Consideration

Topic Structure
• Definitions
• A. Legally Sufficient Consideration
• B. Consideration must move from the promisee but need not move to the
promisor
• C. Past consideration
• D. Pre-existing obligations
– Public duty
– Obligation owed to a third party

– Obligation already owed to the promisor

• Increasing/Decreasing pacts
– Part-payment rule

» Common law exceptions

» Equity exception – doctrine of promissory estoppel

• E. Gifts
WHAT IS CONSIDERATION?

‘Consideration is to contract
law as Elvis is to rock-and-roll:
the King.’
Gordon, J.D., ‘A Dialogue about the Doctrine of Consideration’ (1990) 75 Cornell L. Rev.
987, n 2.
DEFINITION

Currie v Misa (1874-75) L.R. 10 Ex. 153

‘A valuable consideration, in the sense of the
law, may consist either in some right,
interest, profit or benefit accruing to the one
party or some forbearance, detriment, loss
or responsibility, given, suffered or
undertaken by the other.’
ANOTHER DEFINITION
Dunlop Pneumatic Tyre Co Ltd v
Selfridge & Co. Ltd [1915] AC 847
‘An act or forbearance of one party, or the
promise thereof, is the price for which the
promise of the other is bought, and the
promise thus given for value is enforceable.’
LEGALLY SUFFICIENT CONSIDERATION
• The benefit or detriment must be a legally sufficient
benefit or detriment in the eyes of the law, but its
value is irrelevant.
– i.e. the benefit or detriment need not be equivalent
in value to that which is received in return.
• So, consideration must be LEGALLY sufficient
but need not be adequate IN REAL VALUE.
Chappell & Co Ltd v Nestle Co Ltd [1960] AC 87

• FACTS: Nestle ran a sales promotion whereby if

persons sent in 3 chocolate bar wrappers and a postal
order for 1 shilling 6d they would be sent a record.
• HELD: The wrappers did form part of the consideration
as the object was to increase sales and therefore
provided value. The fact that the wrappers were simply
to be thrown away did not detract from this.
White v Bluett (1852) 23 LJ Ex 36
• Facts: A son was upset by his father’s distribution of property
amongst his children and complained to his father. The father said
that he would forgive a debt owed to him by the son as long as he
stopped complaining.
• Held: Ceasing to complain could not be good consideration for the
promise to forgive the debt because the son did not have a right
to complain.
– Giving up rights can be legally sufficient but giving up
something you had no right to do in the first place cannot be
legally sufficient.
Hamer v Sidway (1891) 124 NY 538
(US case of persuasive value)

• Facts: An uncle promised to pay his nephew $5,000 if his

nephew abstained from drinking alcohol, using tobacco,
swearing, and playing cards or billiards for money until he
turned 21 years old. The nephew accepted his uncle’s
promise and refrained from the prohibited acts until he turned
21 years old.
• Held: As the nephew had a right to do these things, his
decision to accept his uncle’s promise and refrain from doing
the particular acts constituted consideration for the promise.
UNILATERAL/BILATERAL CONTRACTS
• Unilateral
– An act or forbearance in return for a promise.
– Put differently, a single exchange.
• Performance of an act by A for which B has promised to pay on
performance; consideration is the performance of the requested act by
A.
• Bilateral
– An exchange of mutual promises.
– Put differently, a double, or two-way exchange.
• E.g. Sale of goods agreement under which A promises to deliver the
goods to B, and B promises to pay for them on delivery; consideration
is the promises exchanged on both sides.
‘BARGAIN’

• The courts will only enforce ‘bargains,’ i.e. a deal or

an exchange where both parties come away with
something they have requested from the other.
– Note: ‘Bargain’ in this context does not mean
‘good deal’ or ‘special offer.’
• Whether the bargain is good or bad for either party
is irrelevant provided that there has been an
exchange.
Combe v Combe [1951] 1 All ER
767
• Facts: Between the dates of decree nisi and decree absolute on a petition
for divorce a husband promised his wife to pay her £100 per year free of
tax. The wife forbore to apply to the Divorce Court for maintenance, but
not on any request by the husband, express or implied, that she should so
forbear. The husband did not pay to his wife the payments he had
promised, and, after the lapse of seven years, the wife brought an action
on her husband's promise to make those payments to her.
• Held: There was no consideration for the husband's promise. The wife had
not promised not to apply for maintenance to the Divorce Court, and even
if she had so promised, she could not have deprived herself of that right.
Also, the wife's actual forbearance to make such an application was not
made at the request of her husband, express or implied.
Shadwell v Shadwell (1860) 9 CBNS 159

