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39 Cards in this Set
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Harvey v Facey [1893] UKPC 1
Offer In order to amount to an offer it must be shown that the offeror had the intention to be bound: |
Harvey sent a Telegram to Facey which stated: -
"Will you sell us Bumper Hall Pen? Telegraph lowest cash price-answer paid;" Facey replied by telegram:- "Lowest price for Bumper Hall Pen £900." Harvey then replied:- "We agree to buy Bumper Hall Pen for the sum of nine hundred pounds asked by you. Please send us your title deed in order that we may get early possession." Held: The Privy Council held that there was no contract concluded between the parties. Facey had not directly answered the first question as to whether they would sell and the lowest price stated was merely responding to a request for information not an offer. There was thus no evidence of an intention that the telegram sent by Facey was to be an offer. |
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Carlill v Carbolic Smoke Ball co [1893] 1 QB 256
Offer In order to amount to an offer it must be shown that the offeror had the intention to be bound: Advertisements Advertisements are also generally invitations to treat: |
A Newspaper advert placed by the defendant stated:-
£100 reward will be paid by the Carbolic Smoke Ball Company to any person who contracts the influenza after having used the ball three times daily for two weeks according to the printed directions supplied with each ball... £1000 is deposited with the Alliance Bank, shewing our sincerity in the matter." Mrs Carlill purchased some smoke balls and used them according to the directions and caught flu. She sought to claim the stated £100 reward. The defendant raised the following arguments in defence: 1. The advert was a sales puff and lacked intent to be an offer. 2. It is not possible to make an offer to the world. 3. There was no notification of acceptance. 4. The wording was too vague to constitute an offer since there was no stated time limit as to catching the flu. 5. There was no consideration provided since the 'offer' did not specify that the user of the balls must have purchased them. Held: The Court of Appeal held that Mrs Carlill was entitled to the reward as the advert constituted an offer of a unilateral contract which she had accepted by performing the conditions stated in the offer. The court rejected all the arguments put forward by the defendants for the following reasons: 1. The statement referring to the deposit of £1,000 demonstrated intent and therefore it was not a mere sales puff. 2. It is quite possible to make an offer to the world. 3. In unilateral contracts there is no requirement that the offeree communicates an intention to accept, since acceptance is through full performance. 4. Whilst there may be some ambiguity in the wording this was capable of being resolved by applying a reasonable time limit or confining it to only those who caught flu whilst still using the balls. 5. The defendants would have value in people using the balls even if they had not been purchased by them directly. |
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Pharmaceutical Society of Great Britain v Boots [1953] 1 QB 401
Goods on display in shops Goods on display in shops are generally not offers but an invitation to treat. The customer makes an offer to purchase the goods. The trader will decide whether to accept the offer: |
Boots introduced the then new self service system into their shops whereby customers would pick up goods from the shelf put them in their basket and then take them to the cash till to pay. The Pharmaceutical Society of Great Britain brought an action to determine the legality of the system with regard to the sale of pharmaceutical products which were required by law to be sold in the presence of a pharmacist. The court thus needed to determine where the contract came into existence.
Held: Goods on the shelf constitute an invitation to treat not an offer. A customer takes the goods to the till and makes an offer to purchase. The shop assistant then chooses whether to accept the offer. The contract is therefore concluded at the till in the presence of a pharmacist. |
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Fisher v Bell [1961] 1 QB 394
Goods on display in shops Goods on display in shops are generally not offers but an invitation to treat. The customer makes an offer to purchase the goods. The trader will decide whether to accept the offer: |
The defendant had a flick knife displayed in his shop window with a price tag on it. Statute made it a criminal offence to 'offer' such flick knives for sale. His conviction was quashed as goods on display in shops are not 'offers' in the technical sense but an invitation to treat. The court applied the literal rule of statutory interpretation.
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Partridge v Crittenden (1968) 2 All ER 421
Advertisements Advertisements are also generally invitations to treat: |
The defendant placed an advert in a classified section of a magazine offering some bramble finches for sale. S.6 of the Protection of Birds Act 1954 made it an offence to offer such birds for sale. He was charged and convicted of the offence and appealed against his conviction.
