WHAT IS CONSIDERATION?
In contract law , a promise is said to be part of a bargain if it is given “for consideration”. A promise is given for consideration when the promisor asks for something in return for his promise and gets what he asks for. Thus a promise is generally not binding unless something of value such as a return promise or an act has been given in exchange for that promise. This is why an offer to make a contract is often described as a promise with a price tag. The price tag is what is termed the “consideration”.
At common law, an agreement is not enforceable unless it is made by deed or supported by consideration. In the case of Marfo & Others v. Adusei, the first appellant under the terms of a mortgage agreement, attempted to sell a farm of the respondent. The parties agreed to postpone the sale for one year. However, the first appellant sold the farm three months later. The trial court accepted the respondent’s evidence that the first appellant had agreed to postpone the sale for a year and held that the sale which was made earlier than agreed was unlawful. On appeal, it was held inter alia, that the trial court’s finding that there was an agreement to postpone the sale could not be interpreted as an agreement enforceable at law because there was no evidence upon which he would be justified in law in holding that there was a contract between the first appellant and the respondent, the performance of which could be enforced against the first appellant in a court of law. There was no agreement by deed, and there was no consideration moving from the respondent to the appellant.
Definition of Consideration
During the 19th century, consideration was established in one of two ways : a promissee either had to prove that he had conferred a benefit on the defendant (promisor) for which the defendant’s promise was given ; or he had established that he suffered or incurred a detriment as a result of acting on the defendant’s promise. This definition was found to be limiting and so as the law developed, a consideration was viewed as the price of a bargain, referring to whatever was given in exchange for the promise of the other party. Thus, the price paid by the plaintiff for the defendant’s promise, such price consisting either in the doing of some act or the making of some promise in exchange for the defendant’s promise.
A more modern definition of consideration is Pollock’s widely accepted definition approved an adopted by Lord Dunedin in the House of Lords decision in Dunlop Pneumatic Ture Co Ltd v. Selffridge & Co Ltd , which states : An act or forbearance of one party , or a promise thereof, is the price for which the promise of the other is bought, an th primes thus given for value is enforceable.
Section 75 of the American Restatement of Contract 2nd states : Consideration for a promise is : (a) an act other than a promise, or (b) a forbearance , or (c) the creation, modification or destruction of a legal relation, or (d) a return promise bargained for and given in exchange for the promise
Consideration may thus consist of the performance of an ac, a counter promise or a forbearance requested or given in exchange for the other party’s promise.
What are the Kinds of Consideration?
Consideration is usually classified into three categories: executed, executory or past consideration.
Consideration is said to be executory when it consists of a promise (to be performed in future), which is given in return for a counter promise. This kind of consideration arises in bilateral contracts , where the contract is formed by the mutual exchange of promises , a good example of which is a contract for the sale of goods to be performed in the future.
Consideration is said to be executed when it consists of an act which is performed in exchange for a promise. Executed consideration arises in unilateral contracts, which are typically formed by the exchange of a promise for the actual performance of an act, such as reward contracts. The performance of the act constitutes the acceptance as well as the consideration.
Consideration is said to be past where the act constituting the consideration is wholly one or the detriment wholly suffered before the promise is made.
WHAT ARE THE RULES GOVERNING CONSIDERATION?
What is Past Consideration?
At common law, past consideration is not sufficient to support the enforcement of a contract. The rule on past consideration is premised on the fundamental principle that to constitute consideration, the promise must be given in exchange for the act.
The consideration is past if the promise comes after the act has been fully performed without any reference to the promise, which is made later. The promise is subsequent to and independent of the act and, therefore, the promise and the act do not constitute one and the same transaction.
In Roscorla v Thomas : The defendant sold a horse to the plaintiff. After the sale the plaintiff asked the defendant if the horse was sound. The defendant responded that it was. The horse turned out to be unsound and the plaintiff brought the action for breach of warranty.
