Contract Law important cases

Offer
Offeror – The person who makes the offer.
Offeree – The person who the offer has been made too (Free to accept or reject)
Bilateral and Unilateral offers
In order to understand the law on offer and acceptance, you need to
understand the concepts of unilateral and bilateral contracts. Most
contracts are bilateral. This means that each party takes on an obligation, usually by
promising the other something – for example, Ann promises to sell something and
Ben to buy it. (Although contracts where there are mutual obligations are
always called bilateral, there may in fact be more than two parties to such a
contract.

A unilateral contract arises where only one party assumes an obligation

under the contract. Examples might be promising to give your mother £50 if
she gives up smoking for a year, or to pay a £100 reward to anyone who
finds your lost purse, or, as the court suggested in Great Northern Railway
Co v Witham (1873), to pay someone £100 to walk from London to York.
What makes these situations unilateral contracts is that only one party has
assumed an obligation – you are obliged to pay your mother if she gives up
smoking, but she has not promised in turn to give up smoking. Similarly, you
are obliged to pay the reward to anyone who finds your purse, but nobody
need actually have undertaken to do so.
Great Northern Railway Co v Witham (1873)

Offer is not an invitation to treat

Offers to the public at large

For example, a student may offer to sell her old textbooks to anyone in the
year below, or the owner of a lost dog may offer a reward to anyone who
finds it.
 In this case, the defendants who were the proprietors of a medical
preparation called, 'The Carbolic Smoke Ball,' issued an advertisement that
they would pay 100 pounds to anyone who contracted influenza after using
one of their smoke balls in a specified manner and for a specified period.
They added that they had deposited a sum of 1000 pounds with their
bankers 'to show their sincerity. The plaintiff contracted influenza after using
the product as directed and subsequently claimed the reward.

The defendants argued: 1. That it was impossible to contact the world at

large. But it was held that there was a valid offer which was binding. 2. It was
a bet within the meaning of the gaming act 3. It was a mere sales puff 4.
There was no offer to any person.

However, the court of appeal rejected those arguments. Lord Bowen is

instructive on this point… Lord justice Bowen “It was also said that the
contract is made with all the world i.e with everyone and that you cannot
contract with everybody. It is not a contract made with the world. There is
the fallacy of the argument. "It is an offer made to all the world; and why
should not an offer be made to all the world which is to ripen into a contract
with anybody who comes forward and performs the condition? *
Nevertheless, offers should be distinguished from advertisements, invitations
to treat, tender etc. Although the offer is made to the world, the contract is
made with a limited portion of the public who come forward and perform the
condition of the faith of the advertisement.

Invitation to treat
Some kinds of transaction involve a preliminary stage in which one party
invites the other to make an offer. This stage is called an invitation to treat.

Advertisements

A distinction is generally made between advertisements for a unilateral

contract, and those for a bilateral contract

Advertisements for

unilateral contracts

These include advertisements such as the one in Carlill v Carbolic Smoke

Ball Co, or those offering rewards for the return of lost property, or for
information leading to the arrest or conviction of a criminal.

Bilateral contract

Advertisements of goods for sale are normally construed as invitations to

treat: Partridge v. Crittenden [1968] 2 All ER 421. An advertisement in a
magazine stated ‘Bramblefinch cocks and hens, 25s each’. As the
Bramblefinch was a protected species, the person who placed the
advertisement was charged with unlawfully offering for sale a wild bird
contrary to the Protection of Birds Act 1954, but his conviction was quashed
on the grounds that the advertisement was not an offer but an invitation to
treat.

It was held in Grainger & Sons v Gough (1896) that the circulation of a
price-list by a wine merchant was not an offer to sell at those prices but
merely an invitation to treat.
Auction Sales

The auctioneer's request for bids is an invitation to treat and each bid is an
offer. Each offer is cancelled by any higher offer by another bidder: Payne v.
Cave [1789] 3 TR 148.

