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Consideration and Promissory Estoppel
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Full Contract law lecture notes, with cases, case descriptions, current law and everything that could be on the exam.
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Consideration and Promissory EstoppleWhen is a promise binding?
Historically contracts were only recognised if they were contained in
a deed.
Today informal promises can be binding If something is given in
exchange.
Badge of enforceability (McKendrick, 2013) – promise binding
when you can find consideration
Suggested alternative: reliance model (Smith 2006)
Consideration:
“Something of value given by both parties to a contract that induces them
to enter into the agreement to exchange mutual performances.”
“An act or forbearance of 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” (Pollock on Contracts, 8th ed.,
p.175)
The basic rules of consideration:
Rule 1- Consideration must not be ‘past’
If a promise of benefit comes AFTER the performance consideration
is past and NOT valid, so the promise is unenforceable.
Roscorla v Thomas [1842] 3 QB 234- horses- promise that horse was
‘sound’- it wasn’t, but promise was not binding as he got nothing in
return for the horse being sound- the contract where he sold the
horse to them was over- consideration was past.
Exception:
Earlier promise might be implied (objective test- when exactly was
the promise made)
Lampleigh v Braithwaite [1615] EWHC KB J17 – Murder, to be hung-
asked someone to do everything and anything to get a pardon from
the King- so happy when D found out, he promised Lampleigh £100
but never paid. Binding? After the performance? Ct said he asked for
this performance – there was consideration and it was past.
Pao on v Lau Yiu Long [1980] AC 614 – shares/swapping of shares –
main contract, claimant said they would only go through with main
contract if promised a guarantee – but didn’t keep this. Was there
any consideration? Ct confirmed found that where the rule of past
consideration where this consideration was requested in the first
place but Judge said they have to fulfil 3 criteria:
1. The act was performed at the request of the promisor AND
2. It was understood at the time (or implied) it was to be paid for
AND
3. It would have been enforceable if made before the act.
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