• Facts: When an uncle found out that his nephew would marry one E. N., agreed with
and promised the nephew, who was then unmarried, in writing: ‘My dear L., I am
glad to hear of your intended marriage with E. N.; and, as I promised to assist you
at starting, I am happy to tell you that I will pay to you 150l. yearly during my life
and until your annual income derived from your profession of a Chancery barrister
shall amount to six hundred guineas, of which your own admission will be the only
evidence that I shall receive or require. Your ever affectionate uncle, C. Shadwell.’
– The marriage was alleged to be the consideration but the case hinged on
whether the uncle requested the marriage consideration or whether it was
merely the condition for an unenforceable gift.
• Held: By the use of the word ‘starting’ the uncle was referring to the marriage and
that he impliedly requested it since the promise was an inducement for the nephew
to marry; it was something the uncle wanted and was prepared to pay for.
CONSIDERATION MUST MOVE FROM THE PROMISEE

• The rule is that consideration must move from the

promisee.
• A promisee must provide consideration for their promise, either by
incurring some detriment or by conferring a practical benefit on
the promisor.
– i.e. the benefit must be conferred on the promisor or the
detriment incurred by the promisee and not by someone else.
• E.g. If A promises to give B £5,000 in return for B’s promise to
employ C, C cannot enforce A’s promise because he has not
supplied consideration for it.
Tweddle v Atkinson (1861) 1 B & S 393

• Facts: John Tweddle (the plaintiff’s father) agreed with William Guy (the
plaintiff’s father in law) for the latter to pay money to the plaintiff upon his
marriage. The consideration for each promise was the promise of the other.
William Guy died before making the payment and William Tweddle (the
plaintiff) sued William Guy’s estate (Atkinson was the executor) for the
promised sum.
• Held: The promisee cannot bring an action unless the consideration for the
promise moved from him. No consideration moved from the plaintiff to
William Guy so the plaintiff had not right to sue on the contract.
– Wightman J: ‘…[I]t is now established that no stranger to the
consideration can take advantage of a contract, although made for his
benefit.’
CONSIDERATION NEED NOT MOVE TO
THE PROMISOR

• While consideration must move from the promisee,

consideration need not move to the promisor.
– i.e. if the promisor requests that the promisee
should benefit someone else (and not the
promisor) this will be good consideration.
• If the promisor had requested such a thing,
he must regard it as a benefit.
NOT ‘GOOD’ CONSIDERATION

1. Past consideration.

2. Performance of a pre-existing obligation.

a. Performance of a non-contractual obligation (public duty).

b. Performance of a contractual obligation owed to a third
party.

c. Performance of a contractual obligation already owed to

the promisor.
• Part-payment of a debt.

3. Gift promises.
1. PAST CONSIDERATION
• The rule is that past consideration is not good
consideration.
• What does past consideration mean though?
– Past consideration refers to a time before the making of
a promise.
– But the fact that the consideration is already past when
a party seeks to enforce a promise is not a problem
(executed consideration).
• Executed consideration: Promise  Completed
Act/Performance
• Executory consideration: Promise  Promise
EXAMPLE

• I gratuitously drive you to Larnaca (i.e. for free)

and when we arrive you promise to pay me €20 in
return. You never pay me though.
• I cannot sue you on your promise to pay me €20.