● In this case, the defendant's bid for a worm-tub and a pewter worm was
highest at the auction, but he withdrew his bid before the hammer fell. The
auction was under standard conditions. Held: no contract had been made.
The bid was an offer which could be withdrawn at any time before
acceptance by the auctioneer's hammer. The auctioneer's request for bids is
not an offer which can be accepted by the highest bidder.
This Case is Authority For… An offer can be revoked at any time before it has
been accepted. At a normal auction

● An auctioneer asking for bids is an invitation to treat;

● Any bid in response to this is an offer;

● The fall of the auctioneer’s hammer is the acceptance.

● Also, in Harris v. Nickerson [1873] LR 8 QB 286, the defendant

auctioneer advertised that lots including certain office furniture would be
sold by him at Bury St Edmunds on specified days. The plaintiff had a
commission to buy this furniture and travelled from London for the sale.
However, the lots were withdrawn from sale. The plaintiff brought an action
against the defendant to recover for his loss of time and expenses. Held: he
had no such right of action. The advertisement was only an invitation to treat
and did not amount to a promise that all the articles advertised would be put
up for sale.

Displays of Goods

The display of an article with a price on it in a shop window is an invitation to

treat: Fisher v. Bell [1961]1 QB 394. In Fisher v Bell (1960) the defendant
had displayed flick knives in his shop window, and was convicted of the
criminal offence of offering such knives for sale. On appeal, Lord Parker CJ
stated that the display of an article with a price on it in a shop window was
only an invitation to treat and not an offer, and the conviction was
overturned.

Where goods are sold on a self-service basis, the customer makes an offer to
buy when presenting the goods at the cash desk, and the shopkeeper may
accept or reject that offer

There are two main practical consequences of this principle. First, shops do
not have to sell goods at the marked price – so if a shop assistant wrongly
marks a CD at £2.99 rather than £12.99, for example, you cannot insist on
buying it at that price (though the shop may be committing an offence under
the Trade Descriptions Act 1968 – see Chapter 16 on consumer contracts).
Secondly, a customer cannot insist on buying a particular item on display –
so you cannot make a shopkeeper sell you the sweater in the window even if
there are none left inside the shop. Displaying the goods is not an offer, so a
customer cannot accept it and thereby make a binding contract.

Invitation to Tender

According to Jill Poole on Casebook on Contract Law, "a request for tenders is
an invitation to treat and each tender is an offer." The requestor is free to
accept or reject any tender to purchase goods, even if it is the highest bid:
Spencer v. Harding [1870] LR 5 CP 561

Spencer Case: There is no obligation to sell to the person who submits the
highest or most advantageous bid.

● In this case, the defendants advertised a sale by tender of the stock in

trade belonging Ellbeck & 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
advertisement amounted to an invitation to treat, the tender was an offer,
and the defendant could choose whether to accept the offer or not.

● However, an invitation to tender may amount to an offer of the unilateral

type if that is what was clearly intended e.g. in Harvela v. Royal Trust of
Canada [1985] Ch, 103; [1986] 1 AC 207 the statement "we bind ourselves
to accept the highest offer" was construed as a valid offer.

Harvela v. Royal Trust of Canada [1985] Ch, 103; [1986] 1 AC 207: It

proves that some ads can be construed as offers. It is a question of
construction (what is the language used in the ad?

“We bind ourselves to accept the highest bid”

● In this case, the first defendant held shares in the company. By means of a
telex communication they invited the claimant and the second defendant to
make an offer to purchase the shares by sealed tender, They stated in this
invitation that they bound themselves to accept the highest offer (“We bind
ourselves to accept the highest bid”)

● The Plaintiffs made a bid for two million, one hundred and seventy five
dollars the second defendant made a bid for 2.1 million or a 100,000 more
than any other bid made (this is what we call a referential bid) The first
defendant accepted the second defendants offer. The referential bid is seen
as a little bit speculative. It was held that the first defendant was bound to
accept P's offer which was higher.

