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CONSIDERATION                                      LIST OF CASES  1. Currie v Misa (1875) LR 10 Ex 153; (1875-76) LR 1 App...
Currie v Misa (1875) LR 10 Ex 153; (1875-76) LR 1 App Cas 554FactsA company named Lizardi& Co, then in good credit in the ...
Dunlop v Selfridge Ltd [1915] AC 847FactsDunlop sued its tyre retailer, New Garage, for breaching an agreement to not rese...
On the contrary, that is just the situation when it is probable that pre-estimated damage was thetrue bargain between the ...
Re Caseys Patents; Stewart v Casey[1892] 1 Ch. 104, Chancery DivisionFactsThe holders of letters patent employed Casey to ...
Lampleigh v Braithwait (1615) Hob 105FactsBraithwait killed someone and then asked Lampleigh to get him a pardon. Lampleig...
Pao On v Lau Yiu Long [1980] AC 614FactsFu Chip Investment Co Ltd, a newly public company majority owned by Yiu-Long Lau a...
to him such as an adequate legal remedy; whether he was independently advised; and whetherafter entering the contract he t...
Price v Easton (1833)Easton made a contract with X that in return for X doing work for him, Easton would pay Price£19. X d...
Alliance Bank v Broom (1864)2 Dr&Sm 289FactsThe defendant owed an unsecured debt to the plaintiffs. When the plaintiffs as...
Collins v Godefroy [1831] 109 ER 1040FactsPlaintiff sued to recover compensation for loss of time in attending court as a ...
Glasbrook Bros Ltd v Glamorgan County Council [1925] AC 270 House of LordsFactsDuring the 1921 coal strike, miners were in...
Stilk v Myrick (1809) Kings BenchFactsPlaintiff was employed as a seaman under articles at £5 per month. On a voyage from ...
Hartley v Ponsonby (1857) 119 ER 1471 Queens BenchFactsPlaintiff was a seaman on a ship sailing from UK to Bombay and earn...
Scotson v Pegg (1861)6 H & N 295FactsScotson contracted to deliver coal to X, or to Xs order. X sold the coal to Pegg and ...
Combe v Combe [1951] 1 All ER 767, CAFactsW was granted a divorce nisi from her husband H. H promised to allow her £100 pe...
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Lecture 3 consideration - cases

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Lecture 3 consideration - cases

  1. 1. CONSIDERATION LIST OF CASES 1. Currie v Misa (1875) LR 10 Ex 153; (1875-76) LR 1 App Cas 554 2. Dunlop v Selfridge Ltd [1915] AC 847 3. Re Caseys Patents; Stewart v Casey[1892] 1 Ch. 104, Chancery Division 4. Lampleigh v Braithwait (1615) Hob 105 5. Pao On v Lau Yiu Long [1980] AC 614 6. Price v Easton 1833 7. Alliance Bank v Broom (1864) 2 Dr&Sm 289 8. Collins v Godefroy [1831] 109 ER 1040 9. Glasbrook Bros Ltd v Glamorgan County Council [1925] AC 270 House of Lords 10. Stilk v Myrick (1809) Kings Bench 11. Hartley v Ponsonby (1857) 119 ER 1471 Queens Bench 12. Scotson v Pegg (1861) 6 H & N 295 13. Combe v Combe [1951] 1 All ER 767, CAYOU WILL NEED TO LOOK UP THESE ADDITIONAL CASES 1. Ferguson v Davies (1996) The Independent December 12th 1996 2. Re C (a Debtor) [1996] BPLR 535 3. Wood v Robarts (1818) 4. Durham Fancy Goods v Michael Jackson (Fancy Goods) [1968] 2 QB 839 5. The Scaptrade [1983] QB 529 6. Ajayi v Briscoe [1964] 1 WLR 1326 7. Alan Co Ltd v El Nasr Export & Import Co [1972] 2 QB 189 8. Re Wyven Developments [1974] 1 WLR 1097 9. Evenden v Guildford City AFC [1975] QB 917 Page 1 of 16
  2. 2. Currie v Misa (1875) LR 10 Ex 153; (1875-76) LR 1 App Cas 554FactsA company named Lizardi& Co, then in good credit in the City, sold four bills of exchange toMrMisa, drawn from a bank in Cadiz. Mr Currie was another of the banking firm and theplaintiff bringing the action. The bills of exchange were sold on the 11th of February, and by thecustom of bill, brokers were to be paid for on the first foreign post-day following the day of thesale. That first day was the 14th of February Lizardi& Co. was much in debt to his banking firm,and being pressed to reduce his balance, gave to the banker a draft or order on MrMisa for theamount of the four bills. This draft or order was dated on the 14th, though it was, in fact, writtenon the 13th, and then delivered to the banker. On the morning of the 14th the manager of Misasbusiness gave a cheque for the amount of the order, which was then given up to him. Lizardifailed, and on the afternoon of the 14th the manager, learning that fact, stopped payment of thecheque.Judgment - Exchequer ChamberLush J, Archibald J, Quain J held that the banker was entitled to recover its amount fromMrMisa.Lord Coleridge CJ dissented.House of LordsThe House of Lords upheld the decision of the majority in the Exchequer Chamber. LordChelmsford gave the opinion, with which Lord Hatherleyand Lord OHagan concurred. Page 2 of 16
