Consideration, Estoppel, and Privity (cases and principles)

Chappell v Nestle

nominal/trivial consideration is valid consideration

indirect advertising benefit in asking people to return 3 chocolate bar wrappers in exchange for discounted record

Pao On v Lau Yiu

exception to the genera rule - from Eastwood v Kenyon that past consideration is not good consideration - where an act prior to the making of the promise was done at the promisor’s request and the parties understood that it would be rewarded

agreement to trade and stabilise shares (considered as good consideration) then threatened to walk away

Glasbrook Bros v Glamorgan CC

where a public authority confers a benefit beyond what was obligated under statute that is considered good consideration

provision of police security at coal mine during miners strike. argued that this was just part of duty of protection.

Ward v Byham

consideration need not be of financial value

can be good consideration even if obligated under general law for private individuals (as opposed to public authorities).

father stopped paying mother of child to look after child once she got married

Denning: promise to perform an existing duty is good consideration as it is nonetheless a benefit

Stilk v Myrick

promise to pay more for performance of an existing obligation is not binding for want of consideration

shipmaster promised to split the wages of deserted crew amongst remaining crew but then refused to pay for extra wages

example of policy consideration re blackmail, today this would constitute economic duress

crew had undertaken to do all they could under all emergencies - this included desertion

Williams v Roffey Bros

offered extra to finish pre-contracted work on time and then refused to perform until the payments continued

enforceable if the promisor obtained a practical benefit - such as avoiding the penalty as a benefit (and was a change from the original as the original contract could have never enabled the full performance)

Foakes v Beer

promise to accept less than one is entitled to under a pre-existing contract is not binding for want of consideration

court order for a sum and interest - agreed to forgo interest if the defendant subscribed to a specific payment schedule.

Selbourne - thought that there should be a possibility to contract as such however allowing this would be disruptive to contract law

Re Selectmove

doctrine of practical benefit introduced in Williams v Roffey Bros does not extend to promises to accept less

paying off overdue tax in instalments. waited for confirmation increased received threat of action and immediate payment. argued that the previous agreement stood.

not good consideration but rather existing obligation under fiscal legislation

allowing instalments would result in a practical benefit for the creditor but barred by Foakes v Beer so would need parliamentary approval

MWB business exchange centres v rock advertising ltd

no oral variation clauses are PF enforceable outside the limited exception where promissory estoppel applies

stressed that Re Selectmove and Foakes v Beer might be reconsidered

entered into a licensing agreement for business property with a no oral variation clause; later agreement made over the phone to backload payments

Sumption: supports existence for commercial reasons; upholds the integrity of written agreements; oral variations more likely to give rise to confusion

Briggs: ‘cautious’ approach to oral variation clauses to avoid abusive litigation about alleged oral variation

Hughes v Metropolitan Railway

promissory estoppel can have a suspensory rather than extinctive effect (until the promise not to enforce the primary obligation expires)

when the tenant was supposed to be repairing the premises, both parties were negotiating the purchase of the property. landlord attempted to reject tenant because tenant had not started repairs at the time they were first requested.

tenant found entitled to relief against forfeiture because the notice to repair was in suspension during the negotiations and did not revive until the negotiations stopped

Central London Property v High Trees House

establishes the principle of promissory estoppel under which a party who promises not to enforce the contractual obligation of the other is estopped from walking back from that promise when it was relied on.

reduce annual rent during wartime conditions but then attempted to enforce full price once discovered the the lease had not reflected the discount.

does not give cause of action (shield not sword)

fusion of law and equity

‘a promise intended to be binding, intended to be acted on and in fact acted on, is binding so far as its terms properly apply’

Combe v Combe

promissory estoppel is not a cause of action

husband agreed to pay wife $100pa but made no payments - no good consideration and promissory estoppel could not be employed as a cause of action

does not create new rights where none existed before

Denning: ‘the doctrine of consideration is too firmly fixed to be overthrown by a side wind’

D an C Builders v Rees

promissory estoppel cannot be founded on a promise induced by promissee’s inequitable conduct

Rees paid under the agreed sum despite knowing that the builders were in financial difficulty. Rees tried to exploit this by threatening the builders to accept a lower sum which the builders accepted but later brought action for the full sum

creditor barred from his rights when it would be inequitable for him to insist upon them

Woodhouse AC Ltd v Nigerian Produce Ltd

promissory estoppel requires a clear and unequivocal promise (Viscount Dilhorne)

claimants offered payment of GBP rather than local currency in cocoa sale, defendants accepted - values then fell to the defendant’s loss.

found for the defendant as it was not clear the the promise of GBP referred to currency or measurement of what was owed

Baird Textile Holdings v Marks and Spencer

promissory estoppel can only be applied where there is an existing contractual relationship between the parties

had been supplying garments for 30 years without any formal agreement. gave notice to no longer purchase at the end of the season. argued that there was either an implied contract or promissory estoppel to prevent this.