Held: The defendant's conviction was quashed. The advert was an invitation to treat not an offer. The literal rule of statutory interpretation was applied. |
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Spencer v Harding Law Rep. 5 C. P. 561
Contract by Tender The request for tenders represents an invitation to treat and each tender submitted amounts to an offer unless the request specifies that it will accept the lowest or highest tender or other condition. If the request contains such a condition this will amount to an offer of a unilateral contract where acceptance takes place on performing the condition: |
The defendants advertised a sale by tender of the stock in trade belonging Eilbeck & co. The advertisement specified where the goods could be viewed, the time of opening for tenders and that the goods must be paid for in cash. No reserve was stated. The claimant submitted the highest tender but the defendant refused to sell to him.
Held: Unless the advertisement specifies that the highest tender would be accepted there was no obligation to sell to the person submitting the highest tender. The advert amounted to an invitation to treat, the tender was an offer, the defendant could choose whether to accept the offer or not. |
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Thornton v Shoe Lane Parking [1971] 2 WLR 585 Court of Appeal
Machines The machine represents the offer, the acceptance is inserting the money: |
The claimant was injured in a car park partly due to the defendant's negligence. The claimant was given a ticket on entering the car park after putting money into a machine. The ticket stated the contract of parking was subject to terms and conditions which were displayed on the inside of the car park. One of the terms excluded liability for personal injuries arising through negligence. The question for the court was whether the term was incorporated into the contract ie had the defendant brought it to the attention of the claimant before or at the time the contract was made. This question depended upon where the offer and acceptance took place in relation to the machine.
Held: The machine itself constituted the offer. The acceptance was by putting the money into the machine. The ticket was dispensed after the acceptance took place and therefore the clause was not incorporated into the contract. |
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Ramsgate Victoria Hotel v Montefoire (1866) LR 1 Ex 109
Termination of offers An offer may be terminated by: 1. Death of offeror or offeree 2. Lapse of time An offer will terminate after a reasonable lapse of time. What amounts to a reasonable period will depend on the circumstances. |
The defendant offered to purchase shares in the claimant company at a certain price. Six months later the claimant accepted this offer by which time the value of the shares had fallen. The defendant had not withdrawn the offer but refused to go through with the sale. The claimant brought an action for specific performance of the contract.
Held: The offer was no longer open as due to the nature of the subject matter of the contract the offer lapsed after a reasonable period of time. Therefore there was no contract and the claimant's action for specific performance was unsuccessful. |
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Dickinson v Dodds (1876) 2 Ch D 463
3. Revocation An offeror may revoke an offer at any time before acceptance takes place: |
The defendant offered to sell his house to the claimant and promised to keep the offer open until Friday. On the Thursday the defendant accepted an offer from a third party to purchase the house. The defendant then asked a friend to tell the claimant that the offer was withdrawn. On hearing the news, the claimant went round to the claimant's house first thing Friday morning purporting to accept the offer. He then brought an action seeking specific performance of the contract.
Held: The offer had been effectively revoked. Therefore no contract existed between the parties. There was no obligation to keep the offer open until Friday since the claimant had provided no consideration in exchange for the promise. The offeror is free to withdraw the offer at any time before acceptance takes place unless a deposit has been paid. |
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Errington v Errington Woods [1952] 1 KB 290 Court of Appeal
Revocation An offeror may revoke an offer at any time before acceptance takes place: This may not apply in unilateral offers where acceptance requires full performance: |
A father-in-law purchased a house for his son and daughter-in-law to live in. The house was put in the father's name alone. He paid the deposit as a wedding gift and promised the couple that if they paid the mortgage instalments, the father would transfer the house to them. The father then became ill and died. The mother inherited the house. After the father's death the son went to live with his mother but the wife refused to live with the mother and continued to pay the mortgage instalments. The mother brought an action to remove the wife from the house.
