CONTRACT LAW

consideration and intention

Lecture 5
Ethics Governance and Law
Karen Clark k.clark@herts.ac.uk
Today
• Remaining two elements of contract
• What is consideration?
• What are the presumptions about intention?
• Practical application of contract law knowledge to simple scenarios
• Practice questions
• Chance to ask questions about inclass test next week
 You owe me that
I’ll have a I’m sorry I now, we had a deal
pint of actually as soon as I said Certainly sir,
London haven’t “certainly” that’ll be
Pride please got the £3.50
money
The contract “equation”
• Four essential ingredients:
• Offer
• Acceptance
• Consideration
• Intention

Offer + Acceptance = agreement

Agreement + Consideration + Intention= Contract
What should happen?

Shopper
I’d like to buy Assistant OK, that’ll
this box be £5.99
CONTRACT!
Here is the
money

goods

We intend to be bound by this deal

What is Consideration?
• Classic definition:
Lush J in Currie v Misa (1875)
“A valuable consideration in the eyes of the law may consist either in
some right, interest, profit or benefit to one party, or some
forbearance, detriment, loss or responsibility given, suffered or
undertaken by the other.”
Modern Version
• Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co Ltd:
• An act or forbearance of the one party, or the promise thereof, is
the price for which the promise of the other is bought, and the
promise thus given for value is enforceable
Consideration
• This is something of value – both sides or parties to a contract must
give consideration
• Agreement alone is not a contract
• Merely promising something to someone is not a contract
• But exchanging promises of value is a contract
Consideration
• Consideration is the value each party brings to a contract.
• No need for exchange to be of equal value
• It is usually a promise in return for an act or another promise
• Anything that has been done before a promise is made is in the past
and not normally good enough to be consideration
 That’s a
Law won’t save you from a bad bargain priceless
Elizabethan
chest

Someone about
to make bad
Antique
decision expert
You can buy
this old box OK, thanks
for £1
CONTRACT!

We intend to be bound by this deal

Past consideration

You have been

Grateful
Man with cat so kind Professional
Good
neighbour Thanks,
looking after Samaritan
pet carer though I
my cat
NO didn’t expect
CONTRACT!
CONTRACT!
anything
I’ll let you
have this old
box you like
as a thank
you
Examples of Past Consideration
• Roscorla v Thomas (1842)
- def promised claimant that horse bought by claimant was sound and
free from vice.
- Held: promise made AFTER sale had been completed there was no
consideration
Re McArdle
• A son and his wife lived in his mother’s house that on her
death would be inherited by her son and three other
children. The son’s wife paid for substantial repairs and
improvements to the property. The mother then made
her four children sign an agreement to reimburse the
daughter-in-law out of her estate.
When she died and her children refused to keep this
promise, the daughter-in-law sued unsuccessfully. Her
consideration for their promise was past consideration. It
came before they signed the agreement to repay her
(promise made after the improvements had been done).
Exception to the rule
1. Where a service was rendered at the request of the promisor on
the understanding that a payment would be made – subsequent
promise to pay a certain sum will be enforced on the basis that it
merely identified the amount.
(Lampleigh v Braithwaite, (1615)
 Lampleigh v Braithwaite (1615)

• Braithwaite was accused of killing a man and asked Lampleigh

to get him a king’s pardon.
• This Lampleigh achieved, at considerable expense to himself,
and Braithwaite, in gratitude, promised to pay him £100, which
he in fact never did.
• Lampleigh claimed that there was a contract. He succeeded.
• Why? Because the service was requested even though no
price mentioned at the time, but clear that both parties would
have contemplated a payment.The later promise to pay was
evidence of this.
Consideration must move from the
promisee
Who is the promisee?

The person whom the promise is made.

Only a person who has provided consideration for a
promise can enforce a promise.
Dunlop Pneumatic Tyre Co v Selfridge(1915)

• Dunlop sold tyres to Day who resold them to Selfridge.

• Day on the request of Dunlop, inserted a term prohibiting Selfridge
from re-selling the tyres below list price.
• Selfridge broke the term.
• Dunlop sued for breach of contract
• Held: even if Day had acted as agents for Dunlop, Dunlop could not
enforce the contract as they had not provided any consideration for
the promise by Selfridge.
 Consideration need not be adequate
• Element of mutuality – most important in doctrine of consideration

• “Adequacy” – Means whether consideration provided corresponds

with the value

• “Sufficient” – Means whether some consideration is provided for the

value of the subject matter

What is the difference?

Thomas v Thomas (1842)
Facts
• Mr T before death expressed his wish that his wife should for the rest
of her life have the house in which they lived
• After his death, his executors made agreement with Mrs T to the
abovementioned effect with obligation that she pay £ 1 per year and
to keep the house in repair
• It was argued that Mrs T did not provide good consideration
Thomas v Thomas (1842)
Held
• Payment of £ 1 and keeping the house in repair was good
consideration

• This was held although, the amount paid was not “adequate” to the
commercial rent of the property.
 He’s given nothing of
If you already have to do it, value. Only doing
what he was obliged
it’s not consideration to do anyway

I will give you OK, that’s a

Worried £5 if you don’t deal, today
passenger go more than
Boy racer we stick to the
30 mph speed limit

NO
CONTRACT!
 He’s given nothing of
If you already have to do it, value. Only doing
what he was
it’s not consideration contractedto do
anyway
I’m in such a good
mood you can Excellent – I’ll
Generous have double our Regular hold you to
passenger agreed rate today driver that

NO
CONTRACT!
 Consideration must be Sufficient
Duty Imposed by General Law

Duties imposed by general law include not taking part

in a crime or promising to appear in court after being
subpoenaed.