• The benefit conferred by me to you (i.e. driving

you to Larnaca) is past consideration because I
drove you before the promise was made.
Roscorla v Thomas (1842) 3 QB
234
• Facts: Roscorla bought a horse from Thomas. Thomas
subsequently promised Roscola that the said horse did not
exceed five years old, and was sound, and free from vice.
Nevertheless, at the time of the making of the said promise, the
horse was not free from vice, but, on the contrary was then very
vicious, restive, ungovernable, and ferocious.
• Held: Thomas’ subsequent assurance to Roscorla that the horse
was sound and free from vice was unenforceable because the only
possible consideration for it was the price already payable under
the original contract and that consideration was past.
Re McArdle [1951] Ch. 669

• Facts: The claimant had voluntarily carried out the improvements

to the property two years before the unenforceable promise to pay
her for doing so.
• Held: Since the works had all been completed before the
execution of the agreement, the consideration for the agreement
was a wholly past consideration.
- The fact that the promise said ‘in consideration of’ your
carrying out the improvements did not turn the improvements
into good consideration as the improvements had already been
made by the time the promise was made.
RATIONALE OF THE PAST
CONSIDERATION RULE

• Contracts must be bargains,

– i.e. consideration must be

requested by the promisor as
the price of his promise.
EXCEPTIONS TO THE PAST
CONSIDERATION RULE
• Pao On v Lau Yiu Long [1980] A.C. 614, per Lord Scarman at 629-630:

‘An act done before the giving of a promise to make a payment or to confer some other benefit

can sometimes be consideration for the promise. The act must have been done at the promisors'

request: the parties must have understood that the act was to be remunerated either by a

payment or the conferment of some other benefit: and payment, or the conferment of a benefit,

must have been legally enforceable had it been promised in advance.’

– Promise to pay that comes after benefit is conferred may be enforceable if:

• It is done at promisor’s request.

– See Lampleigh v Braithwait (1615) Hob 105.

• The is an implied promise of payment.

– See Re Caseys Patents [1892] 1 Ch 104.

• The promise must be legally enforceable had it been promised in advance.

Lampleigh v Braithwait (1615) Hob 105

• FACTS: The defendant had killed a man and was due to be hung for
murder. He asked the claimant to do everything in his power to obtain a
pardon from the King. The claimant went to great efforts and managed to
get the pardon requested. The defendant then promised to pay him £100
for his efforts but never paid up.
• HELD: Whilst the promise to make payment came after the performance
and was thus past consideration, the consideration was proceeded by a
request from the defendant which meant the consideration was valid. The
defendant was obliged to pay the claimant £100.
Re Caseys Patents [1892] 1 Ch 104

• FACTS: The defendant, Casey, managed some patents owned by the plaintiffs,
Stewart and Charlton. The plaintiffs later signed a document that read: ‘In
consideration of your services… we hereby agree to give you one-third share of
the patents’. This payment was in return for work Casey had already done. When
Casey registered this document on the patent register in order to claim his 1/3
interest in the patents, the plaintiffs applied to have the document expunged from
the register.
• HELD: The Court of Appeal held that Casey must have assumed his work was to
be paid for in some way. The work done was not just a matter of goodwill but
something a manager would have expected to have been paid for. The promise to
pay was, therefore, just a crystallization of this reasonable expectation. Therefore,
Casey’s past work was good consideration and the agreement was enforceable.
EXAMPLE

• I drive to you to Larnaka and when we arrive you

promise to pay me €20 in return.
• Usually would be past consideration so not good
consideration (see previous example).
• But if my car has a taxi sign on it, or perhaps you
have always paid me for previous lifts to Larnaca,
then the consideration will not be past in relation
to this new implied promise.
2. PERFORMANCE OF A PRE-EXISTING LEGAL DUTY

• Is the promise to perform an existing legal

duty sufficient or insufficient consideration?

– i.e. will doing something you are already legally

obliged to do count as a benefit or detriment
(consideration) in the eyes of the law?

• But what do we mean by a ‘pre-existing legal

duty’?
HOW HAVE THE COURTS ADDRESSED THIS ISSUE?

• Formal Approach:
– Focus on strict rules of consideration.

– Any new offer must be paid for by a new detriment moving from the
promisee.
– Focus is on identifying ‘new’ or ‘additional’ legal detriment (must give
or promise to give up something they own).
– Formal because it uses the traditional concepts the bargain theory of
consideration - reciprocal exchange, showing mutual benefit +
detriment.
HOW HAVE THE COURTS ADDRESSED THIS ISSUE?

