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Summary Consideration and Promissory Estoppel; Intention to Create Legal Relations
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2i Contract Law notes
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CONTRACT 2015-2016II. FORMATION (2):
CONSIDERATION AND PROMISSORY ESTOPPEL;
INTENTION TO CREATE LEGAL RELATIONS
Reading:
McKendrick TCM, chs. 5 & 7.
McKendrick Chapter 5: Consideration and Promissory Estoppel
Doctrine of consideration: promise cannot enforce a promise unless he has given or
promised to give something in exchange. Consideration must be sufficient but not
adequate; consideration must not be past; consideration must move from the promise.
Must be considered alongside estoppel – prevent a party from going back on his
promisee when the person to whom the promisie has been made has acted on it to his
detriment.
Introduction
Consideration unique to common law; criticised by Atiyah and others.
Arguments against doctrine of consideration:
Too narrow; does not give effect to promises which should be given effect to –
Dawson (2008): ‘even the most embittered critics of bargain consideration do
not really object to the enforcement of bargains. The objection has been to its
transformation into a formula of denial, a formula that would deny legal effect
to most promises for which there is nothing given or received in exchange’.
Too technical
Divorced from commercial reality
Difficult to reconcile with major theories of contract eg will theory of contract
Too broad – should be split up into duress / unconscionability / estoppel /
intention to create legal relations analysis
For (Chen-Wishart, 2010):
‘It recognises and expresses our deep instinct for reciprocity… terms of
engagement between equals’ and prevent state interference / coercion in the
giving of gifts
Consideration: Its Scope
Lush J per Currie v Misa (1875): ‘A valuable consideration, in the sense of the law,
may consist either in 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’
Treitel: ‘What the law is concerned with is the consideration for a promise – not the
consideration for a contract’
CONSIDERATION MUST BE SUFFICIENT
The law does not intervene in bad bargains but something of value must be given in
return. Contract to sell a business for £1 is enforceable unless there was duress (eg
Tony Fernandez bought Air Asia from MAS for RM1). For a nominal money amount,
there is no difficulty, but what of other types of promises?
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