Held: The wife was entitled to remain in the house. The father had made the couple a unilateral offer. The wife was in course of performing the acceptance of the offer by continuing to meet the mortgage payments. Under normal contract principles an offer may be revoked at any time before acceptance takes place, however, with unilateral contracts acceptance takes place only on full performance. Lord Denning held that once performance had commenced the Mother was estopped from revoking the offer since it would be unconscionable for her to do so. Furthermore there was an intention to create legal relations despite it being a family agreement. |
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Hyde v Wrench (1840) 49 ER 132 Chancery Division (Decided by Lord Langdale MR)
Counter offer A counter offer is where an offeree responds to an offer by making an offer on different terms. This has the affect of destroying the original offer so that it is no longer open for the offeree to accept. |
The defendant offered to sell a farm to the claimant for £1,000. The claimant in reply offered £950 which the defendant refused. The claimant then sought to accept the original offer of £1,000. The defendant refused to sell to the claimant and the claimant brought an action for specific performance.
Held: There was no contract. Where a counter offer is made this destroys the original offer so that it is no longer open to the offeree to accept. |
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Entorres v Miles Far East [1955] 2 QB 327 Court of Appeal
Acceptance Once valid acceptance takes place a binding contract is formed. It is therefore important to know what constitutes a valid acceptance in order to establish if the parties are bound by the agreement. There are three main rules relating to acceptance: 1. The acceptance must be communicated to the offeree. 2. The terms of the acceptance must exactly match the terms of the offer. 3. The agreement must be certain. 1. Communication The general rule is that the offeror must receive the acceptance before it is effective: |
The claimant sent a telex message from England offering to purchase 100 tons of Cathodes from the defendants in Holland. The defendant sent back a telex from Holland to the London office accepting that offer. The question for the court was at what point the contract came into existence. If the acceptance was effective from the time the telex was sent the contract was made in Holland and Dutch law would apply. If the acceptance took place when the telex was received in London then the contract would be governed by English law.
Held: To amount to an effective acceptance the acceptance needed to be communicated to the offeree. Therefore the contract was made in England. |
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Felthouse v Bindley [1862] EWHC CP J35 Court of Common Pleas
The general rule is that the offeror must receive the acceptance before it is effective: Silence will not amount to acceptance: |
A nephew discussed buying a horse from his uncle. He offered to purchase the horse and said if I don't hear from you by the weekend I will consider him mine. The horse was then sold by mistake at auction. The auctioneer had been asked not to sell the horse but had forgotten. The uncle commenced proceedings against the auctioneer for conversion. The action depended upon whether a valid contract existed between the nephew and the uncle.
Held: There was no contract. You cannot have silence as acceptance. |
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Brogden v Metropolitan Railway (1877) 2 App. Cas. 666
Acceptance can be through conduct: |
The claimants were the suppliers of coal to the defendant railway company. They had been dealing for some years on an informal basis with no written contract. The parties agreed that it would be wise to have a formal contract written. The defendant drew up a draft contract and sent it to the claimant. The claimant made some minor amendments and filled in some blanks and sent it back to the defendant. The defendant then simply filed the document and never communicated their acceptance to the contract. Throughout this period the claimants continued to supply the coal. Subsequently a dispute arose and it was questioned whether in fact the written agreement was valid.
Held: The written contract was valid despite no communication of the acceptance. The acceptance took place by performing the contract without any objection as to the terms. |
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Butler Machine Tool v Ex-Cell-O Corporation [1979] 1 WLR 401 Court of Appeal
Acceptance can be through conduct: |
Ex-Cell-O wished to purchase a machine from Butler. Butler sent out a quotation of £75,535 along with a copy of their standard terms of sale. The terms included a price variation clause and a term that the seller's terms would prevail over any terms submitted by a purchaser. The machine would be delivered in 10 months. Ex-Cell-O put in an order for the machine at the stated price and sent a set of their terms which did not include the price variation clause. The order contained an acknowledgement slip which required a signature by Butler and was to be returned to Ex-Cell-O. This slip stated that the contract would be subject to the terms stated overleaf. Butler duly signed the slip and returned it. The machines were then delivered and Butler sought to enforce the price variation clause and demanded an extra £2,893. Ex-Cell-O refused to pay.
