Contract law

There are numerous definitions of consideration in legal texts, one being “‘A valuable consideration, in the sense of 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”. In relation to Rent a Tents contract with Susie the terms of the contract are that in return for Rent a Tent providing a marquee for the birthday weekend Susie will pay ? 2,000.

This is a binding contract as the several requirements to make a binding contract are, offer and acceptance, intention to create legal relations and consideration. ‘. However Rent a Tent then approached Susie and seeked to change the agreement and increase the cost of hire of the marquee to ? 2,500 to which Susie reluctantly agreed. Can this be considered economic duress? Lord Scarman stated “The classic case of duress is, however, not the lack of will to submit but the victim’s intentional submission arising from the realisation that there is no other practical choice open to him. “

It needs to be considered whether this is a new binding agreement and if the variation of the price is supported by sufficient consideration. ‘Sufficient’ does not mean that consideration needs to be adequate … ‘. The benefit or detriment need not be equivalent in value to that which is received in return…the point is that the benefit or detriment must be ‘legally sufficient’ in the sense that the law recognizes that benefit or detriment as constituting consideration, but its value is irrelevant. If both parties merely perform an existing contractual duty in return for a promise then consideration is not sufficient.

Here it would appear that Rent a Tent are merely performing their duty to provide a marquee and that Susie is paying extra for this so is not getting any benefit for the extra payment that she has agreed to make. There appears to be no practical benefit to the promisor, for paying the ? 500 on top of the already agreed ? 2000. The promisee however is gaining without detriment which is not considered good consideration. The agreement is therefore not binding as Rent a Tent had an existing duty to provide a marquee.

If however it can be shown that the promise was freely made and that Susie was receiving an objective benefit, or obviating a detriment, for the payment she agreed to make, the agreement will be supported by consideration and will be binding. The Court of Appeal held that it would be more ready to construe someone performing essentially what they were bound to do before as giving consideration for the new deal if they conferred a “practical benefit” on the other side. This essentially followed an earlier judgment. This principle will not apply here as the promise of extra payment was not freely given and there was no ‘practical benefit’.

When Rent a Tent upped their price by ? 500 there was no mutual interest or benefit for both parties, only for Rent a Tent. It was suggested by Rent a Tent rather than offered by Susie, so Susie does not owe Rent a Tent the extra ? 500. The fact that Rent a Tent asked for more money to complete an already existing contractual duty means that it will not amount to good consideration. If Rent a Tent had agreed to exceed their contractual duty in return for extra payment then the agreement would be binding as it would be supported by consideration.

However this does not apply here as a new binding contract was made with fresh consideration. Susie can be considered to have made the promise freely, resulting in the original contract being overruled and a new binding contract taking its place. This could mean that Susie would be entitled to pay Rent a Tent the full amount of ? 2500. After the party Susie tells Rent a Tent that she will only pay ? 1,800. Rent a Tent agrees to accept this figure in settlement of the debt of ? 2500.

Susie is only partly paying the debt.‘payment of a lesser sum on the day in satisfaction of a greater, cannot be any satisfaction for the whole, because it appears to the Judges that by no possibility, a lesser sum can be a satisfaction to the plaintiff for a greater sum: but the gift of a horse, hawk, or robe, etc. in satisfaction is good… [as] more beneficial to the plaintiff than the money. ’ . The rule in Pinnel’s case states that debts are payable in full unless consideration is given, i. e. payment in a different form, at an earlier time, at a different place if at the debtor’s request. It is necessary to advise Susie if she has given any consideration.