• Practical Approach:
– Look for evidence of ‘new’ consideration for the contract as a whole.

– So long as at least one party gains an additional benefit, then this is ‘good’
consideration.
– Focus is usually on an additional benefit to the promisor in paying someone more
(additional benefit) for the same (offeree promises to do no more than they are
obliged already to do).
– Absence of mutual benefit + detriment (not a bargain in the traditional/formal/legal
sense, but it is in a practical/pragmatic business sense, hence supports the actual
expectations of how businesses deal with one another).
– Consideration is said to be ‘practical.’
PRE-EXISTING LEGAL DUTY SITUATIONS

a. Performance of a non-contractual obligation

(public duty).
b. Performance of a contractual obligation owed
to a third party.

c. Performance of a contractual obligation

already owed to the promisor.
• Part-payment of a debt.
 PROMISE
PROMISE PROMISE
Existing Duty to Third
Existing Public Duty Party Existing Duty to Promisor

A makes a promise to B in A makes a promise to B in A makes a promise to B in

consideration of B doing/not doing consideration of B doing/promising consideration of doing/promising
what they are required to do under to do what they are bound under what they are already bound to do
a duty imposed by law (i.e., contract to do with C under a contract with A
statute)

“I promise a police officer £600 if “I promise you £1000 if you “I promise you an extra £10,000 if
she protects my property from perform your contract with your complete my house
theft” someone else” renovation a previously agreed”

“I promise to discharge you from

the debt of £1000 if you promise
to pay me £700.”
a. PERFORMANCE OF A NON-CONTRACTUAL
OBLIGATION (PUBLIC DUTY)

• The general rule is that performance of an existing non-contractual duty

imposed by general law or public duty generally cannot in itself form good
consideration.
– Rationale: It would be highly undesirable to allow public officials to
extract benefits in return for the performance of their existing legal
duties.
EXISTING PUBLIC DUTY
EXISITING DUTY CREATED BY STATUTE/PUBLIC DUTY
Duty Created by General Law Regardless of Contract

NO NEW DETRIMENT GIVEN/PROMISED BY PROMISEE

Promisor already entitled to benefit under statute

GRATUITOUS PROMISE

No Benefit supplied by promisee

CASES
• In Collins v Godefroy (1831) 1 B Ad 950 the promise to pay a witness who
was already under a public duty to give evidence was found to lack
consideration.
• But it will depend on the facts of the case:
– In Glasbrook Brothers Ltd v Glamorgan CC [1925] AC 270, the owner
of a mine, fearful of violence during a miners’ strike, agreed to pay the
police £2,200 for protection and the court enforced the payment because
the police had provided more protection than their public duty prescribed.
– In Ward v Byham [1956] 1 WLR 496, the father of an illegitimate child
promised to pay the child’s mother £1 per week provided that the child was
‘well looked after and happy’ and the court found that the mother had
promised to do more than was required under her legal duty by promising
to keep the child ‘happy.’
Harris v Sheffield Utd F.C. [1988] QB 77

• FACTS: Up until 1970 the club had made special

arrangements for the attendance of police officers at
matches for which payments had been made. Thereafter
the police continued to attend at matches both inside and
outside the ground, but the club’s view was that they were
obliged to do so in accordance with their duty to maintain
law and order. The club refused to make any payment.
• HELD: Police did not exceed their existing public duty, so
no good consideration.
EXISTING PUBLIC DUTY

Collins v Glasbrook v
Godefroy [1831] Glamorgan CC
1 B & Ad 950 [1925] AC 270
UNENFORCEABLE ENFORCEABLE
No new promisee New promisee
detriment detriment

Within E/D Beyond E/D

EXISTING PUBLIC DUTY

Harris v Sheffield Ward v Byham

United FC [1988] [1956] 1 WLR 496
QB 77 Denning LJ (Obiter)

UNENFORCEABLE ENFORCEABLE
No new promisee New promisee
detriment detriment?