Offers must be distinguished from Requests for Information

In Harvey v. Facey [1893] AC 522; [1893] UKPC 1, the plaintiff asked the
defendant "will you sell Bumper Hall Pen? Telegraph lowest cash price". The
defendant replied, "lowest cash price for BHP 900 pounds." The plaintiff then
cabled the defendant "we agree to buy BHP for the 900 pounds asked by
you. Please send us your title deed in order that we may get early
possession." The Privy Council held that there was no contract concluded
between the parties as the and telegram was not an offer. The defendant
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. Therefore, there was no evidence of an intention
that the telegram sent by the defendant was to be an offer.

Clifton v Palumbo - “I am prepared to offer you my estate for $600,000.”

Held: These words were construed as preliminarily discussions as to price
since the sale of land is a complex process.

Sale of Land

Because the process involves many steps (sometimes complex) it is usually

difficult to distinguish the offer from merely steps in the negotiation process:
Gibson v. Manchester City Council [1979] UKHL 6; 1 WLR 294; 1 All
ER 972.

In this case, the City Council adopted a policy of selling council houses to
tenants. The respondent tenant applied on a printed form for details of the
price and mortgage terms. The city treasurer wrote to the respondent that
the Council 'may be prepared to sell the house to you at the purchase price
of 62,725 less 20% = E2,18o.' The letter gave details of the mortgage likely
to be made available and stated 'If you would like to make a formal
application to buy...please complete the enclosed application form and return
it to me as soon as possible.' The respondent completed the application form
and returned it on 5 March. Before contracts were prepared and exchanged,
political control of the Council changed and the Council decided to proceed
only with those sales where contracts had already been exchanged. The
respondent sought specific performance of the contract, claiming that the
offer in the city treasurer's letter had been accepted by him. Held: there was
no binding contract because no offer capable of acceptance had been made
by the Council. The statements in the city treasurer's letter that the Council
May be prepared to sell' and inviting Mr Gibson 'to make a formal application
to buy' did not constitute an offer to sell, only an invitation to treat.

Issue: Whether the early negotiation is a binding contract? - It is not.

Also, in Clifton v. Palumbo [1944] 2 All ER 497, the statement 'l am prepared
to offer you my estate for £600,000' was held not to constitute an offer.

1. Agreement for Sale (Pay deposit and Sign)

2. Conveyance Stage

3. Closing Stage (Pay off the 90%

Termination of Offer

An offer must be accepted to have legal effect. It can however stay open
until it is terminated by any of the following

Express rejection by the Offeree

Counter-offer

a) Offeree must accept unconditionally the offer of offeror

b) No new terms must be introduced
c) If new terms are introduced, it might be construed as an offer that
runs counter to the original offer.
d) The legal effect is to destroy the original offer
e) (You can’t revert to the original offer once it has been destroyed by
the new offer)