It was held that the sale itself created no implied warranty that the horse was sound. The warranty had to be regarded as independent of an subsequent to the contract of sale itself.
In Eastwood v Kenyon, the plaintiff , Eastwood had been a guardian and an agent of Mrs. Kenyon while she was a minor and had voluntarily incurred expenses in the improvement of her property. When the infant came of age she promised to pay the money that Eastwood had borrowed for the improvement of her property etc. The plaintiff sued to enforce the defendant’s promise. The court held that the moral obligation of the defendant to fulfil the promise was not sufficient consideration and since the acts had been wholly done before the promise was given , the consideration was past and the promise was therefore unenforceable.
The fact that the parties have used the word “consideration” has been found not to be conclusive . In Re Mcardle : A number of children by their father’s will were entitled to a house after their mother’s death. While their mother was alive one of the children and his wife lived in the house. The wife made various improvements to the house and at a later date all the children signed a document addressed to her stating : “ In consideration of your carrying out certain alterations and improvement to the property, we hereby agree that the executors shall repay you from the estate the sum of 488 in settlement of the amounts spent by you on such improvements. The wife sued to enforce this promise. The court held that since all the work on the house had in fact been completed before the document was signed , this was a case of past consideration and it was not sufficient to support the document signed as a binding contract.
WHAT ARE THE EXCEPTIONS TO PAST CONSIDERATION RULE?
Act Specifically Requested by Promisor : It has been established that past consideration will be sufficient to support a subsequent promise if the prior act or service (which constitutes the consideration) was done or rendered at the express request of the promisor.
In Lampleigh v. Brathwaite : The defendant had killed a man and had been convicted of murder. he asked the plaintiff to do all he could to obtain a pardon for him from the king. The plaintiff exerted himself to this end, journeying to and from London at his own expense and was able to obtain the pardon for the defendant. Later the defendant promised to pay the plaintiff 100 pounds for his trouble. He failed to pay and the plaintiff sued. The court held that even though the alleged consideration was wholly given before the promise of remuneration was made the promise was enforceable because the act constituting the consideration was done at the express request of the defendant.
Act Done by Way of business :
The second exception to the rule on past consideration is that an act done before the giving of a promise will constitute consideration if the act was done by way of business and the parties understood at the time of performance that the act was to be remunerated or paid for and the payment , if promised in advance would have been legally recoverable. This exception applies where the act is done or the services are rendered by way of business and not as an act of friendship. Here it is presumed that both parties must have understood that the act would ultimately be paid for.
In the case of Re Casey’s Patent, Stewart v. Casey , A and B joint owners of certain patent rights, wrote to C stating that “in consideration of your services as the practical manager in working our patents, we hereby agree to give you one third share of the patents”. A and B subsequently refused to fulfil this promise arguing that the promise was made only in return for C’s past services as Manager and, therefore was no consideration to support it. the court held that the nature of the past services raised an implication that the services would be paid for. The subsequent promise to pay was therefore simply an admission of the bargain and serve to fix the amount of the remuneration that has to be paid.
Consideration need not be adequate
It has been settle for centuries that the common law courts will not inquire into the adequacy of consideration. This means that the courts will ordinarily not seek to assess the value of the defendant’s promise and compare it to the value of the act or promise given by the plaintiff in exchange for it to determine whether the consideration is adequate. In the absence of any vitiating factor, as long as the promisor gets what he asks for in return for his promise, he is deemed to have received adequate consideration and is bound by the contract so made.
This principle is based on the doctrine of freedom of contract which presumes that the parties are capable of determine their own interests and making their own bargain. The courts will generally not upset a bargain between two persons of full age and understanding on the basis that the bargain appears to be unfair or unjust or that the consideration given is in the view of the court inadequate.
In Bolton v Madden, it was noted that “the adequacy of consideration is for the parties to consider at the time of the making of the contract, and not for the court to consider when it is sought to be enforced”.