  3. 3. Dunlop v Selfridge Ltd [1915] AC 847FactsDunlop sued its tyre retailer, New Garage, for breaching an agreement to not resell Dunlop tyresat a price lower than that listed in the contract. The agreement then said if that did happen, NewGarage would pay £5 per tyre „by way of liquidated damages and not as a penalty‟.The judge held the £5 sum was liquidated damages and enforceable. The Court of Appeal heldthe clause was a penalty and Dunlop could only get nominal damages. Dunlop appealed.JudgmentThe House of Lords held the clause was not a penalty, and merely a genuine preestimate ofDunlop‟s potential loss, and so Dunlop could enforce the agreement. Lord Dundein set out thefollowing principles.“To assist this task of construction various tests have been suggested, which if applicable to thecase under consideration may prove helpful, or even conclusive. Such are:(a) It will be held to be penalty if the sum stipulated for is extravagant and unconscionable inamount in comparison with the greatest loss that could conceivably be proved to have followedfrom the breach.(b) It will be held to be a penalty if the breach consists only in not paying a sum of money, andthe sum stipulated is a sum greater than the sum which ought to have been paid.This though oneof the most ancient instances is truly a corollary to the last test. Whether it had its historicalorigin in the doctrine of the common law that when A. promised to pay B. a sum of money on acertain day and did not do so, B. could only recover the sum with, in certain cases, interest, butcould never recover further damages for non-timeous payment, or whether it was a survival ofthe time when equity reformed unconscionable bargains merely because they wereunconscionable.(c) There is a presumption (but no more) that it is penalty when "a single lump sum is madepayable by way of compensation, on the occurrence of one or more or all of several events, someof which may occasion serious and others but trifling damage".(Lord Watson in LordElphinstone v Monkland Iron and Coal Co.On the other hand:(d) It is no obstacle to the sum stipulated being a genuine pre-estimate of damage, that theconsequences of the breach are such as to make precise pre-estimation almost an impossibility. Page 3 of 16
  4. 4. On the contrary, that is just the situation when it is probable that pre-estimated damage was thetrue bargain between the parties.Turning now to the facts of the case, it is evident that the damage apprehended by the appellantsowing to the breaking of the agreement was an indirect and not a direct damage. So long as theygot their price from the respondents for each article sold, it could not matter to them directlywhat the respondents did with it. Indirectly it did. Accordingly, the agreement is headed "PriceMaintenance Agreement," and the way in which the appellants would be damaged if prices werecut is clearly explained in evidence by Mr. Baisley, and no successful attempt is made tocontrovert that evidence. But though damage as a whole from such a practice would be certain,yet damage from any one sale would be impossible to forecast. It is just, therefore, one of thosecases where it seems quite reasonable for parties to contract that they should estimate thatdamage at a certain figure, and provided that figure is not extravagant there would seem noreason to suspect that it is not truly a bargain to assess damages, but rather a penalty to be held interrorem. Page 4 of 16
  5. 5. Re Caseys Patents; Stewart v Casey[1892] 1 Ch. 104, Chancery DivisionFactsThe holders of letters patent employed Casey to promote their invention in the commercialworld. Afterwards, they undertook in a letter, "in consideration of his services as manager inworking the patents" to give him A one third share of the patents. Later, the other patent holdersattempted to have his name removed from the Register of Patents.HELD Bowen LJCounsel for the applicants presented a number of arguments:1. It was argued that there was no consideration and that the document was not under seal.2. It was also argued that the consideration here was a future consideration, for which nothingwas done. Yet that cannot be so, for the consideration is not the doing of a future act, but thepromise to do the future act.3. Counsel then said that it was really past consideration, in that it refers to past services - andpast services cannot support a future promise.The correct approach is to look at the document and see if it cannot receive a proper effect. Apast service raises an implication at the time it was rendered, that it was to be paid for. Whensubsequently there is evidence of a promise to pay, that may be seen as an admission which fixesthe amount of the bargain, on the basis of which the service was rendered.Fry LJ took the same view.[NB. Bowens argument really is a factual one rather than a legal one. He is saying that on theevidence adduced he is able to infer that payment was part of the original agreement. As such,the decision would carry little value as a precedent.One gets the impression that Bowen was determined to find grounds for finding an enforceablecontract for the payment]. Page 5 of 16