The Offeree must accept the exact terms proposed by the Offeror
unconditionally and must not introduce new terms which the Offeror
has not had an opportunity to consider. An introduction of new terms
will amount to a counter-offer.
● In Hyde v. Wrench [1840] 49 ER 132, the defendant offered to sell
his farm for 1000 pounds to the plaintiff. In reply, the plaintiff offered
950 pounds. This was rejected. Later, the plaintiff purported to accept
the original offer of 1000. It was held that there was no contract.
● However, a counter-offer must be distinguished from a mere request
for information: Stevenson Jacques & Co. v. McLean [1880] 5 QBD 346.
Lapse of Time (Offer can’t be opened indefinitely - Depends on
the nature/subject matter of the contract.
Where the offeror has not specified how long the offer will remain
open, it will lapse after a reasonable length of time has passed. Exactly
how long this is will depend upon whether the means of
communicating the offer were fast or slow and on its subject matter –
for example, offers to buy perishable goods, or a commodity whose
price fluctuates daily, will lapse quite quickly. Offers to buy shares on
the stock market may last only seconds.
In Ramsgate Victoria Hotel v Montefiore (1866) the defendant
applied for shares in the plaintiff company, paying a deposit into their
bank. After hearing nothing from them for five months, he was then
informed that the shares had been allotted to him, and asked to pay
the balance due on them. He refused to do so, and the court upheld his
argument that five months was not a reasonable length of time for
acceptance of an offer to buy shares, which are a commodity with a
rapidly fluctuating price. Therefore the offer had lapsed before the
company tried to accept it, and there was no contract between them.
Some offers are made subject to certain conditions, and if such
conditions are not in place, the offer may lapse.
In Financings Ltd v Stimson (1962) the defendant saw a car for sale
at £350 by a second-hand car dealer on 16 March. He decided to buy it
on hire-purchase terms. The way that hire purchase works in such
cases is that the finance company buys the car outright from the
dealer, and then sells it to the buyer, who pays in instalments. The
defendant would therefore be buying the car from the finance
company (the plaintiffs), rather than from the dealer. The defendant
signed the plaintiffs’ form, which stated that the agreement would be
binding on the finance company only when signed on their behalf. The
car dealer did not have the authority to do this, so it had to be sent to
the plaintiffs for signing. On 18 March the defendant paid the first
instalment of £70. On 24 March the car was stolen from the dealer’s
premises. It was later found, badly damaged and the defendant no
longer wanted to buy it. Not knowing this, on 25 March the plaintiffs
signed the written ‘agreement’. They subsequently sued the defendant
for failure to pay the instalments. The Court of Appeal ruled in favour
of the defendant, as the so-called ‘agreement’ was really an offer to
make a contract with the plaintiffs, which was subject to the implied
condition that the car remained in much the same state as it was in
when the offer was made, until that offer was accepted. The plaintiffs
were claiming that they had accepted the offer by signing the
document on 25 March. As the implied condition had been broken by
then, the offer was no longer open so no contract had been concluded.

Death
Death of the offeror
The position is not entirely clear, but it appears that if the offeree
knows that the offeror has died, the offer will lapse; if the offeree is
unaware of the offeror’s death, it probably will not (Bradbury v
Morgan (1862)). So if, for example, A promises to sell her video
recorder to B, then dies soon after, and B writes to accept the offer not
knowing that A is dead, it seems that the people responsible for A’s
affairs after death would be obliged to sell the video recorder to B, and
B would be obliged to pay the price to the executors. However, where
an offer requires personal performance by the offeror (such as painting
a picture, or appearing in a film) it will usually lapse on the offeror’s
death.
Death of the offeree
here is no English case on this point, but it seems probable that the
offer lapses and cannot be accepted after the offeree’s death by the
offeree’s representatives.

Revocation

The Offeror can revoke the offer at any time before acceptance. The
Offeror may even break a "promise" to keep the offer open for a period
of time, unless supported by consideration: Routledge (for example,
making a down payment to keep something.
In Routledge v Grant (1828) the defendant made a provisional offer
to buy the plaintiff’s house at a specified price, ‘a definite answer to be
given within six weeks from date’. It was held that, regardless of this
provision, the defendant still had the right to withdraw the offer at any
moment before acceptance, even though the time limit had not
expired.
Withdrawal must be communicated
It is not enough for offerors simply to change their mind about an offer;
they must notify the offeree that it is being revoked.
The revocation of an offer does not have to be communicated
by the offeror; the communication can be made by some other
reliable source.

In the situation of the unilateral contract (where one party promises

something in return for some action on the part of another party) the
Offeror must take all reasonable steps to notify persons who are likely
to accept, that the offer is being revoked: Shuey v. U.S. [1875] 92 US
73.