In Adjabeng v. Kwabla, the defendant bought land from the father of the plaintiff for 40 pounds. The plaintiff brought an action alleging that , inter alia, that the consideration for the sale was inadequate (he thought the land was worth about 200 pounds).
The court held that in the absence of fraud or misrepresentation, inadequacy of consideration cannot be a ground for avoiding a sale validly made.
The principle on adequacy of consideration is also clearly illustrate n the case of Chappell & Co. Ltd v. Nestle Co. Ltd.
WHAT IS FORBEARANCE AS CONSIDERATION
As noted earlier, consideration may consist of an act , promise or forbearance. Forbearance simply refers to from doing what one has a right to do. Generally, forbearing from doing or promising to forbear from doing what one has a right to do amounts to good consideration for another promise.
DELLE & DELLE VRS OWUSU AFRIYIE [2005-20066] SCGLR 60: In this case, the defendant admitted taking money from the plaintiff. Upon request of the payment of the amount remaining, the plaintiffs claimed the defendant executed a statutory declaration affirming the indebtedness in which he promised to repay the money before the 31st of December 1995. The defendant however failed to settle the debt. Thereupon the plaintiff brought the action. The defendant however denied ever executing the statutory declaration contending that it had been made by fraud. This however was dismissed by the trial judge who entered judgement for the plaintiff. On appeal, the court of appeal reversed the decision of the trial high court. Whereupon the plaintiffs proceed to the Supreme Court. The SC held that a statutory declaration is not, in itself a cause of action. But the statement of fact made in it may be used to found a cause of action. In the instant case, the defendant made a statement in the declaration acknowledging the debt. The said statutory declaration however contained a fresh contractual promise for which there is consideration that is, if the defendant failed to honour his promise then the plaintiffs would be free to sue after the stipulated time. This could be reasonably interpreted as an implied request for the plaintiffs to forbear from suit before the 31st of December 1995, in exchange for the promise to pay off his indebtedness before the date. The plaintiffs actual forbearance in the instant case would amount to consideration.
Hammer v Sidway : An uncle promised a nephew who was an infant at the time : “If you would refrain from drinking liquor , using tobacco ,swearing , playing cards for money until you are 21 years I will give you 5, 000 pounds on your 21st birthday”. The nephew complied and later sued to enforce the promise. It was argued that the nephew provided no consideration since what he did was not a detriment to him but was in fact a benefit to him, not to the uncle. The court held that the nephew’s forbearance amounted to good consideration. It was sufficient that the nephew had restricted his lawful freedom of action within certain prescribed limits upon the faith of the uncle’s promise.
WHAT IS SUFFICIENCY OF CONSIDERATION?
It is often sated that consideration need not be adequate, but it must be sufficient. The term “adequacy of consideration” is used in connection with the assessment of the value or relative worth of the consideration being offered by one party for the promise of the other. The courts generally refrain from making this kind of assessment to determine the adequacy of the consideration because the parties are considered to be the best judges of their own interests. Thus the principle that consideration need not be adequate.
However, the courts have shown great interest in ensuring the “sufficiency” of consideration, that is , the validity of the acts or promises which should qualify as consideration for a contract. In this regard, the common law courts developed a number of rules to ensure that the consideration is sufficient, that is, the act or promise itself satisfies the definition of consideration and is capable in law of supporting an enforceable contract. In determining the sufficiency of consideration, the courts are conserved with ensuring that the promises or acts qualify as consideration in the true sense and are therefore deemed sufficient.
Over the years, the common law has identified certain kinds of promises or actions which are not considered as sufficient consideration. These include promises to keep an offer open for a specified period to perform pre-existing legal obligations and part payment of debts. It must be note that these common law rules have however been heavily modified by statuary law in Ghana, in particular by the Contracts Act, 1960 (Act 25).