  6. 6. Lampleigh v Braithwait (1615) Hob 105FactsBraithwait killed someone and then asked Lampleigh to get him a pardon. Lampleigh got the pardonand gave it to Braithwait who promised to pay Lampleigh £100 for his trouble.HeldIt was held that although Lampleighs consideration was past (he had got the pardon) Braithwaitespromise to pay could be linked to Braithwaites earlier request and treated as one agreement, so itcould be implied at the time of the request that Lampleigh would be paid. Page 6 of 16
  7. 7. Pao On v Lau Yiu Long [1980] AC 614FactsFu Chip Investment Co Ltd, a newly public company majority owned by Yiu-Long Lau and hisyounger brother Benjamin (the defendants), wished to buy a building called Wing On, ownedby Tsuen Wan Shing On Estate Co. Ltd., whose majority shareholder was On Pao and family(the claimants).Instead of simply selling the building for cash, Lau and Pao did a swap deal for the shares intheir companies. Tseun Wan would get 4.2m $1 shares in Fu Chip, and Fu Chip bought all theshares of Tsuen Wan. To ensure the share price of Fu Chip suffered no shock, Pao agreed to notsell 60% of the shares for at least one year. Also, in case the share price dropped in that year, Lauagreed to buy 60% of the shares back from Pao at $2.50.But then Paorealised, if the share price rose over $2.50 in the year, the price would stay fixed andhe would not get the gains. So he demanded that instead of that, Lau would merely indemnifyPao if the share price fell below $2.50. Pao made clear that unless he got this "guaranteeagreement", he would not complete the main contract. It was signed on 4 May 1973.But as it turned out the shares did slump in value. Pao tried to enforce the guarantee agreement.Lau argued the guarantee agreement was not valid (1) because there was no consideration, onlyin the past and under a pre-existing duty, and (2) because it was a contract procured by duress.HeldLord Scarman, giving the Privy Council‟s advice first disposed of the question about pastconsideration, because a promise to perform a pre-existing contractual obligation to a third partycan be good consideration.The question of whether consideration can be invalidated „if there has been a threat to repudiate apre-existing contractual obligation or an unfair use of a dominating bargaining position‟ wasrejected because „where businessmen are negotiating at arm‟s length it is unnecessary for theachievement of justice‟.On the point of duress, Lord Scarman held the following.“There must be present some factor „which could in law be regarded as a coercion of his will soas to vitiate his consent.‟ This conception is in line with what was said in this Boards decision inBarton v Armstrong [1976] AC 104, 121 by Lord Wilberforce and Lord Simon of Glaisdale- observations with which the majority judgment appears to be in agreement. In determiningwhether there was a coercion of will such that there was no true consent, it is material to inquirewhether the person alleged to have been coerced did or did not protest; whether, at the time hewas allegedly coerced into making the contract, he did or did not have an alternative course open Page 7 of 16
  8. 8. to him such as an adequate legal remedy; whether he was independently advised; and whetherafter entering the contract he took steps to avoid it. All these matters are, as was recognised inMaskell v Horner [1915] 3 KB 106, relevant in determining whether he acted voluntarily ornot. ”This was commercial pressure and no more, since the company really just wanted to avoidadverse publicity. For a general doctrine of economic duress, it must be shown „the victim‟sconsent to the contract was not a voluntary act on his part… provided always that the basis ofsuch recognition is that it must amount to a coercion of will, which vitiates consent.‟ Page 8 of 16
  9. 9. Price v Easton (1833)Easton made a contract with X that in return for X doing work for him, Easton would pay Price£19. X did the work but Easton did not pay, so Price sued. It was held that Prices claim mustfail, as he had not provided consideration. Page 9 of 16
  10. 10. Alliance Bank v Broom (1864)2 Dr&Sm 289FactsThe defendant owed an unsecured debt to the plaintiffs. When the plaintiffs asked for somesecurity, the defendant promised to provide some goods but never produced them. When theplaintiffs tried to enforce the agreement for the security, the defendant argued that the plaintiffshad not provided any consideration.HeldIt was held that normally in such a case, the bank would promise not to enforce the debt, but thiswas not done here. By not suing, however, the bank had shown forbearance and this was validconsideration, so the agreement to provide security was binding. Page 10 of 16