Withdrawal of an offer to enter into a unilateral contract

There are a number of special rules that apply in relation to the
revocation of an offer to enter into a unilateral contract. An offer to
enter into a unilateral contract cannot be revoked once the offeree has
commenced performance.
However, if it can be established that the Offeree has commenced
performance, then the offer may not be revoked: Errington v.
Errington and Woods [1952] 1 KB 290.
 Agreement

Branca v. Cobarro [1947] KB 857 is instructive

Facts: The defendant contracted with the plaintiff to sell his farm. The defendant wrote
that it "was a provisional agreement". So, the question for the court was whether or not
this is a valid contract
Held: It was held that there was a contract because there were terms which could be
formalised later.

Acceptance can be done through Conduct

Brogden v Metropolitan

Acceptance of Tender
A tender is an invitation to treat often made by large public
organisations such as councils, hospitals and government
 departments. The tender is often related to fairly large contracts that
need to be filled, such as the building of a hospital. Any response made
as a result of the advertisement to tender is considered an offer. It is
then up to the buyer of the goods or services to accept whichever
tender is most suitable.

What are the legal rules in relation to Tenders?

If X invites tenders for supply of a specific service on a specific date, then

acceptance of the tender results in a binding contract

If tenders are invited for supply of a specific quantity of goods over a period
of time, then acceptance will result in a contract.

If an invitation to tender does not specify the quantity of goods, but requires
the supply of goods in such quantities as may be ordered from time to time,
then "acceptance" of such a tender will not result in a contract. Only when
orders are placed for appropriate quantities for the goods will a contract
result.

Acceptance by Post (Pay Keen attention to)

The general rule for acceptances by post is that they take effect when they
are posted, rather than when they are communicated. The main reason for
this rule is historical, since it dates from a time when communication through
the post was even slower and less reliable than it is today. Even now, there is
some practical purpose for the rule, in that it is easier to prove that a letter
has been posted than to prove that it has been received or brought to the
attention of the offeror.

If a party has agreed to use the post as a means of communication then he

has also agreed to bare the risks involved.

Where the mail is registered, you have proof that the person sent, but
without, there is no proof.

Where acceptance by post is an appropriate and reasonable means of

communicating, then acceptance is complete immediately when the letter of
acceptance is properly addressed, stamped and posted. The contract is
concluded, even if the letter subsequently fails to reach the Offeror.
it is unreasonable to use the post (when dealing with perishable goods).

The postal rule was established as an exception of the normal rule that
acceptance must be communicated to the offeror. Amongst the reasons why
the postal rule was established was the delay involved in portal transit, as
well as the fact that the offeree seeds control of the acceptance letter to the
postal office. These reasons do not seem to apply to email communications
which are near instantaneous and allow an offeree to confirm whether a
message has been delivered to an offeror. For example, by way of delivery
notification. These days these situations are governed by statutory
provisions such as the electronic transactions acts which state that a receipt
occurs when the electronic record enters an information processings systems
of the addressee. Put another way, acceptance does not occur when the
message leaves the senders processing system but rather when it is
delivered to the recipient’s processing system.

Acceptance by email can be considered as tantamount to situations of

instantaneous communication in which case acceptance would only become
effective once the email was received by the offeror. On the other hand,
acceptance by email could be viewed along the lines of the postal rule in
which case the acceptance would become effective as soon as you hit
“send”.

Part B (Intention to Create Legal Relations)

Advertisements
° Salespersons or businesses may make vague exaggerated claims in ads. It
is customary to regard such as "mere puff" and not intended to be binding,
unless it can be established that there is clear misrepresentation or deceit.

In Weeks v. Tybald [1605] Noy 12, the D was not bound when he offered 100
pounds to the man who would marry his daughter with his consent. But the
defence of "mere puff" may be rejected if the courts determine that the
Offeror intended to be bound (recall Carlill [a892] EWCA Civ 1);11

‘Mere puffs’

Where an offer is extremely vague, or clearly not intended to be taken

seriously, the law will not give its acceptance contractual effect. In Weeks v
Tybald (1604) the defendant announced that he would give £100 to any
suitable man who would marry his daughter, but it was held that his words
were not intended to be taken seriously, and his promise was not legally
binding.