REFORM OF SPECIFIC RULES ON CONSIDERATION BY THE GHANA COTNRACTS ACT, 1960 (ACT 25)
Promise to keep an Offer Open for Specified Period of Time-section 8(1) of Act 25
At common law, a promise to keep an offer open for acceptance for a specified time period is not binding on the promisor unless it is supported by consideration. This implies that, at common law where the promisor promises to keep an offer open for a period of time , he is entitled to revoke the contract if no consideration is given. In Routledge v Grant, the defendant made an offer to take a lease of the plaintiff’s premises. The defendant stated that his offer would be open for acceptance for a period of six weeks. Before the expiration of the six weeks the defendant revoked his offer and the plaintiff sued. The court held that the defendant was entitled to revoke his offer at any time before the offer was accepted since no consideration was given for the promise to keep the offer open.
However, this has been modified by section 8(1) of the Ghana Contracts Act, 1960(Act 25) which states that: A promise to keep an offer open for acceptance for a specified time shall not be invalid as a contract by reason only of the absence of any consideration thereof. This means that, whether there is consideration or not, a promise to keep an offer open for a specified time period will be binding on the promisor. The memorandum to the contract’s Act provides that though there is no requirement of proof of consideration flowing from the promise of such a promise to be binding, there must be some evidence from which the court can infer that the promisee has accepted the promise to keep the offer open before it will be deemed to be enforceable.
Part Payment of Debt Section 8(2) of Act 25
At common law , the promise to waive or forgo a debt or part-payment of a debt is not binding on the promisor unless there is some fresh consideration flowing from the promisee. This means that at common law where there is no consideration , a creditor after making a promise to forgo a debt or part of a debt can still claim it. This rule came from the ancient Pinnel’s case(1902) 5 Co. Rep. 117, where an action was brought in debt on bond against Cole by Pinnel for the payment of 8.10 pounds against Cole on . Cole pleaded that at Pinnel’s request he had paid the sum of 5 2s pounds and that Pinnel had accepted that lesser amount in full satisfaction of the debt. The Court recognized the principle that the payment of a lesser sum on the day the debt was due in satisfaction was no satisfaction of the whole. However it further noted that a debt could be discharged, not simply by the payment of part of it, but by the debtor complying with some new or additional requirement introduced by the creditor, for example , tendering part payment at a place different from that agreed or on a date earlier than that agreed .
This rule has however been modified by section 8(2 ) of the Ghana Contracts Act 1960(Act 25) that: A promise to waive the payment of a debt or part of a debt or the performance of some other contractual or legal obligation shall not be invalid as a contract by reason only of the absence of any consideration therefor. This means that a creditor cannot go back to sue for a debt or part of a debt which he had waived already.
Pre-Existing Legal Obligations
At common law, the promise to perform a pre-existing legal obligation does not constitute sufficient consideration for another promise. The reason is that since the promisor is legally bound to perform the act, he suffers no detriment in performing it and the promisee receives no benefit from its performance. A pre-existing legal obligation may arise in 3 ways. Firstly, is a pre- existing legal public duty, thus a public duty imposed on the person by the general law , usually because of the persons position, status or employment . Next is a pre-existing contractual duty owned to a contracting party. This arises from an existing contract entered into between the promisor and the promisee himself. And finally a pre-existing contractual duty owned to a third party. This kind of pre-existing duty arises from an existing contract entered into between the promising party and a third party.
The common law position can be illustrated with the case of Colins v Godefroy : In this case, the plaintiff received a subpoena to appear at a trial as witness on behalf of the defendant. The defendant promised him a sum of money for his trouble. Generally, a person who receives a subpoena is bound by law to attend court and give evidence. The court held that there was no consideration for the promise to pay since the plaintiff was under a legal duty to attend.
