Explain what judges take into account and what they ignore in deciding whether or not the lack of consideration is fatal to the existence of a binding contract.

Judges also take into account whether the consideration was already past, if an act or gift was given before a promise was made then this cannot amount to a consideration, as the act was not exchanged for the promise.  In the case Re McArdle it was held that as the improvements to the house made by the plaintiff were made prior to the contract of 1945 promising to reimburse the plaintiff, the consideration was past and the agreement invalid. However in Pao On v. Lau Yiu Long, Lord Scarman states that “ An act done before the giving of a promise to make a payment or to confer some other benefit can sometimes be consideration for the promise.” Scarman set down 3 criteria judges must consider before finding past consideration to be valid. 1)” the act must have been done at the promisors’ request, 2) the parties must have understood that the act was to be remunerated either by a payment or the conferment of some other benefit and 3) the conferment of a benefit must have been legally enforceable.” If the judge finds that these criteria are not met by the particular case then it is probable the judge would find the contract invalid. Judges must consider whether in the circumstances it is prudent to assume the act was expected to be remunerated.

Also judges in determining the validity of a contract must consider whether the duties performed were imposed by law, if so then the judges must ignore this, as they cannot provide sufficient consideration. In Collins v. Godefroy it was held that a promise by Godefroy to pay the plaintiff for attending as a witness in a trial to which he was already subpoenaed was unenforceable as he was already bound by the law to attend as a witness, hence his attendance could not be a consideration to be paid. Another angle judges must take into consideration is if the consideration is promised to continue carrying out a contractual duty owed to a third party. In the case Shadwell v Shadwell the plaintiff after getting engaged to Shadwell’s niece received a letter promising £150 yearly payment. In this case the consideration for the contract being the marriage. It was held that this was sufficient consideration and the payments were to be made.  This decision is contrary to the principal that there must be some economic value to the consideration. If there is an existing contract, “a promise by one party to fulfil his existing contractual duty towards his other contracting party is not good consideration.” This principal was established in the case Stilk v. Myrick where it was held that sailors on a ship who were promised extra wages to carry out extra work for the two sailors who deserted could not succeed in there claim as they were already contracted to sail the ship and carry out any work needed on the ship.

Judges are mainly concerned with determining which acts or promises amount to a sufficient consideration. Judges must not make decisions on the adequacy of consideration; it is up to the individual to make sure they make a fair bargain “caveat emptor” meaning buyer beware. Judges when deciding on the sufficiency of consideration must make sure the consideration if past fulfils the requirements set down in Pao On v.Lau Yiu Long otherwise it will be invalid. Also judges must take into account if a duty was imposed by law and if so cannot amount to a sufficient consideration. The Law on consideration although firmly laid down seems not to be followed so strictly by the judges, we can see that there are many exceptions to the rules and judges seem to make decisions on the adequacy but this depends on the particular facts of the case.

Word Count: 1428

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• ii) Len, a very wealthy businessman, decides to hold a celebration to mark 30 years of successful trading. He invites his entire workforce. He employs caterers, a cocktail barman, a jazz band and asks his own security to provide additional cover. The week before the event he hears that a small group of former employees who were made redundant are planning to mount a protest outside the venue. He contacts the police and asks them to provide extra security cover. His own security guards tell him they will not be providing additional cover. The police say the protest may well be very disruptive and they will only attend if they are paid £5000. During the evening a guest has an asthma attack and is considerably helped by the barman who (unknown to Len) has first-aid training. Len is so grateful he promises the barman £250. After the party Len changes his mind and decides he will not pay the police or the barman and wishes to dismiss his own security guards who he considers acted in breach of contract. Discuss.

Len may have two suits against him, firstly the barman who was promised payment of £250 might sue Len for this payment and Secondly the police whom Len had promised payment of £5000 for their protection of his party. Len wishes to dismiss his personal security for breach of contract and may take action in the courts against them.

The barman who saved the life of the guest will argue that he was promised £250 for saving the life of the guest, the act of saving the guests life being the consideration for the purposes of the contract. However as stated in the case Re Mcardle if the consideration is past then the contract will be deemed invalid. It can be seen here that the act of saving the life of the guest was done without any expectation of a reward. Once the act was done then Len made a “gratuitous promise” to the barman the reward of £250, the courts might find the consideration past and the barman not able to claim the reward form Len. It is a general principal in contract law that gratuitous promises cannot be enforced in the courts.

The second suit Len may have against him is the case of the Police who did not receive payment of £5000 for attending and protecting the guests. Firstly there was a verbal contract made by the parties, an offer of protection from the police was given for the payment of £5000, which was not negotiable. Len accepted the terms of the contract to pay £5000 to the police. Although this is not specifically mentioned in the text his acceptance can be inferred by his conduct as stated in the case Brogden v. Met railway.

