Contract law: Consideration, privity and intent

Consideration

Both parties must gain and lose something

Curie v Misa

Extent of value of goods

Must be adequate but not sufficient

Chappell v Nestle

When is consideration invalid

Past consideration is no consideration - Re McArdle

Pre existing duty - Glasbrook Bros

Exception to invalid consideration

Consideration is valid if payment is expected

Casey’s patent case

Where must consideration come from

Must come from the promise

Tweedle v Atkinson

Pre existing duty cannot be used as new consideration

Unless extra duties are added

Glasbrook Bros

Payment of debt

Part payment of a debt is not valid consideration

Exception - Foakes v Beer

Privity definition

A contract cannot infer or impose on the rights of a third party

Dunlop v Selfridges

Issue with privity definition

Does not include acting on people’s behalf e.g. agents

Exceptions to privity

• Unreasonability - Jackson v Horizon Holidays

• Collateral contracts, Court may be able to find a 2nd agreement - Shanklin Pier v Detel ltd

Contract ( rights of a third party) Act 1999

A third party may enforce the contract if:

• If they are expressly identified

• If contract expressly states a 3rd party can enforce it

• Contract created to benefit the 3rd party

Example - Beswick v Beswick

Business agreements

Intention to create legal relations is presumed - Jones v Vernon pools

Burden of proof is to establish that there is no legal intention

Difficulties occurs with gifts

Domestic agreements

Presumed to not be legally binding

If financial security is put at risk then deemed intended to be legally binding - Parker + Clarke

Consideration plan

Consideration

• Def - where both parties lose and gain something from a contract - Curie v Misa

• Must be sufficient but not adequate - Chappell v Nestle

Not consideration

• Past con is no con - Re McArdle, can be valid if payment is expected before act - Re Casey’s patent

• Cannot sue for breach unless have provided valid consideration - Tweedle v Atkinson

• Pre existing duty is no con, unless extras are added - Glasbrook Bros

• Part payment of a debt not usually con - Foakes v Beer

Privity plan

Main rule - 3rd parties cannot impose or have obligations imposed on them - Dunlop v Selfridge

Exceptions - Agencies, Reasonability - Jackson v Horizon Holidays, Collateral contracts - Shanklin pier v Detel

Contracts (rights of 3rd party) Act S.1 - 3rd parties can enforce contract if: identified in contract, explicitly states that they can, contract is for their benefit - Beswick v Beswick

Intent plan

Business agreements

• Presumed to be legally binding

• Jones v Vernon pools

• Likely business agreement if financial security is at risk - Parker v Clarke

Middle ground

• Must prove that there was intent - Sadler v Reynolds

Domestic

• Presumed no intention to be legally binding - Meritt v Meritt

• Still could be - Balfour v Balfour

Middle ground

Could be either domestic or business relations

Must prove that there was intent

Sadler v Reynolds