She has paid a lesser amount in satisfaction of a greater amount and Rent a Tent does not appear to have received any benefit. Under the rule in Pinnel’s case the balance of the debt remains due i. e. ?700 as the agreement was supported by consideration. Rent a Tent should try to claim the balance of the money that is owed from Susie and she may seek to use the defence of Promissory Estoppel. Promissory estoppel can only be used as a defence to a cause of action. It can be used as both a shield and a sword. To be able to use the defence of promissory estoppel Susie should be advised that she must establish the following criteria:

(1) the promise was clear and definite; (2) the promisee justifiably relied on the promise; (3) the promisee’s reliance was substantial and of a definite character; and (4) enforcing the promise will serve the best interests of justice. On the basis of the criteria as set out above, Rent a Tent has agreed to enforce its strict legal rights, it has agreed to accept less. However, the promise was given freely by Rent a Tent, it was given reluctantly, believing that they had better accept this as they would be unlikely to receive any more.

However a promise by a creditor to accept a smaller amount in discharge of a larger amount is not binding and the creditor can still sue for the full amount of debt. Therefore it would be inequitable for Rent a Tent to go back on their promise. Susie would therefore not be able to successfully plead promissory Estoppel as a defence to a claim for the balance of the money which Rent a Tent say are due. Rent a Tent reluctantly agreed to accept the ? 1800 under duress under the impression they would receive no more. They didn’t intend for it to become a binding promise.

The advice to Susie therefore is that Rent a Tent will be able to claim the balance of the monies due, i. e. ?700. In relation to Billy, he owes Susie ? 350. Billy agreed to perform in return for not having to pay the ? 350. Susie should be advised whether this is a binding contract supported by consideration ‘The general rule is that an executory agreement, by which the plaintiff agrees to do something on the terms that the defendant agrees to do something else, may be enforced if what the plaintiff has agreed to do is either for the benefit of the defendant or to the trouble or prejudice of the plaintiff.

Billy owes a debt to Susie and under the rule in Williams and Roffey an agreement to pay a debt is not binding as there is sufficient consideration. If a debt is being paid later, at a differing time or place, or form at the request of the debtor this can be consideration Here Susie is requesting Billy to repay his debt in a differing form and to perform for the evening. Valuable consideration means that what is offered in exchange for a promise must have an economic value but that the value of the promise does not have to be equal.

Sir Frederick Pollock stated “An act or forbearance of one party, or the promise thereof, is the price for which the promise of the other is bought, and the promise thus given for value is enforceable. ” This means that although the cost of Billy’s performance would of cost less, the promise of his performance is of equal value. It does not matter that Billy would only have charged ? 100, whereas he owes Susie ? 350, as consideration must be something of value.

——————————————– [ 1 ]. R Taylor and D Taylor, Contract Law Directions (3rd edition, Oxford 2012) [ 2 ]. Currie v Misa (1875) LR 10 Ex 153. [ 3 ]. North Ocean Shipping v Hyundai Construction (The Atlantic Baron) [1979] QB 705 [ 4 ]. R Taylor and D Taylor, Contract Law Directions (3rd edition, Oxford 2012) [ 5 ]. R Taylor and D Taylor, Contract Law Directions (3rd edition, Oxford 2012) [ 6 ]. Stilk v Myrick(1809) Camp 317 [ 7 ]. Stilk v Myrick(1809) Camp 317 [ 8 ].

Williams v Roffey Bros & Nicholls(Contractors) Ltd [1990] 1 All ER 512 [ 9 ]. Denning LJ in Ward v Byham [1956] 1 WLR 496 [ 10 ]. Stilk v Myrick (1809) Camp 317 [ 11 ]. Pinnel’s case (1602) 5 Co. Rep. 117a [ 12 ]. Central London Property Trust Ltd v High Trees Ltd [1947] KB 130 [ 13 ]. Combe v Combe [1951] 2 KB 215 [ 14 ]. R Taylor and D Taylor, Contract Law Directions (3rd edition, Oxford 2012) [ 15 ]. D & C Builders v Rees [1966] 2 WLR 28 [ 16 ]. Bolton v Madden (1873) LR 9 QB 55 [ 17 ]. Dunlop v Selfridge Ltd [1915] AC 847.

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