公司法和商法(双语)讲义 第7章Corporate and Business Law Chapter 7

7 Consideration

1 Definitions

1.1 It is the element of value in the agreement.

1.2 Both parties must bring something of value to the agreement.

1.3 E.g. A sells B a car for £1. A and B are both providing value.

1.4 ‘An act or forbearance of one party o r the promise thereof is the price for which the promise of the

other is bought and the promise thus given for value is enforceable’: Dunlop v Selfridge.

2 Rules of consideration

Overview

RULES OF CONSIDERATION

Executed Executory Past

2.1 Must be provided by both parties (unless in the form of deed).

2.2 (a) May be executed: an act in return for a promise.

(b) Executory: a promise given for a promise.

(c) Must not be in the past: Re McArdle.

An exception is where there is an implied promise to pay : Lampleigh v Braithwait.

Privity of contract

2.3 Only a party to a contract may sue on that contract –'Privity of Contract'. Dunlop v. Selfridge.

There are a number of exceptions:

(a) persons entitled to benefit under third party motor insurance can sue the insurer directly:

Road Traffic Act 1972.

(b) a principal where his agent was the party entering into the contract.

(c) a special relationship exists between the parties (eg acting as executor of a deceased's

estate).

(d) where there has been an assignment of the benefit of the contract. The burden can only be

assigned with the consent of the other party.

2.4 Also be aware of Contracts (Rights of Third Parties) Act 1999.

This has a fundamental effect on the rule of privity of contract and sets out the circumstances in

which a third party may enforce a contract term.

(a) the third party must be expressly identified in the contract.

(b) the contract must give an express or implied right to the third party to enforce the term.

3 Doctrine of consideration

Overview

CONSIDERATION NEED NOT BE ADEQUATE BUT MUST BE SUFFICIENT

INSUFFICIENT CONSIDERATION DEFINED AS:

Performance of

existing contractual Exceptions

obligation

3.1 Need not be adequate, but must be sufficient: Chappell v Nestle.

3.2 The law defines what will be insufficient.

(a) Performance of an existing legal or contractual obligation is insufficient consideration

to support a promise of additional reward Stilk v Myrick unless:

(i) More than existing duties are performed Hartley v Ponsonby; or

(ii) Both parties derive a benefit, provided no duress or fraud Williams v Roffey Bros & Nicholls (Contractors) Ltd.

(b) Partial performance of an estimating legal or contractual obligation is insufficient consideration

to support a waive of contractual or legal rights.