LAWS

LAW OF CONTRACT

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 Casey’s 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 enforced…When 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).

c. Forbearance of existing rights as consideration?

(i) Part payment of a debt
Pinnel’s 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.
Corbern v Whatmusic Holdings Ltd [2003] EWHC 2134.
*South Caribbean Trading Ltd v Trafigura Beheer BV [2005] 1 Lloyds Rep 128

(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
O’Sullivan: “In Defence of Foakes v Beer” [1996] Cambridge Law Journal 219.
Atiyah: “Consideration: A Restatement” reproduced in Atiyah: ‘Essays on Contract’
(Clarendon Press 1986), 179.
Treitel: “Consideration: A Critical Analysis of Professor Atiyah’s Fundamental Restatement”
(1974) 50 Australian Law Journal 439.

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 L’industrie v Palm and Vegetable Oils M’sia (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 Yeoman’s 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
 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.

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 into…as a formal or legal agreement, and shall not be
subject to legal jurisdiction in the Law Courts…but 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.”

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 2009
LLM Intermediate 2009/10