Held: The offer to sell the machine on terms provided by Butler was destroyed by the counter offer made by Ex-Cell-O. Therefore the price variation clause was not part of the contract. The contract was concluded on Ex-Cell-O's terms since Butler signed the acknowledgement slip accepting those terms. Where there is a battle of the forms whereby each party submits their own terms the last shot rule applies whereby a contract is concluded on the terms submitted by the party who is the last to communicate those terms before performance of the contract commences. |
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Adams v Lindsell (1818) 106 ER 250
The postal rule Where it is agreed that the parties will use the post as a means of communication the postal rule will apply. The postal rule states that where a letter is properly addressed and stamped the acceptance takes place when the letter is placed in the post box: |
The defendant wrote to the claimant offering to sell them some wool and asking for a reply 'in the course of post'. The letter was delayed in the post. On receiving the letter the claimant posted a letter of acceptance the same day. However, due to the delay the defendant's had assumed the claimant was not interested in the wool and sold it on to a third party. The claimant sued for breach of contract.
Held: There was a valid contract which came in to existence the moment the letter of acceptance was placed in the post box. This case established the postal rule. This applies where post is the agreed form of communication between the parties and the letter of acceptance is correctly addressed and carries the right postage stamp. The acceptance then becomes effective when the letter is posted. |
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Hyde v Wrench (1840) 49 ER 132 Chancery Division (Decided by Lord Langdale MR)
The terms of the acceptance must exactly match the terms of the offer. If the terms differ this will amount to a counter offer and no contract will exist: |
The defendant offered to sell a farm to the claimant for £1,000. The claimant in reply offered £950 which the defendant refused. The claimant then sought to accept the original offer of £1,000. The defendant refused to sell to the claimant and the claimant brought an action for specific performance.
Held: There was no contract. Where a counter offer is made this destroys the original offer so that it is no longer open to the offeree to accept. |
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Balfour v Balfour [1919] 2 KB 571
Intention to create legal relations in social and domestic agreements In social and domestic agreements the law raises a presumption that the parties do not intend to create legal relations: |
A husband worked overseas and agreed to send maintenance payments to his wife. At the time of the agreement the couple were happily married. The relationship later soured and the husband stopped making the payments. The wife sought to enforce the agreement.
Held: The agreement was a purely social and domestic agreement and therefore it was presumed that the parties did not intend to be legally bound. |
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Errington v Errington Woods [1952] 1 KB 290 Court of Appeal
In social and domestic agreements the law raises a presumption that the parties do not intend to create legal relations: This presumption may be rebutted by evidence to the contrary. This evidence may consist of: A written agreement: |
A father-in-law purchased a house for his son and daughter-in-law to live in. The house was put in the father's name alone. He paid the deposit as a wedding gift and promised the couple that if they paid the mortgage instalments, the father would transfer the house to them. The father then became ill and died. The mother inherited the house. After the father's death the son went to live with his mother but the wife refused to live with the mother and continued to pay the mortgage instalments. The mother brought an action to remove the wife from the house.
Held: The wife was entitled to remain in the house. The father had made the couple a unilateral offer. The wife was in course of performing the acceptance of the offer by continuing to meet the mortgage payments. Under normal contract principles an offer may be revoked at any time before acceptance takes place, however, with unilateral contracts acceptance takes place only on full performance. Lord Denning held that once performance had commenced the Mother was estopped from revoking the offer since it would be unconscionable for her to do so. Furthermore there was an intention to create legal relations despite it being a family agreement. |
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Merritt v Merritt [1970] 1 WLR 1211 Court of Appeal
In social and domestic agreements the law raises a presumption that the parties do not intend to create legal relations: This presumption may be rebutted by evidence to the contrary. This evidence may consist of: Where the parties have separated: |
A husband left his wife and went to live with another woman. There was £180 left owing on the house which was jointly owned by the couple. The husband signed an agreement whereby he would pay the wife £40 per month to enable her to meet the mortgage payments and if she paid all the charges in connection with the mortgage until it was paid off he would transfer his share of the house to her. When the mortgage was fully paid she brought an action for a declaration that the house belonged to her.