The common law courts, however, have held that if the promisor promised or undertook to do more than what he was legally bound to do, such performance would constitute sufficient consideration for another promise as decided in the case of Glasbrook Bros. Ltd. v. Glamorgan County Council
Section 9 of the Contracts Act, 1960(Act25) has modified the common law’s position on pre-existing legal duties and provides that: The performance of an act or the promise to perform that act may be sufficient consideration for another promise notwithstanding that the performance of that act may already be enjoined by some legal duty , whether enforceable by the other party or not. This means that the performance of an act or the promise to perform an act which one is already bound legally to perform is sufficient consideration for another promise. Section 9 covers all three kinds of pre-existing legal obligations discussed. Thus a public duty imposed on a person under the general law, an act already enjoined by some legal duty; a pre-existing contractual duty owed by the promisor to the promisee under an existing contract between them in which case it would be an act enforceable by the contracting party; or a pre- existing contractual duty owed to a third party under an existing contract between the promisor and that third party , in which case it would be an act which is not directly enforceable by the other contracting party.
In the case of Kessie v. Charmant [1973] 2 GLR 194, the plaintiff was the Ambassador to Liberia whom the defendants had sought help to use his official position and bring his influence to bear of the Liberian government in order to assist the defendants in their business transactions. In return the defendant promised to give the plaintiff 5% share of the company’s share in the company they proposed to set up and an office of directorship in that company. The plaintiff after helping the defendant to establish the company was denied the promise made by the defendant. It was held that even though the plaintiff as Ambassador was already under a pre-existing legal duty to assist the defendants in their business endeavors , his act of performing this duty amounted to consideration under section 9 of the Ghana Contract Act. However the court found that the entire contract was unenforceable on grounds of public policy. The contract was held to be unenforceable on the ground that where a public officer uses his official position to procure a business advantage for another in return for a private reward such an act is injurious to the public interest and tends to undermine the high standards expected of public officials. The contract was therefore unenforceable not on grounds of lack of consideration but on the ground that it was contrary to public policy.
In the case of a pre-existing contractual duty owed to the promise, section 9 stipulates that : The performance of an act or the promise to perform an act may be a sufficient consideration for another promise notwithstanding that the performance of that act may already be enjoined by some legal duty, whether enforceable by the other party or not.
For a pre-existing contractual obligation owed to a third party, the principle is that : The performance of an act or the promise to perform an act may be a sufficient consideration for another promise notwithstanding that the performance of that act may already be enjoined by some legal duty, whether enforceable by the other party or not.
It should be noted that although section 9 of Act 25 may be applicable in certain contracts, that section cannot override such vitiating factors like undue influence , duress, fraud etc. On this , the Judgment of Annan J. A. in Kessie v. Charmant is instructive : “I turn then to consider the last leg of the case as to consideration, namely, whether it is shown to be sufficient. The common law rule is that although consideration need not be adequate, it has to be shown to be sufficient and merely to repeat an existing obligation is not generally considered sufficient. Such a case at common law is the situation where the plaintiff is already under a public duty imposed by law to perform the act which is relied on as consideration.
It may readily be appreciated that a person, who by his official status or through the operation of the law is under a public duty to act in a certain way, is not regarded as furnishing consideration merely by promising to discharge that duty’: see, Cheshire and Fitfoot, Law of Contract (6th ed.), p.76. This proposition of the common law, however, is one of those which the Contracts Act, 1960 , has done away with. The present position is therefore as set out in section 9 of the Act. No issue therefore arises in this case as to sufficiency of consideration. I conclude that no difficulty arises in this case in respect of any aspect of the law as to consideration.
The defendants’ case in this area is that the plaintiff’s admitted status as his country’s diplomatic representative in Monrovia in 1960 debarred him from demanding or accepting any financial or other remuneration or reward for services rendered by him to a Ghanaian registered company in that capacity. Any contract for reward for such services rendered is therefore illegal as being contrary to public policy and therefore void ab initio.
Is the plaintiff’s contract then illegal? In my view that contract was entered into upon an unlawful consideration. The plaintiff was required to use his official position to render services to the defendants by bringing his official influence to bear on a foreign government , to whose country he was accredited as an ambassador, for the betterment of the defendants’ business transactions and with a view, to the plaintiff’s own financial advantage. In sum, the purpose of the contract was that the plaintiff was to procure an advantage for the defendants in his official capacity and for a private reward. That in my judgment is clearly an unlawful purpose and contrary to public policy.
