Law - 3 Consideration, Mere representations

Consideration

An exchange of promises between parties where each promise must possess legal value to be enforceable.

Executory consideration

A promise to perform an obligation or provide something in the future (e.g., promising delivery next week in exchange for payment on arrival).

Executed consideration

An act that has already been performed in return for a promise (e.g., carrying out a service today based on a promise of payment tomorrow).

Bilateral contract

An agreement in which both parties exchange mutual promises with reciprocal obligations.

Unilateral contract

An agreement in which one party makes a promise conditional on the performance of a specific act by another party.

Sufficiency vs. Adequacy of consideration

The legal principle that consideration must be sufficient (have recognizable legal or economic value) but does not need to be adequate (of equal commercial or market value).

Previous request rule (past consideration)

An act performed before a promise is made is valid consideration if the act was originally done at the promisor's request with an expectation of payment.

General rule on part payment of a debt

A creditor's agreement to accept a lesser sum in full settlement is not legally binding, meaning the creditor can claim the remaining balance unless fresh consideration is provided.

Contractual term

A binding provision of a contract; if untrue or breached, it gives rise to a legal action for breach of contract.

Mere representation

A pre-contractual statement made during negotiations that is not binding; if false, it can only give rise to an action for misrepresentation.

Four tests distinguishing a term from a representation

1. Special knowledge or skill of the parties; 2. Oral statement reduced into writing; 3. Timing of the statement; 4. Importance attached to the statement.

Routledge v McKay (1954)

Held that if an oral statement made during negotiations is omitted from the final written agreement, the court infers it was intended as a mere representation rather than a binding term.

Re Selectmove Ltd (1995)

Affirmed that paying a lesser amount than what is owed, without providing additional consideration, does not discharge the full debt.

Hartley v Ponsonby (1857)

Established that performing duties significantly beyond existing contractual obligations discharges the original agreement and provides good consideration for a new promise.

Mountford v Scott (1975)

Confirmed that consideration must be sufficient but need not be adequate to make an option or promise legally binding.

Oscar Chess Ltd v Williams (1957)

Demonstrated that the relative expertise of the parties matters; an innocent misstatement by a non-expert to a specialist dealer was held to be a representation, not a term.