Held: The agreement was binding. The Court of Appeal distinguished the case of Balfour v Balfour on the grounds that the parties were separated. Where spouses have separated it is generally considered that they do intend to be bound by their agreements. The written agreement signed was further evidence of an intention to be bound. |
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In contract law consideration is concerned with the bargain of the contract. A contract is based on an exchange of promises. Each party to a contract must be both a promisor and a promisee. They must each receive a benefit and each suffer a detriment. This benefit or detriment is referred to as consideration.
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Consideration must be something of value in the eyes of the law - (Thomas v Thomas) (1842) 2 QB 851. This excludes promises of love and affection, gaming and betting etc. A one sided promise which is not supported by consideration is a gift. The law does not enforce gifts unless they are made by deed.
Whilst the common law strictly adheres to the requirement of consideration (although in some instances the courts seem to go to some lengths to invent consideration eg Ward v Byham [1956] 1 WLR 496, Williams v Roffey Bros [1990] 2 WLR 1153) equity will, in some instances, uphold promises which are not supported by consideration through the doctrine of promissory estoppel. |
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Rules of consideration
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There are various rules governing the law of consideration:
1. The consideration must not be past. 2. The consideration must be sufficient but need not be adequate. 3. The consideration must move from the promisee. 4. An existing public duty will not amount to valid consideration. 5. An existing contractual duty will not amount to valid consideration. 6. Part payment of a debt is not valid consideration for a promise to forego the balance. |
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Re McArdle (1951) Ch 669 Court of Appeal
Consideration must not be past: |
Majorie McArdle carried out certain improvements and repairs on a bungalow. The bungalow formed part of the estate of her husband's father who had died living the property to his wife for life and then on trust for Majorie's husband and his four siblings. After the work had been carried out the brothers and sisters signed a document stating in consideration of you carrying out the repairs we agree that the executors pay you £480 from the proceeds of sale. However, the payment was never made.
Held: The promise to make payment came after the consideration had been performed therefore the promise to make payment was not binding. Past consideration is not valid. |
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Lampleigh v Braithwaite [1615] EWHC KB J17
Consideration must not be past: Past consideration may be valid where it was proceeded by a request: |
The defendant had killed a man and was due to be hung for murder. He asked the claimant to do everything in his power to obtain a pardon from the King. The claimant went to great efforts and managed to get the pardon requested. The defendant then promised to pay him £100 for his efforts but never paid up.
Held: Whilst the promise to make payment came after the performance and was thus past consideration, the consideration was proceeded by a request from the defendant which meant the consideration was valid. The defendant was obliged to pay the claimant £100. |
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Chappel v Nestle [1960] AC 87 House of Lords
Consideration must be sufficient but need not be adequate: There is no requirement that the consideration must be market value, providing something of value is given eg £1 given in exchange for a house would be valid. The courts are not concerned with whether the parties have made a good or bad bargain: |
Nestle ran a sales promotion whereby if persons sent in 3 chocolate bar wrappers and a postal order for 1 shilling 6d they would be sent a record. Chappel owned the copyright in one of the records offered and disputed the right of Nestle to offer the records and sought an injunction to prevent the sales of the records which normally retailed at 6 shillings 8d. Under s.8 of the Copyright Act 1956 retailers were protected from breach of copyright if they gave notice to the copyright holders of the ordinary retail selling price and paid them 6.25% of this. Nestle gave notice stating the ordinary selling price was the 1 shilling 6d and three chocolate bar wrappers. The question for the court was whether the chocolate bar wrappers formed part of the consideration. If they did it was impossible to ascertain the value they represented and therefore Nestle would not have complied with their obligation to give notice of the ordinary retail selling price. If the wrappers were a mere token or condition of sale rather than constituting consideration, then the notice would be valid and Nestle could sell the records.