Such an act is injurious to the public interest and tends to undermine the high standards which one is entitled to expect of public officials in a responsible position of authority or influence. In my judgment , the plaintiff’s contract, as well as the offer of a gift of five per cent shares are illegal transactions and therefore void.
Consideration need not move from promise
At common law the general rule is that consideration must move from the promisee. Thus a person in whose favour a promise is made has to provide consideration by himself in order to enforce the contract. This means that where consideration is provided by a third party, a promisee cannot sue for a promise. In Tweddle v. Atkinson [1861-73] ALL ER 369, H and W got married . After the marriage a contract was entered into between X and Y, the fathers of H and W. The contract provided that each should pay a sum of money to H and that H can sue for such sums. After the death of X and Y, H sued the executors of y for the money promised him. The court held that the contract must fail because H was not a party to the contract and no consideration moved from him. This rule has been modified by section 10 of the Ghana Contracts Act which states that no promise shall be invalid as a contract by reason only that the consideration for it is supplied by someone other than the promisee. This means that a person can enforce a contract even if he did not provide the consideration himself but some other party provided.
The doctrine of promissory estoppel
Sometimes the parties to an existing contract may enter into a subsequent agreement whereby one party agrees to suspend his strict contractual rights under the existing contract for a limited period of time without the provision of any fresh consideration by the promisor for this promise. Such agreements often become necessary in the case of misfortunes, temporary recessions and other obstacles in economic activity which would disrupt the continued performance of contracts and necessitate the variation of terms of an existing contract. At common law this promise is not binding in the absence of consideration however under equity a doctrine was developed to deal with issue. This is the doctrine of promissory estoppels.
HUGHES V METROPOLITAN RAILWAY COMPANY: Thomas Hughes owned property leased to the Railway Company at 216 Euston Road. Under the lease, Hughes was entitled to compel the tenant to repair the building within six months of notice. Notice was given on 22 October 1874 from which the tenants had until 22 April to finish the repairs. On 28 November, the tenant railway company sent a letter proposing that Hughes purchase the tenant’s leasehold interest. Negotiations began and continued until 30 December, at which point nothing was settled. Once the six months had elapsed the landlord sued the tenant for breach of contract and tried to evict the company. Held- it was held in favor of the def as at the initiation of the negotiations there was an implied promise by the landlord not to enforce their strict legal rights with respect to the time limit on the repairs, and the tenant acted on this promise to their detriment
CENTRAL LONDON PROPERTY TRUST V HIGH TREES HOUSE LTD: In 1937, High Trees House Ltd leased a block of flats in Clapham, London, for a rate £2500/year from Central London Property Trust Ltd. Due to the conditions during the beginning of World War II occupancy rates were drastically lower than normal. In January 1940, to ameliorate the situation the parties made an agreement in writing to reduce rent by half. However, neither party stipulated the period for which this reduced rental was to apply. Over the next five years, High Trees paid the reduced rate while the flats began to fill, and by 1945, the flats were back at full occupancy. Central London sued for payment of the full rental costs from June 1945 onwards. Held- if Central London had tried to claim for the full rent from 1940 onwards, they would not have been able to. This was reasoned on the basis that if a party leads another party to believe that he will not enforce his strict legal rights, then the Courts will prevent him from doing so at a later stage
Scope of the doctrine
The principals is to the effect that of one party to a contract by his words or conduct leads the other party to believe that his strict rights arising under the contract will not be insisted upon, intending that the other party should action that belief, and he does act on it, then the first party will not afterwards be allowed to insist on his strict legal rights where it would be inequitable for him to dose, even though the first party, upon giving reasonable notice, may resume his full legal rights under the contract.
