Consideration and Promissory Estoppel

Can performing a pre-existing duty to a third party be good consideration for a promise to a different part?

Yes - Following Shadwell v Shadwell and Scotscon v Pegg.

Explain the arguments against the need or the doctrine of consideration?

1. Atiyah - Historically judges only looked for considerations. That is reasons a contract ought to be enforced, this is the approach we should return to. 2. Fried - the requirement of consideration is too internally inconsistent in it's application, it allows some promises to be enforced but not others e.g. practical benefit is good consideration in pay more cases - Williams and Roffey but not in cases of payless/part payment of a debt e.g. Foakes. 3. There exist effective alternatives to consideration. a) A requirement of form such as only promises in writing are enforceable, b) an expansion of the requirment of intention to create legal relations, such that promises can only be enforced when it is clear that legal relations were intended, c) a requirment that promsies can only be enforced once they have been relied on. 4. Consideration is not reciprocal, because it does not need to be adequate only sufficient.

What are the notable exceptions to the requirement of consideration?

1. Deeds - If enforced by a deed, consideration is not necessary in order to enforce a gratuitous promise. 2. Promissory Estoppel - a specific equitable doctrine developed by Denning.

Explain the key exceptions to the rule that performing a pre-existing contractual duty to a party cannot be good consideration for another promise with that party?

1. Hartley v Ponsonby - More than half the ship left, conditions changed radically, so it was held to be good consideration - In the opinion of some modern authors the contract was frustrated. 2. Williams v Roffey Bros - Major change in the law. There was good consideration for the additional promise, as long as it fulfils Glidewell​ LJ's guiding propositions: a)"if A has entered into has entered into a contract with B to do work. for, or supply goods or services to, B in return for a payment by B" b)"at some stage before A has completely performed his obligations under the contract, B has reason to doubt whether A will" c)"B thereupon promises A an additional payment in return for A's promise to perform his contractual obligations on time. d) As a result of giving his promise, B obtains in practice a benefit or obviates a disbenefit. e) B's promise is not given as a result of duress or fraud on the part of A. If all these conditions are matched, the practical benefit garnered by B will be considered good consideration for the renegotiation.

Arguments for the existence of consideration

1. If every written contract is enforceable, it could lead very easily to people becoming accidentally bound, especially by gratuitously made promises. Furthermore, it would prevent the enforcement of seriously made oral promises. Compare that to a deed. 2. Although an expansion of the intention doctrine provides flexibility it creates manifest uncertainty. This is obviously very damaging to a business world in which certainty is very important. 3. Enforcing gratuitous promises would leave us in a world where we cannot build trust - the risk that trust will be broken is important as it allows for the existence of real trust, you cannot prove your trust or untrustworthiness when you are only performing on the will of an outside force. Furthermore, forcing someone to perform a gratuitous promise will normally contradict the constructive nature of the parties relationship. 4. Mindy Chen Wishart argues that Consideration is the most just solution because it recognises the idea of reciprocation that sits at the core of human morality. Social scientists have observed that reciprocation is a universal generalised norm. See Kant's categorical imperative - do not treat others as a means to an end, but as an end in themselves.

Problems with the rule from Pinnel's case

1. It ignores business realities. 2. Pinnel's case already accepts some practical benefits as sufficient "a hawk or a robe" or payment earlier than due, so why not others? Bear in mind a creditor cannot be forced to accept such a variation, it has to be requested. 3. A peppercorn could at the request of the debtor remove a debt of £1000, so why not £900? However, arguably money cannot be valued against money, whereas a hawk can. 4. Duress is relevant in these cases however - DC Builders v Rees, DC due to dire finances was forced to accept the £300 in return for a £400 debt owed by Rees. 5. The real issue I guess is who deserves protection, there is clearly a moral difference between a debtor who due to financial difficulties is forced to accept less than they are owed and a debtor who only accepts less to ensure they get something and then proceeds to demand all of it. Foakes v Beer vs DC Builders v Rees - Thankfully here, Promissory Estoppel helps make this distinction.

Problems with MWB v Rock

1. It would in essence, make the concept of promissory estoppel irrelevant as a method of solving part payment of a debt cases. This in itself is not problematic. Where it becomes a problem is that unlike promissory estoppel it does not distinguish between situations in which it is equitable or not to at in those situations. This is problematic becasue often it is inequitable to stop the creditor from reclaiming the money they deserve, see DC Builders vs Rees (Mrs Rees could claim they got a practical benefit in that she saved them from bankruptcy.) 2. The decisison itself is questionable, in the way the court treats anti-oral variation clauses and more importantly in the way they treat practical advantage. The court ignores the practical benefits that MWB might have gotten had they not agreed to the part payment of the debt with Rock, such as the oppurtunity cost that was lost as a result of keeping Rock in the property. For example, the ability to find potentially more solvent clientelle. Furthermore, the other two benefits - recieving money upront and the third potentially recovering arrears from Rock are both rejected explicity in Foakes v Beer and Re Selectmove. 3. It is unclear the authority on which this decision is being made on given that the Court of Appeal is beholdent to decisions made by past Courts of Appeal and the Supreme Court. 4. It establishes a strange halfway house between requiring consideration for part payment of a debt cases and not requiring it at all. This will only cause confusion down the road.