Held: The wrappers did form part of the consideration as the object was to increase sales and therefore provided value. The fact that the wrappers were simply to be thrown away did not detract from this. Therefore Chappel were granted the injunction and Nestle could not sell the records as they had not complied with the notice requirements under s.8. |
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Tweddle v Atkinson [1861] EWHC QB J57 Queen's Bench Division
Consideration must move from the promisee If a person other than the promisee is to provide the consideration, the promisee can not enforce the agreement: |
A couple were getting married. The father of the bride entered an agreement with the father of the groom that they would each pay the couple a sum of money. The father of the bride died without having paid. The father of the son also died so was unable to sue on the agreement. The groom made a claim against the executor of the will.
Held: The claim failed: The groom was not party to the agreement and the consideration did not move from him. Therefore he was not entitled to enforce the contract. |
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Collins v Godefrey (1831) 1 B & Ad 950 King's Bench Division
An existing public duty will not amount to valid consideration Where a party has a public duty to act, this can not be used as consideration for a new promise: |
The claimant, Collins, had been subpoenaed to attend court as a witness in separate court case involving the defendant, Godefrey. Godefrey had sued his attorney for malpractice and Collins was required by the court to attend as an expert witness. In fact Collins never gave evidence but was required to be on standby for six days in case he was called. After the trial Collins gave Godefrey an invoice to cover his time spent at court and demanded payment by the next day. Without giving him the full day to pay, Collins commenced an action to enforce payment.
Held: Collins was under a public duty to attend court due to the subpoena. Where there exists an existing public duty this can not be used as consideration for a new promise. Godefrey was not required to pay him. |
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Glasbrook Bros v Glamorgan County Council [1925] AC 270 House of Lords
An existing public duty will not amount to valid consideration Where a party has a public duty to act, this can not be used as consideration for a new promise:Unless the promisor goes beyond their duty: |
The defendant owners of a colliery asked the police to provide protection during a miner's strike. The police provided the protection as requested and provided the man power as directed by the defendants although they disputed the level of protection required to keep the peace. At the end of the strike the police submitted an invoice to cover the extra costs of providing the protection. The defendants refused to pay arguing that the police were under an existing public duty to provide protection and keep the peace.
Held 3:2 decision: In providing additional officers to that required, the police had gone beyond their existing duty. They were therefore entitled to payment. |
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Ward v Byham [1956] 1 WLR 496 Court of Appeal
An existing public duty will not amount to valid consideration Where a party has a public duty to act, this can not be used as consideration for a new promise:Unless the promisor goes beyond their duty: |
An unmarried couple had a child together and lived together for five years. The father then turned the mother out of the house and sent the child to live with a neighbour and the father paid the neighbour £1 per week. The mother then got a job as a live in house keeper and wished to have the daughter live with her. The father agreed to allow the daughter live with the mother and agreed to pay her £1 per week provided she ensured the child was well looked after and happy. The father made payments but then when the mother remarried he stopped making payments. The mother brought an action to enforce the agreement. The father argued that the Mother was under an existing legal duty to look after and maintain the child and therefore was not providing any consideration for the promise to make payment.
Held: By promising to ensure the child was well looked after and happy she had gone beyond her existing legal duty and therefore had provided consideration. She was entitled to the payment. |
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Stilk v Myrick [1809] EWHC KB J58 King's Bench Division
An existing contractual duty will not amount to valid consideration If a party has an existing contractual duty to do an act, this act can not be used as consideration for a new promise: |
The claimant was a seaman on a voyage from London to the Baltic and back. He was to be paid £5 per month. During the voyage two of the 12 crew deserted. The captain promised the remaining crew members that if they worked the ship undermanned as it was back to London he would divide the wages due to the deserters between them. The claimant agreed. The captain never made the extra payment promised.