Domestic Agreements

Generally speaking, agreements between husband and wife living together

as a household are presumed not binding legally, unless the contrary is
stated. (The seriousness of the arrangements may be a factor the courts take
into account).

Lived together: In Balfour v. Balfour [1919] 2 KB 571

Wasn’t living together (This case rebuts the presumption): In Merritt v

Merritt (1969) Mr Merritt had left his wife to go and live with another
woman, and subsequently met his spouse to resolve various financial
arrangements. Sitting in Mr Merritt’s car, they decided that he would pay his
wife £40 a month, out of which she was to pay the outstanding mortgage
payments on their house; he would transfer the house to her sole ownership
when the mortgage was paid off. Mrs Merritt then refused to get out of the
car until her husband put the agreement in writing. Eventually, he signed a
piece of paper stating what they had agreed. The wife duly paid off the
mortgage, but the husband then refused to transfer ownership of the house
to her. The Court of Appeal upheld the wife’s claim. Lord Denning pointed out
that the presumption applied in Balfour v Balfour, that an agreement
between husband and wife was ‘a family arrangement’, was not valid where
the parties had separated or were about to do so. In such circumstances the
parties ‘do not rely on honourable understandings’, but ‘bargain keenly’, and
it could be safely presumed that any agreement between them was intended
to be legally binding. The US courts have shown themselves increasingly
willing to give effect to domestic agreements, as shown by the case of
Morone v Morone (1980), where an agreement between a cohabiting couple
that the man would financially support the woman in return for her help in
running their home and helping in his business was held to be binding.

It was held that the agreement was purely a domestic agreement

which raises a presumption that the parties do not intend to be
legally bound by the agreement. There was no evidence to rebut
this presumption.

Agreements between parent and child

In Errington v. Errington Woods [1952] 1 KB 290, Court of Appeal, 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
installments, 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 installments. The mother brought
an action to remove the wife from the house. It was held that the wife was
entitled to remain in the house. The father had made the couple a unilateral
offer. The wife was in the process 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 on full
performance. Per Lord Denning,
Held: Once performance had commenced the Mother was stopped
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.

Social Agreements

• It is said that to offer a friend a meal is not to invite litigation (Cheshire &
Fifoot)

In Coward v. Motor Insurance Bureau [1963] 1 QB 359, Court of Appeal,

Coward was killed whilst riding pillion on a motorcycle driven by a friend and
work colleague on the way to work. The collision was due to the negligence
of the friend. Coward's widow sought to claim damages from the Motor
Insurance Bureau since the rider's insurance did not cover pillion passengers.
The Motor Insurance Bureau would only be obliged to pay if insurance for the
pillion was compulsory.

Insurance was only compulsory for pillions if they were carried for hire or
reward. The widow therefore argued that this was a contract for hire or
reward. However, the MIB argued that to amount to a contract for hire or
reward there had to be an intention to create legal relations which was
absent in agreements of this nature between friends. It was held that there
was no contract of hire or reward as it was a social and domestic agreement
and therefore no intention to create legal relations. The widow was therefore
not entitled to compensation.

Commercial Agreement (yes there is intention)

There is a presumption that in such agreements the parties intend to be

bound, Esso Petroleum v. Commissioners of Customs & Excise [1976] a WLR
3, and only express words will rebut this, Rose and Frank v. Crompton Bros.
[1925]AC 445.
In Rose and Frank v. Crompton Bros. (supra), the claimants and
defendants entered an agreement for the supply of some carbonised tissue
paper. Under the agreement the claimants were to be the defendant's sole
agents in the US until March 1920. The contract contained an honourable
pledge clause which stated the agreement was not a formal or legal
agreement and shall not be subject to the jurisdiction of the courts in neither
England nor the US. The defendants terminated the agreement early and the
claimants brought an action for breach. It was held that the honourable
pledge clause rebutted the presumption which normally exists in commercial
agreements that the parties intend to be legally bound by their agreements.
The agreement therefore had no legal affect and was not enforceable by the
courts.