  11. 11. Collins v Godefroy [1831] 109 ER 1040FactsPlaintiff sued to recover compensation for loss of time in attending court as a witness undersubpoena.HeldThat since the law imposes a duty on people to turn up, a promise of remuneration to do thatwhich the court requires is without consideration. The principle also applies to promises not todo that which the law prohibits. Page 11 of 16
  12. 12. Glasbrook Bros Ltd v Glamorgan County Council [1925] AC 270 House of LordsFactsDuring the 1921 coal strike, miners were involved in picketing which sometimes led to violence.The colliery manager insisted on extra police cover and some 70 people were provided. Under awritten agreement, Defendant promised to pay specified amounts. When payment was sought,Defendant refused to pay.HeldThat any attempt by a public authority to extract payment for normal services should be stronglyresisted. If in any situation the provision of police is deemed necessary, then it would not beproper to exact payment for those services.However, where the person or institution under a duty has, in return for a promise of payment,gone further than that duty requires, the additional performance can constitute consideration.Where there is no public policy bar to the performance of the duty being a matter of contract,then another person can acquire a right to enforce the duty by a promise to pay for itsperformance. If the provision of extra police was in excess of operational requirements, (as wasthe case here) then it could be proper to ask for payment for it. Page 12 of 16
  13. 13. Stilk v Myrick (1809) Kings BenchFactsPlaintiff was employed as a seaman under articles at £5 per month. On a voyage from London tothe Baltic and back, 2 of the crew deserted. The captain could not replace them and the rest ofthe crew said that they would work the vessel back to London, and share the wages of the other2. The extra money was not paid. It was said that before they left on the voyage, they hadundertaken to do all they could under all the emergencies of the voyage and the desertion of thecrew is to be taken as part of such an emergency.HeldThe court found that the remaining crew had no liberty to quit when the other men left. Page 13 of 16
  14. 14. Hartley v Ponsonby (1857) 119 ER 1471 Queens BenchFactsPlaintiff was a seaman on a ship sailing from UK to Bombay and earning £3 per month. Duringthe course of the voyage, 17 of the crew refused to work and were sent to prison. Defendantundertook in writing to pay Plaintiff £40 to assist in sailing the vessel to Bombay with a crew of19. They arrived in Bombay 6 weeks later. The extra payment was refused. At trial, it wasestablished that Defendant entered the agreement voluntarily. Additional crew could not havebeen found at a reasonable price. There should have been crew of 36.HeldThe court found here that it was unreasonable for the ship to proceed with just 19. Because it wasdangerous for the ship to proceed with so few hands, Plaintiff could not have been required toperform the work. Therefore Plaintiff was free to undertake the remaining voyage or not. Theagreement was voluntary on both sides. They were free to make a new contract. Plaintiff mayhave taken advantage of this position to make a hard bargain, but this did not amount to duress. Page 14 of 16
  15. 15. Scotson v Pegg (1861)6 H & N 295FactsScotson contracted to deliver coal to X, or to Xs order. X sold the coal to Pegg and orderedScotson to deliver the coal to Pegg. Then Pegg promised Scotson that he would unload it at afixed rate. In an action by Scotson to enforce Peggs promise, Pegg argued that the promise wasnot binding because Scotson had not provided consideration as Scotson was bound by hiscontract with X (a third party) to deliver the coal.HeldIt was held that Scotsons delivery of coal (the performance of an existing contractual duty to athird party, X) was a benefit to Pegg and was valid consideration. It could also been seen as adetriment to Scotson, as they could have broken their contract with X and paid damages. Page 15 of 16
  16. 16. Combe v Combe [1951] 1 All ER 767, CAFactsW was granted a divorce nisi from her husband H. H promised to allow her £100 per annum aftertax by way of maintenance, and so W did not apply to the court for a formal maintenance order.After the divorce was final, H made no payments and W sued.HeldByrne J gave judgment in her favour, but the Court of Appeal said this was not a case in whichpromissory estoppel could be used. Denning LJ said the principle stated in High Trees does notcreate new causes of action where none existed before; it only prevents a party from insisting onhis strict legal rights when it would be unjust to allow him to enforce them. Birkett and AsquithLJJ were equally clear that promissory estoppel must be used as "a shield and not a sword",though that is not to say that it can only ever be used by a defendant. Page 16 of 16

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