Held: The claimant was under an existing duty to work the ship back to London and undertook to submit to all the emergencies that entailed. Therefore he had not provided any consideration for the promise for extra money. Consequently he was entitled to nothing. |
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Hartley v Ponsonby [1857] 7 EB 872
An existing contractual duty will not amount to valid consideration If a party has an existing contractual duty to do an act, this act can not be used as consideration for a new promise: Unless the party goes beyond their existing duty: |
Half of a ship's crew deserted on a voyage. The captain promised the remaining crew members extra money if they worked the ship and completed the voyage. The captain then refused to pay up.
Held: The crew were entitled to the extra payment promised on the grounds that either they had gone beyond their existing contractual duty or that the voyage had become too dangerous frustrating the original contract and leaving the crew free to negotiate a new contract. |
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Williams v Roffey Bros [1990] 2 WLR 1153
An existing contractual duty will not amount to valid consideration If a party has an existing contractual duty to do an act, this act can not be used as consideration for a new promise: or if they confer a practical advantage: |
The defendants were building contractors who entered an agreement with Shepherds Bush Housing Association to refurbish a block of 27 flats. This contract was subject to a liquidated damages clause if they did not complete the contract on time. The defendants engaged the claimant to do the carpentry work for an agreed price of £20,000. 6 months after commencing the work, the claimant realised he had priced the job too low and would be unable to complete at the originally agreed price. He approached the defendant who had recognised that the price was particularly low and was concerned about completing the contract on time. The defendant agreed to pay the claimant an additional £575 per flat. The claimant continued work on the flats for a further 6 weeks but only received an additional £500. He then ran out of money and refused to continue unless payment was made. The defendant engaged another carpenter to complete the contract and refused to pay the claimant the further sums promised arguing that the claimant had not provided any consideration as he was already under an existing contractual duty to complete the work.
Held: Consideration was provided by the claimant conferring a benefit on the defendant by helping them to avoid the penalty clause. Therefore the defendant was liable to make the extra payments promised. |
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Pinnel's Case 1602 5 Rep, 117 Court of Common Pleas
Part payment of a Debt Part payment of a debt is not valid consideration for a promise to release the debt in full: Part payment of a debt is not valid consideration for a promise to forebear the balance unless at the promisor's request part payment is made: a). before the due date b). with a chattel c). to a different destination |
Pinnel's Case 1602 5 Rep, 117 Court of Common Pleas
The claimant was owed £8 10 shillings. The defendant paid £5 2 shillings and 2p. The claimant sued for the amount outstanding. Held: The claimant was entitled to the full amount even if they agreed to accept less. Part payment of a debt is not valid consideration for a promise to forebear the balance unless at the promisor's request part payment is made either: a). before the due date or b). with a chattel or c). to a different destination |
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Foakes v Beer (1883-84) LR 9 App Cas 605 House of Lords
Part payment of a debt is not valid consideration for a promise to forebear the balance unless at the promisor's request part payment is made: a). before the due date b). with a chattel c). to a different destination This rule from Pinnel's case was affirmed by the House of Lords in: |
Dr Foakes owed Mrs Beer £2,000 after she had obtained judgment against him in an earlier case. Dr Foakes offered to pay £500 immediately and the rest by instalments, Mrs Beer agreed to this and agreed she would not seek enforcement of the payment provided he kept up the instalments. No mention was made in this agreement of interest although judgment debts generally incurred interest. Dr Foakes paid all the instalments as agreed and Mrs Beer then brought an action for the interest.
Held: Dr Foakes was liable to pay the interest. The agreement reached amounted to part payment of a debt and under the rule in Pinnel's case this was not good consideration for a promise not to enforce the full amount due. |
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Hirachand Punamchand v Temple [1911] 2 KB 330 Court of Appeal
Part payment of a Debt Where part payment is made by a third party: Further exceptions to the rule in Pinnel's case: |
The claimants were money lenders in India. They lent money to the defendant Lieutenant Temple who was an army officer serving in India. The claimants sought return of the money from the claimant but were unable to get any response so they contacted his father. Some correspondence went between the claimant and the father's solicitors. The claimants asked how much the father would be prepared to pay to settle the son's accounts. An amount was agreed which was a substantial, amount although not the full amount due. The claimant promised to send the promissory note relating to the son's debt to the father once they received payment. The father paid, but the claimant retained the promissory note and sued the son to enforce the balance.