• Collins v Godefroy (1831)-If the promisee performs a

legal duty and nothing more this is not sufficient
consideration.
 Duty imposed by the general law

• Glasbrook Bros v Glamorgan CC (1925)-

• If promisee exceeds his legal duty, he provides consideration.
• ( Facts: council-as police authority, sued on an agreement to pay for police
protection during a strike. In the opinion of a senior police officer, a
garrison was unnecessary to preserve the peace, a mobile force would have
been adequate. On insistence of colliery manager, he agreed to provide a
garrison in return for a promise of payment.
• Held: the decision as to what measures were necessary is the
responsibility of senior police officer on the spot, and
provided it was made in good faith, and reasonable, court
would NOT interfere. Thus police had DONE MORE than they
were obliged to do and were entitled to be paid.)
Duty imposed by general law (con’t) Ward v Byham (1956)

• Facts: father of an illegitimate child wrote to mother

from whom he was separated, saying that she could
have the child and an allowance of £1 per week if she
proved that the child was ‘well-looked after and
happy’.
• Held : mother was entitled to enforce the promise
because in undertaking to see that the child was
‘well-looked after and happy’, she was doing more
than her legal obligation.
Ward v Byham (1956) (con’t)

• Lord Denning,however, based his decision on the ground that

the mother provided consideration by performing her legal
duty to maintain the child.
• Treitel agrees with Denning that performance of a duty
imposed by the law can be consideration for a promise. He
argues that it is public policy which accounts for refusal of the
law in certain circumstances to enforce promises to perform
existing duties.
• He claims where there are no grounds of public policy
involved, then a promise given in consideration of a public duty
can be enforced.
Sufficiency of consideration
Duty imposed by a contract with same party

General rule: If promisee performs existing

contractual duty owed to promisor this is
not sufficient consideration.
• A request for extra payment for doing the same work
• Stilk v Myrick – two sailors deserted ship, captain
promised the rest of crew extra wages if they sail ship
back home. Held: crew already bound by contract to
meet normal emergencies of voyage and were doing
no more than their original contractual duty in
working ship home.
• Hartley v Ponsonby – nearly half the crew left.
Sailors exceeded their existing contractual duty.
Williams v Roffey Bros & Nicholls Contractors (1990)- an exception to the
Stilk v Myrick rule

• A n exception to the basic rule occurs where the party making the promise
to pay extra receives an extra benefit from the other party’s agreement to
complete what he was already bound to do under an existing arrangement.
Final element: intention to be bound by
contract

HOME
LAW PRESUMES NO INTENTION TO FORM
CONTRACT
CONTRACT – unless divorcing
Social and Domestic Agreements
• Arrangements between family members are usually left to them to
sort out themselves and are usually not legally binding.
 Balfour v Balfour (1919)
• Husband worked abroad without his wife who had to stay in England
because of illness and promised an income of $30 per month.
• When wife later petitioned for divorce, her claim to this income
failed. It had been made at an amicable point in their relationship
and not in contemplation of divorce.
• It was a purely domestic arrangement beyond the scope of the court.
• Where husband and wife are estranged, an agreement between them
may be taken as intended to be legally binding

• Can you name a case to illustrate?

(Hint: Think of ELS: doctrine of precedent)
 Merritt v Merritt (1970)
• Husband had deserted his wife for another woman.
• An agreement that he would pay her an income from which she
would pay the outstanding mortgage. Once the mortgage was fully
paid he would transfer the house to her name. This arrangement was
held by the court to be intended to create legal obligations.
• Sometimes families makes arrangements that
appear to be business arrangements because of
their character.

• In such cases the court will need to examine what

the real purpose of the arrangement was
Jones v Padavatton (1969)
• A mother provided an allowance for her daughter under an
agreement for the daughter to give up her highly paid job in New
York, to study for the Bar in England and then return to practice in
Trinidad where the mother lived.
• When the daughter was finding it difficult to manage on the
allowance the mother then bought a house for her to live in , part of
which the daughter could let to supplement her income.
Jones v Padavatton (cont’d)
• They later quarreled and the mother sought repossession of the
house. The daughter’s argument, that the second agreement was
contractual, failed.
• The court could find no intent.
Final element: intention to be bound by
contract

SHOP

LAW PRESUMES INTENTION TO FORM CONTRACT

 Commercial and Business
Agreements
• An arrangement made within a business context is presumed to be
intended to be legally binding unless evidence can show a different
intent.
Edwards v Skyways (1969)
• An attempt to avoid making an agreed ex gratia payment in a
redundancy failed.
• Although ex gratia indicates no pre-existing liability to make the
payment, the agreement to pay it, once made, was binding.
• What about offer of free gifts where this is to
promote the business?

• Is this legally binding?

Yes
 Esso Petroluem v Commissioners
of Customs and Excise (1976)

• Esso gave free World cup coins with every four gallons
of petrol purchased. Customs and Excise wanted to
claim purchase tax from the transaction.
• Since Esso were clearly trying to gain more business
from the promotion there was held to be intention to
be bound by the arrangement.
Has a contract been made?
Yusuf sees the poster (right ) and goes into
the GK Sports, Hatfield on 12 October.
He picks up a pair of Duckboots in his size. SPECIAL OFFER
The price on the shelf says £90.
NIKE Lunar Force Duckboot
He takes them to the till and presents his one day only
card. GKSports
Shop owner Geri says, “Thanks” and takes Hatfield
£90
his card. She charges £130 , which is the (next to Asda)
price shown on the box. 12 Oct 15
Yusuf does not check the price and keys in
his pin code. He notices the receipt later and
goes back to the shop to complain that he is
owed £40.
Any questions?
• Please remember BE EARLY next week
• No admittance after 1205

Thank you