Potential Benefits of MWB v Rock

1. Presumably, duress and good faith can protect from misuses of this such as in DC Builders v Rees. This also gets round arguably some of the other limitations of promissory estoppel such as the fact it can only be used as a shield and not a sword.

What are the main problems raised with the law in Williams v Roffey?

1. The carpenter in the case gets more than he promised for doing less than he promised to do, given that he downed tools before finishing the flats and they still incurred liability under the penalty clause so what benefit did they gain? 2. Glidewell refers not only to practical benefit from the avoidance of litigation, penalty clause etc but also from a repetition of the promise to perform existing contractual obligations? But what practical benefit is gained from this. 3. The reliance on duress is not straightforward as the duress case law in England is still in its formative stage. It is clear from the case law, however, that implied or veiled threats count as duress. At what point of the builders suggesting (subtly) that they won't be able to perform does it become duress. 4. As argued by O'Sulivan. The point of Stilk v Myrick is also to encourage parties to price out their contracts properly in advance, what else would be the point? 5. Contracts over a long period of time, if drafted properly can have their own mechanisms for renegotitation. 6. A more radical approach than Roffey, like that in New Zealand, is that once relied on contractual variations do not need consideration at all.

What are the requirements for the doctrine of economic duress?

1. There is an illegitimate pressure or threat. 2. Which subjectively caused the victim to act as he did. 3. Which objectively would have caused a reasonable person in the victims position to act in the same way. This is the approach endorsed by DSND Subsea Ltd v Petroleum Geo Services.

What conditions need to be fulfilled in order for promissory estoppel​ to apply?

1. There must be a clear and unambiguous promise or representation that the creditor will not insist on his legal rights. To ascertain this an objective test is used - Baird Textiles v Marks & Spencer. 2. It can only be used to take the place of consideration when a contract is being varied or altered, not when it is being formed for the first time- This has been criticised as illogical in Walton Stores v Maher. 3. The debtor must have relied on this promise. It must be shown that the debtor acted differently from the way in which he would have acted had the representation not been made. - Emphasised in Prince Jefri Bolkiah v State of Brunei Darussalam. Most cases require that the debtor "acts differently" or "alters his position". 4. The creditor is estopped from going back on or acting inconsistently with what he promised only where it would be inequitable to do so. This is flexible. It was not inequitable for the builders in DC Builders v Rees 5. Promissory Estoppel can only be used as a shield not a sword. - Coombe v Coombe - "it may be part of a cause of action but not a cause of action in itself". Hence why it could not be used in Williams v Roffey. But some would argue that proprietary estoppel can be used? So why not promissary? Furthermore, the issue fo Walton Stores in Australia where it was allowed.

When is consideration needed?

Consideration is not only needed at the start of a contract, but also for every variation that is made to that contract.

When is consideration trivial?

Consideration needs to be sufficient but not valuable. That is to say, it needs to have legal value. This means that it does not need to be equivalent but it does need to have some economic value. Chappel Co v Nestle Ward v Bryham - Simply keeping a child happy can be a good consideration. Agreeing to drop a legal claim regardless of whether it is grounded or not can be good consideration. Only if, as in Wade v Simeon they knowingly make a legal claim that is groundless, is it not good consideration. The controversial case of White v Bluett, found that, if you abstain from something that you have no right to do, that is not good consideration. But Bluett was at liberty to complain.

Can part payment of a debt be good consideration for a renegotiation to pay less?

Generally not - Following Pinnel's Case. If a debtor agrees with the indebted that they can pay a smaller portion of the overal debt in exchange for the whole debt being relinquished, that is not sufficient consideration for that promise. The only exceptions ruled in Pinnels Case were if that part payment provided a practical benefit in: a) It was paid before it was due. b) It was paid in a different means, e.g. property rather than money c) it was paid in a different location than that intitally specified. Pinnel's Case was upheld by the House of Lords in Foakes v Beer - this was done unwillingly, as the principle is very harsh. It ignores the business​ reality that often times it makes sense to accept a part payment of a debt. Re Selectmove - Also upheld the principle and said that paying in instalments, even though it is a practical benefit it is not good consideration. This is strange seeing as Pinnel's Case already supports some types of practical consideration but that cannot be extended.

Can performing a pre-existing contractual duty to a party be good consideration for a promise with the same party?

Generally not. Performing a duty that you are already bound to do is not considered good consideration for a new promise. This starts in Stilk v Myrick - sailors, abandoning , renegotiation. Where the sailors promising to continue the voyage was not good consideration for a renegotiation fo their wages. This rule existed at the time potentially to prevent any form of duress - as economic duress did not exist at the time.

What is the doctrine of consideration?