• Existing contractual relationship between the parties-First of all, the doctrine applies where there is an existing contractual relationship between the two parties and the contract is usually one which gives rise to continuing or recurrent obligations as seen in the HIGH TREES CASE (the contract was one which gave rise to recurrent obligation to pay rent )
• Clear unequivocal promise– there must be a clear and unequivocal promise or representation, intended to affect the legal relations of the parties, to the effect that the promisor would not insist on his strict legal rights arising out of the contract. Such representation or promise may be express or implied as done in HUGHES V METROPOLITAN RAILWAY COMPANY where the promise was implied from the landlord’s conduct in commencing the negotiations with the tenant.
• Reliance-the promisee must show that he conducted himself or his affairs in reliance on the representation or promise of the promisor. HUGHES V METROPOLITAN RAILWAY COMPANY
Effect of promise generally suspensory
The doctrine of promissory estoppel operates only to suspend and not wholly extinguish the promisee’s existing obligations or the promisor’s legal rights. The promisor upon giving reasonable notice, may resume the rights which he had suspended and revert to the original terms of the contract.
TOOL METAL MANUFACTURING CO LTD V TUNGSTEN ELECTRIC COMPANY: Tungsten had been infringing a patent right held by TMM. When TMM heard of this they waived all infringements in return for Tungsten paying 10% Royalty and also 30% ‘compensation’ if sales exceeded 50KG in any month. These sums were excessive but Tungsten agreed to pay them otherwise they would be faced with a claim for infringing the copyright. Tungsten struggled to make payments. They got into arrears during the war times and an agreement was reached to waive the ‘compensation’ payments during the war years. Held- TMM could not enforce the compensation payments during the war years but could enforce them on termination of the war. TMM were estopped from going back on their promise to waive the payments in equity. Generally promissory estoppel will merely suspend legal rights rather than extinguish them. However, where periodic payments are involved and a promise has been made to reduce the payments because of pressing circumstances which are not likely to persist, promissory estoppel can be used to extinguish legal rights.
Circumstances must be inequitable
The principle would only apply if it would be inequitable for the promisor’s to go back on his promise and insist on his strict legal rights under the contract.
D & C BUILDERS V REES
Mr Rees instructed the claimant to do some building work at his home to the value of £746. Mr Rees paid £250 on account and the claimant reduced the bill by £14 and there was a sum owing of £482. The claimant wrote to the defendant several times pressing for payment but was unsuccessful there had been no complaints as to the workmanship at this time. The claimant at the time was in dire financial need and the business was verging on bankruptcy a fact that Mrs Rees was aware of. The defendant telephoned the home and Mrs Rees answered, she made complaints about the work and said she would give them £300 in satisfaction of the whole debt. The defendant refused and said he would take the £300 and give her a year to clear the balance. He called at the house to collect the money but Mrs Rees remained firm that she would only pay £300 and demanded that the defendant wrote on the receipt ‘in completion of the account’ otherwise she would pay him nothing. The defendant needed the money immediately so reluctantly agreed to write this on the receipt but stated he fully intended to pursue the balance as the money paid did not cover the costs he had incurred. He subsequently brought an action to recover the balance. The defendant sought to rely on estoppel relying on the written receipt as demonstrating a promise to accept the lesser sum. Held- The claimants were successful. Mrs Rees could not rely on estoppel as there was no true agreement to accept less and because Mrs Rees had taken advantage of the builder’s position and mislead them as to her financial position.
Doctrine does not create entirely new rights where none existed before
It doesn’t create new contractual rights in the absence of consideration based on the fact that one party makes promise which the other must rely on –
COMBE V COMBE, 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.
TSEDE V NUBUASA, One CN, a relative of the def, incurred in the course of his employment by the plfs. On his being asked to pay the money, he took the defs. The defs promised to pay the debt on behalf of their relative Cn within week. They caused a note to be prepared in favor of the plfs to that effect. They were able to pay. The plf took action against them for the balance. It was contended on their behalf that there was no consideration for their promise to pay the debt and therefore the contract was not enforceable. Held- even though on the face of the note there was no consideration for the promise to pay, consideration need not always be express; it could be implied from the circumstances of a particular case.