Collective Agreements

In general, the collective agreement between a trade union and an employer

is not binding: Ford Motor v. Amalgamated Union of Engineering and
Foundry Workers [1969]2 QB 303. However, if the terms of the
agreement are incorporated into the employee's contract of service, they will
be legally binding on employer & employee.
Contracts binding on a minor

The only contracts which are binding on a minor are contracts for the supply
of necessaries. ‘Necessaries’ are interpreted as including not just the supply
of necessary goods and services, but also contracts of service for the minor’s
benefit.
In Chapple v Cooper (1844) an undertaker sued a widow, who was a minor,
for the cost of her husband’s funeral. It was held that this was a necessary
service, and so the young woman was obliged to pay. In discussing what kind
of goods and services could be considered necessaries, the court said
‘Articles of mere luxury are always excluded, though luxurious articles of
utility are in some cases allowed.’

The Sale of Goods Act also provides that if necessaries are sold to a minor,
but before receiving the goods the minor decides that they are no longer
wanted, there is no obligation to accept and pay for them. Nor is a minor
bound by a contract which contains oppressive or exceptionally onerous
terms. Whether a term is sufficiently onerous to exclude liability will depend
on the circumstances of each case. In Fawcett v Smethurst (1914) a minor
was held not to be bound by a contract for the hire of a car, even though it
was a necessary service in this case, because the contract included a term
making him liable for damage to the car ‘in any event’ – that is, whether or
not the damage was his fault.

Where there is a binding contract for necessaries, the minor is only bound to
pay a reasonable price for them, which need not be the contract price.
Consideration

Consideration is usually described as being something which represents

either some benefit to the person making a promise (the promisor) or some
detriment to the person to whom the promise is made (the promisee), or
both.

In Dunlop v Selfridge (1915) the House of Lords explained consideration in

terms of purchase and sale – the plaintiff must show that he or she has
bought the defendant’s promise, by doing, giving or promising something in
return for it. Atiyah has suggested that consideration can simply be seen as
‘a reason for the enforcement of promises’, with that reason being ‘the
justice of the case’.

Consideration need not benefit the promisor

Consideration need not benefit the promisor – so there can be consideration

where the promisee suffers some detriment at the promisor’s request, but
this gives no particular benefit to the promisor. For example, in Jones v
Padavatton (see p. 61), the daughter’s giving up her job would be
consideration for the mother providing an allowance, even though it did not
directly benefit the mother (though as we have seen, the mother’s promise
was not binding because there was no intention to create legal relations).

Executory’ and ‘executed’ consideration

Consideration is often divided into two categories: executory and executed.

Executory consideration is where something is to be done in the future
after the contract has been formed. Executory consideration exists when the
contracting parties make promises to each other because they are promising
something for the future, after the contract has been made – on making the
contract you promise to deliver some goods to me and I promise to pay for
them when they arrive, for example. A bilateral contract usually involves
executory consideration.

Executed consideration is where at the time of the formation of the

contract the consideration has already been performed. If I promise to give
£20 to anyone who finds my lost handbag, returning the bag is both
acceptance of my offer (and thus the time when the contract is formed) and
executed consideration for my promise. Executed consideration usually
occurs in unilateral contracts.
Consideration must not be past

Consideration must be given in return for the promise or act of the other
party; something done, given or promised for another reason will not count
as consideration. If one party has completed performance before the other
offered consideration, then as a matter of fact it is unlikely that the earlier
performance was done in return for that consideration. So, if Ann looks after
Ben’s dog while Ben is on holiday, and when Ben returns he promises to give
Ann some money, Ann cannot enforce that promise because she did not look
after the dog in return for it – she had already looked after the dog

There are two exceptions to the rule that past consideration is no

consideration. The first is where the past consideration was provided at the
promisor’s request, and it was understood that payment would be made in
return. This exception can be traced back to the old case of Lampleigh v
Brathwait (1615).
Consideration must be sufficient