It is an aspect of English law, that means that in order to enforce a contract there must be good consideration. Consideration can be defined as the "price of the promise" or as in Currie v Misa - "A valuable consideration, in the sense of law, may consist either of some right, interest, profit or benefit, accruing to the one party, or some forbearance, detriment, loss or responsibility, given, suffered or undertaken by the other". i.e. It is giving something in return for a promise.

Does promissory estoppel extinguish the creditors rights or merely suspend them until revived by notice?

It is unclear what the answer to this is. The most common response is that it is merely suspensory, based on the fact that Hughes was able to reactivate the six month's repair notice after giving proper notice. It is also supported by the House of Lords in Tool Metal Manufacturing v Tungsten Eletric Co. However, the issue is raised - can you give retrospective notice regarding claims from the past, many of which are the subject of the cases themselves? Denning would have certainly thought not, as that would defeat the purpose of PE.

What does it mean to say that Consideration must move from the promisee?

It means basically that the consideration must move from the party to whom a promise is being made and not a third party. For example, if A promises B £300 in return for C cleaning A's windows, that is not an enforceable promise. Becasue B has not provided any consideration. This is reflected in Tweedle v Atkinson. However, if A promises to pay B £300 in return for B promising A to clean C's windows, that is enforceable because B has provided consideration for A's promise. This is closely related to the concept of privity. And remember the Contracts (Rights of 3rd Parties Act) has removed many of the issues surrounding C being able to enforce a promise.

What is the effect of the recent MWB v Rock Advertisers on part payment of a debt cases?

MWB, although not yet decided by the Supreme Court could have a major impact on these Part payment of a debt cases. In essence, it transfers the principle from Williams and Roffey from only pay more - Existing contractual duty cases to pay less - part payment of a debt cases. In MWB, the Court of Appeal held that Rock had provided good consideration for the promise to pay a part payment of debt owed to MWB on the basis of the fact that Rock had provided a practical benefit. The benefit was a) the recovering of some of the arrears immediately and b) the maintenance of Rock as a licensee. This extension of the principle to the case of a part payment of a debt is controversial in that it could completely make promissory estoppel irrelevant.

How much value does something need in order to be considered good consideration?

None. Consideration needs to be sufficient but need not be adequate. That is to say, the courts are not concerned with the economic value of the consideration. What they are concerned about is whether it is what was requested by the promisor. That is to say, if you request a peppercorn in return for my house. By providing that peppercorn I have provided good consideration. Thomas v Thomas - Peppercorn rent If however, I do not provide what you requested or provide something else, that is not good consideration. Coombe v Coombe. Although Courts have been found to imply requests on occasion.

How does promissory estoppel affect situations in which consideration cannot be found for the part payment of debts?

Promissory Estoppel was created by Dennin LJ in Central London Properties v High Trees House Ltd. He created it in an obiter dictum on the case, fusing equity and existing common law precedent from Hughes v Metropolitan Railway. It prevents (estopps) a debtor from going back on a promise to release a debt for a part payment.

Explain the subjective requirement for economic duress?

The question at hand is did the threat cause the victim to act as he did? For this, we apply a subjective test. It is in essence, a "but for" test, would the victim have acted this way "but for" the threat? In Pao On v Lau Yiu some other factors were identified: 1. Whether the victim did or did not protest? 2. Where he did or did not have an alternative cause open to him? 3. Whether he was independently advised? 4. Whether after entering into a contract he took steps to avoid it?

Explain the requirement of objective causation in economic duress?

The requirement is simply objectively would a reasonable person have acted as the victim did? Mance J identified this in Huyton. That is did the victim have no other reasonable choice? Could they have sought out an alternative legal remedy?

What does it mean to say consideration cannot be past?

This comes from two cases: A) Eastwood v Kenyon B) Roscorla v Thomas Basically, an action or promise before a promise is made cannot be good consideration for a future promise. E.g. I clean your windows, you then promise to pay me at a later date £500. I cannot enforce the promise for the money. As what I did was past and not good consideration. There is one good exception to this from Lampleigh v Braithwaite. If B does something for A at A's request and then later A promises to pay for it. That can be good consideration. It must however, fufil the criteria of: 1. the service must have been made on request 2. the parties understood that the act was to be renumerated further 3. the payment itself must have been legally enforceable if it had been promised in advance.

What is classified as an illegitimate pressure or threat for economic duress?

This is about the type of threat made. First, it will need to be a threat to breach an existing contract e.g. a threat of non-performance - Huyton SA v Peter Creamer. Second, the threat will have to be in bad faith. It is unclear what this means but in DSND it is said that it means it is generally trying to take advantage of a difficult financial or otherwise position of the party to whom the threat is being made.

Can performing a pre-existing public duty be good consideration for a promise?

Traditionally the answer is no, with the authority of Collins v Godefroy - court, evidence. However, when you do more than your public duty requires, that can be good consideration. Glasbrook bros v Glamorgan County Council - here it was the police. The same applies with familial relations - Ward v Bryham.