 After the party, Len wishes to discharge the contract, however the police have performed their side of the bargain and are expecting Len to honour the agreement by paying the £5000. Len is unilaterally discharging the contract; a unilateral discharge is where one party has performed their obligation while the other party wants to discharge the contract without fulfilling their contractual obligations. In the case Williams v. Roffey Brothers & Nicholls ltd it was held that as the defendant obtained a benefit from making the promise, the promise was hence enforceable against them and must make reparations for the breach of contract. This case suggests that the courts would find Len in breach of contract and possibly enforce the agreement against him. Len may be able to discharge the contract with the police but he must provide some valuable consideration to the police, possibly paying a smaller sum in form of a cancellation charge. However in Pinnels Case it was held that “simply paying a smaller sum than that owed will not be sufficient, since the debtor has done only what he was legally obliged to do anyway under the contract.” It seems likely that Len will not be able to escape liability for payment to the police.

 

The police will be seeking a remedy for the breach of contract, the most common remedy being damages. Contractual damages “aim to compensate the injured party for the loss suffered as a result of the other party’s breach of contract.” It is up to the claimant to prove a loss resulted from the breach of contract. In the case Surrey County Council v. Bredero Homes Ltd it was held that damages would only be given for actual loss and in Robinson v. Harman it was held that “the rule of contract law is, that where a party sustains a loss by reason of a breach of contract, he is, so far as money can do it, to be placed in the same situation, with respect to damages, as if the contract had been performed.” This is known as expectation loss as it compensates the affected party’s loss of expectation. The police were expecting payment of £5000 for their services and had the contract been carried out properly they would have received their payment, they may be able to claim their actual loss of £5000 in damages.

The third issue is the security guards who refused to provide additional protection to Len’s party. Len wishes to dismiss his security guards for breach of contract. In the text the words “additional cover” when referring to Len’s request to the security guards to attend the party and provide cover suggest that this request was not in the security guards contract but an additional service which Len whished them to provide. If this is the case then the contract to provide security to the party is a separate one to their every day security contract and Len may only be able to claim damages from them for non-performance. However if this is not the case and the security guards are contracted to provide security to Len at any time then Len will be able to dismiss them for breach of contract. The security guards in informing Len of not being able to provide extra security cover are performing an anticipatory breach, which Is where “before the time of performance, one of the party’s informs the other they will not be able to perform their contractual obligations.” The anticipatory breach can have the effect of repudiating the contract, however “a breach of contract, no matter what form it may take, always entitles the innocent party to maintain an action for damages.”

However it is up to Len to affirm their repudiation, if he does so they can treat the contract as at an end, if Len does not affirm their repudiation he may treat their contract as continuing and sue for damages if the security guards do not perform their contractual duties. To affirm or disaffirm the breach Len must “with full knowledge of the facts, make it clear by words or acts, or even silence” that he intends the contract to continue. It the courts take this view then it is likely that Len will be able to prove a breach of contract and dismiss the security guards.

It is likely that Len will be able to escape liability for payment to Len as the courts do not usually enforce gratuitous promises. The police may be able to successfully sue Len and recover the money promised to them for loss of expectation under damages. The security guards may be seen to be in breach of contract however this depends on whether their contract stated that the guards should provide security cover at any time or the cover for the party was extra and above the ordinary contract.

Word Count: 1107

Bibliography

Secondary sources: Text books.

• Casebook on Contract Law, 6th edition, Jill Poole, Oxford University Press, New York 2003
• Law of Contract, 15th edition, Michael Furmston, Oxford University Press, New York 2006
• Law of Contract, 4th edition, Lawrence Koffman, Elizabeth Macdonald, Tolley Press, 2001

Primary sources: Cases Cited.

Currie v. Misa (1875) LR 10 EX 153

Thomas v. Thomas (1842) 2 QB 851

Chappell & Co Ltd v. The Nestle Co Ltd (1960) AC 87

White v. Bluett (1853) 23 LJ Ex 36

Hamer v. Sidway (1891) 27 NE 265 (court of appeal New york)

Re McArdle (1951) Ch 669 (CA)

Pao On v.Lau Yiu Long (1980) AC 614 (PC)

Collins v. Godefroy (1831) 1 B & Ad 950

Shadwell v. Shadwell (1860) 142 ER 62 (Court of Common Bench)

North Ocean Shipping co. v, Hyundai Construction co (1979) QB 705

Stilk v. Myrick (1809) 170 ER 1168

Brogden v. Metropolitan Railway (1877) 2 AC 666

Williams v. Roffey Brothers & Nichols Ltd (1991) 1 QB (CA)

Pinnel’s Case (1602) 5 CoRep 117a

Surrey County Council v. Bredero Homes Ltd (1993) 1 WLR 1361 (CA)

• Robinson v. Harman (1848) 1 Exch 850
• Denmark Productions Ltd v. Boscobel Productions Ltd (1968) 3 All ER 513

Total Word Count: 2535

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