Although consideration must provide some benefit to the promisor or

detriment to the promisee, these do not have to amount to a great deal. This
principle is usually described in the rather confusing phrase ‘consideration
must be sufficient but need not be adequate’, which effectively means that
the courts will not inquire into the adequacy of consideration, so long as
there is some.
Consideration must be of economic value

In Thomas v Thomas (discussed above), for example, the plaintiff

suggested that following her husband’s wishes was part of the consideration,
but the court rejected this argument because they said the husband’s wishes
had no economic value (though in the event this did not alter the outcome of
the case, as the widow’s own promise was consideration). Similarly, in White
v Bluett (1853), a father promised not to make his son repay money he had
borrowed, if the son promised not to keep boring him with complaints. The
court held that the son’s promise was not sufficient consideration to make
his father’s promise binding, because it had no economic value.
Existing public duty

In Collins v Godefroy (1831) the plaintiff had been summoned to give

evidence in a court action. The defendant promised to give him six guineas
for doing so, but later refused to pay. The plaintiff tried to enforce the
promise, but it was held that since he was legally obliged to give the
evidence, doing so could not be considered consideration for the promise.
Clearly there are public policy reasons, as well as technical legal ones, for
this principle.

In Glasbrook Brothers v Glamorgan County Council (1925) Glasbrook

Brothers were the owners of a coal mine in South Wales. Their employees
went on strike and Glasbrook Brothers asked the police to place a guard at
the coal mine during the strike. The police refused to do this as they
considered that regular checks by a mobile police patrol would be sufficient
to protect the mine. The mine owners therefore offered to pay the police
£2,200 to cover the extra cost of having the police stationed at the mine full
time during the strike. When the strike was over, the mine owners refused to
pay. They argued that the police had an existing duty to protect the mine
and therefore had provided no consideration for their promise to pay. The
House of Lords held that the police had provided an extra service which did
amount to consideration. The police were merely under a public duty to
maintain law and order and could choose how they achieved this. Viscount
Cave LC said:

“If in the judgement of the police authorities, formed reasonably and in good
faith, the garrison was necessary for the protection of life and property, then
they were not entitled to make a charge for it.”

Existing contractual duty to the promisor

The position on contractual duties and consideration has changed in recent
years, and the implications of the change are still rather unclear. In the past,
the rule was that performance of an existing contractual duty owed to a
promisor was not consideration, as illustrated by two nineteenth-century
shipping cases.

Contractual duties to pay debts

Special rules apply to contractual duties regarding debts. Where someone

owes another money and cannot pay the full amount, they will sometimes
offer to pay a smaller sum, on condition that the creditor promises to accept
it as full settlement for the debt – in other words, agrees not to sue later for
the full amount. Even if such an agreement is made, it is only binding if the
debtor provides some consideration for it by adding some extra element.
“The past payment for a debt is not good consideration for a
promise to forgo the balance”

When can we show consideration?

a) Early payments (good consideration)

b) Payment in kind (y agree to accept payment in chattel)
c) Something of value (payment of kind or item of value)
d) Convenient of location(payment at different location, amounts to
consideration)

Other exceptions

Composition agreement A debtor who owes money to several different

people, and cannot pay, may offer to pay each one a percentage of their
claim, which is often expressed as so much in the pound, and known as a
dividend. As an example, if A owes £10 to B, £50 to C and £100 to D, and
cannot pay, her creditors may agree to accept a ‘dividend’ of 10p in the
pound in settlement of each debt, which will amount to £1 to B, £5 to C and
£10 to D. Such an arrangement is called a composition agreement, and the
courts have long held such an agreement to be binding, so that none of the
creditors can later sue for the full amount – although it is hard to see what in
the arrangement could amount to consideration.

Wood v Roberts 1818

Payment of a lesser sum by a third party.

Welby v Drake 1825