Collier v Wright Holdings

promissory estoppel can have an extinctive effect on the original contract obligation in relation to one off payment of debt

joint liability of business debt to the claimant who allowed him to pay just 1/3 of the debt and would pursue the others separately. upon the bankruptcy of the other debtors the claimant returned to the defendant.

promissory estoppel bound the claimant to accept what the defendant had paid because the reliance on the promise had extinguished the rights to the rest of the contract.

Walton Stores v Maher

in Australia, promissory estoppel is a cause of action and can apply to non-contractual promises

negotiations for lease of land involving demolition and reconstruction but no formal agreement. one party then withdrew and the other sued on promissory estoppel having already completed a substantial amount of the work

claim succeeded - the long delay to reply induced the claimant to continue to work on the assumption that a contract will be entered and the defendant’s conduct was unconscionable as it knew the claimant would rely on its promise

argued that the limit to existing rights was illogical.

estoppe by convention

prevents parties from denying a common assumption they have acted on

Amalgamated Investment v Texas Commerce International Bank

estoppel by convention cannot be a cause of action in form but it can be in substance by being incorporated into pleading on another ground

guarantee of loans

Properietary Estoppel

prevents someone from reneging on a promise or assurance related to land/property when the recipient relied on it to their detriment

Crabb v Arun DC

proprietary estoppel can arise from negotiations if supported by later conduct that was unequivocal in nature, or by words/conduct (short of an actual promise).

non-binding agreement for right of way however when the council sold part of their land it became landlocked. repudiated agreement and took away gate and gap

proprietary estoppel is a cause of action and therefore entitled to right of way

test for proprietary estoppel: (Scarman)

1. is there an equity established?

2. what extent of any equity?

3. what relief is appropriate to satisfy the equity?

Tweddle v Atkinson

establishes privity of contract

fathers of bride and groom agreed to pay the groom a sum with a clause which allowed the groom to sue

Compton: consideration must move from the party entitled to sue on the contract

n.b. doctrine of privity is separate from the doctrine of consideration

Dunlop Pneumatic Tyre Co v Selfridge

privity rule = only a person who is a party to a contract can sue on it

Claimant sold tyres to intermediary who sold on to Defendant but claimant tried to bring claim for liquidated damages, established in the contract between the claimant and the intermediary, against the defendant

no consideration from C that would entitle to bring an action

Beswick v Beswick

agreement to pay wife after the death of the uncle

wife could only sue as administrator of the uncle’s estate, not in her own right as a beneficiary of the contract

The Eurymedon

when invoking agency exception to general rule of privity must provide consideration by performing the services which form the obligations under the contract

dockworkers (who were agents in a contract not written themselves - clause that they were only liable for damage if a clause was brought within a year). damaged dock worker but action brought outside the time frame.

issue was whether they could benefit from the time limitted clause?

consideration was given because within the year the respondent had the advantage of the opportunity to sue.

Chudley v Clydesdale Bank

paid money into investment bank for purposes of financing a property development scheme - bank failed to make segregated client account. through acting in breach of the contract the bank caused a loss to the third party.

demonstrates the use of the Contracts (Rights of Third Parties) Act 1999.

DEFRA v Public and Commercial Services Union

union subscription deducted from their pay roll system from the employer. paid directly from the employer to the claimant. (common ground that these agreements are not legally enforceable).

when employer failed to pay, the employees brought an action even though it was the union that lost earnings.

action brought by union succeeded - contracts would have to demonstrates that it was not the joint intention of the parties that the union should not be able to enforce the agreements

the fact that the employees had not let the union’s right be waived demonstrated that they were relying on it

Assignment

process whereby a contractual right is transferred to someone other than the original creditor without the consent of the original debtor

exception to the doctrine of privity

Shanklin Pier v Detel

seller of goods liable on express warranty given by him to the promisee who in consideration of the warranty causes a third party to buy the goods so warranted and suffers damage by reason of the breach of warranty

quality of paint

Re Schebsman

post-employment agreement to be paid a sum for 5 years for compensation; on his death to transfer to widow and subsequently daughter (then to cease).

after his death manager of estate tried to intercept payments and claim that the contract was void because of the 1914 Bankruptcy Act.

any attempt to divert would have constituted a breach.

manifest intention was to transfer rather than creating a trust

not legitimate to import an idea into contract when there is no indication of intention

because the wife and daughter were under no obligations as they were not privy to the contract, they cannot be made to pay sums back