Held: The payment made by the father was sufficient to discharge the full balance. Where the person making payment in return for discharging the debt owed by another this will amount to good consideration as the existing duty to make payment was not owed by them but a third party. |
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Promissory estoppel
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Promissory estoppel is an equitable doctrine which in some instances can stop a person going back on a promise which is not supported by consideration. Promissory estoppel was developed by an obiter statement by Denning J (as he then was) in Central London Property Trust Ltd v High Trees Ltd [1947] KB 130 (Case summary). Denning J based the doctrine on the decision in Hughes v Metropolitan Railway (1876-77) L.R. 2 App. Cas. 439 (Case summary). The House of Lords affirmed the existence of promissory estoppel in contract law in Tool Metal Manufacturing v Tungsten [1955] 1 WLR 761 (Case summary).
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Central London Property Trust v High Trees House [1947] KB 130 High Court
Promissory estoppel was developed by an obiter statement by Denning J |
High Trees leased a block of flats from CLP at a ground rent of £2,500. It was a new block of flats at the time the lease was taken out in 1937. The defendant had difficulty in getting tenants for all the flats and the ground rent left High Trees with no profit. In 1940 many of the flats were still unoccupied and with the conditions of the war prevailing, it did not look as if there was to be any change to this situation in the near future. CLP agreed to reduce the rent to £1,250 during the war years. The agreement was put in writing and High Trees paid the reduced rent from 1941. When the war was over the flats became fully occupied and the claimant sought to return to the originally agreed rent.
Held: The rent would be returned to the originally agreed price for the future only. CLP could not claim back the arrears accrued during the war years. This case is important as Denning J (as he then was) established the doctrine of promissory estoppel. Promissory estoppel prevented CLP going back on their promise to accept a lower rent despite the fact that the promise was unsupported by consideration. Denning J "In my opinion, the time has now come for the validity of such a promise to be recognised. The logical consequence, no doubt is that a promise to accept a smaller sum in discharge of a larger sum, if acted upon, is binding notwithstanding the absence of consideration" |
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Hughes v Metropolitan Railway (1876-77) LR 2 App Cas 439 House of Lords
Denning J based the doctrine of promissory estoppel on the decision |
A landlord gave a tenant 6 months notice to carry out repairs failure to do so would result in forfeiture of the lease. The landlord and tenant then entered into negotiations for the tenant to purchase the freehold of the property. It was thought by both parties that a conveyance of the property would take place. The tenant had not carried out the repairs as they believed they would be purchasing the freehold and the repairs required by the landlord were not essential to his use of the property. At the last minute negotiations broke down and the Landlord gave the tenant notice to quit for failure to carry out the repairs.
Held: The time limit imposed for carrying out the repairs was suspended during the negotiations. Lord Cairns CJ:- "It is the first principle upon which all Courts of Equity proceed, that if parties who have entered into definite and distinct terms involving certain legal results - certain penalties or legal forfeiture - afterwards by their own act or with their own consent enter upon a course of negotiation which has the effect of leading one of the parties to suppose that the strict rights arising under the contract will not be enforced, or will be kept in suspense, or held in abeyance, the person who otherwise might have enforced those rights will not be allowed to enforce them where it would be inequitable having regard to the dealings which have thus taken place between the parties." |
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Combe v Combe [1951] 2 KB 215 Court of Appeal
Requirements of promissory estoppel: A pre-existing contractual or legal obligation which is then modified: |
A husband promised to make maintenance payments to his estranged wife but failed to do so. The wife brought an action to enforce the promise invoking promissory estoppel.
Held: Her action failed. There was no pre-existing agreement which was later modified by a promise. The wife sought to use promissory estoppel as sword and not a shield. |