Within E/D – unless: Beyond E/D

Police Act 1996 25 (1)
b. PERFORMANCE OF A CONTRACTUAL OBLIGATION OWED TO
A THIRD PARTY

• ‘There is no authority for the proposition that where there has been a promise to one person to
do a certain thing, it is not possible to make a valid promise to another to do the same thing.’
– See Scotson v Pegg (1861) 6 H & N 295 where Pegg’s promise for Scotson’s delivery of
coal was held to be enforceable, although Scotson was already contractually obliged to do
so for a third party; and Pao On v Lau Yiu Long [1980] A.C. 614 where the HL affirmed
that the mere promise of performing the duty owed to a third party is good consideration.
• Example:
– There is a contract between A and X which obliges A to deliver goods to X.
– B promises A £50 if he delivers goods to X (something A has already promised to do for X).
– X is a party to his contract with A but he is a third party in relation to A and B’s alleged
contract.
– Can A’s promise to perform his existing contractual obligation to X count as consideration
for B’s promise to pay?
– The answer is Yes.
Scotson v Pegg [1861] 30 LJ Ex 225
• FACTS: A purchaser of some coal paid the defendant to carry and
to unload the coal. The claimant was the supplier of the coal who
had also paid the defendant to carry and unload the coal. The
claimant brought an action to recover the money paid arguing the
defendant was already under an existing duty to carry and unload
the coal and thus provided no consideration.
• HELD: An existing contractual duty owed to a 3rd party to the
contract can amount to valid consideration for a new promise.
Consequently the claimant could not recover the sums paid and
the defendant was entitled to get paid twice for doing the same
thing.
New Zealand Shipping v Satterthwaite [1975] AC 154

• FACTS: A contract for the carriage of a machine by ship to New Zealand provided that
the owners of the goods could not sue the carriers or stevedores unless any claim was
brought within one year of the action giving rise to the cause of action. The stevedores
were independent contractors who were engaged to load and unload the ship by the
ship owner. A stevedore damaged the machine whilst unloading it. The owner of the
machine brought an action against the stevedore after the limitation period specified in
the contract. The stevedore sought to rely upon the clause in order to escape liability.
The owner of the machine argued that the stevedores could not rely on the clause as
they were not privy to the contract and had not provided them with any consideration.
• HELD: The stevedores had provided consideration in the form of services of unloading
the machine. there is nothing to prevent consideration owed to a 3rd party being valid
consideration for a new promise to another party. Therefore the stevedores had
protection from the limitation clause. The claimant's action was unsuccessful.
 EXISTING DUTY OWED TO A THIRD PARTY

Shadwell v Shadwell Scotson v Pegg [1861]

(1860) 9 CBNS 159 30 LJ Ex 225

New Zealand Shipping v

Pau on v Lau Yiu Long
Satterthwaite [1975] AC
[1980] AC 614
154

“An agreement to do an act the promisor is under an existing

obligation to a third party to do may quite well amount to valid
This was approved by Lord
consideration . . . The promisee obtains the benefit of a direct
Scarman in this later PC case
obligation”

Lord Wilberforce
 EXISTING DUTY OWED TO A THIRD PARTY

• What is the rationale for this rule?

1. B has twice as many obligations as he had before

– New legal detriment –can be sued twice
– New pressure NOT to breach with A
2. So, if B does not paint the house:
– A will sue him for breach of contract: A - B contract for £1000
– C will sue him for breach of contract: C – B contract for £200
3. No policy objections
– No risk of extortion by public officials (as in existing public law
duties)
– No risk of duress - e.g., why should C want B to breach their
contract with A?
c. PERFORMANCE OF A CONTRACTUAL
OBLIGATION ALREADY OWED TO THE
PROMISOR (EXISTING CONTRACTUAL DUTY)
• Can a second promise by the promisor to perform the contractual obligation he
already owes to the promisee constitute good consideration for the second promise
of the promisor to the promisee?
• Example:
– I promise to paint your house and you promise to pay me €500 in return. There
is a benefit and burden for each of our promises and there is a clear exchange.
However, I find the work originally harder than expected and I promise to finish
painting your house if you make a fresh promise to pay me an extra €100.
– Can I enforce your second promise of an extra €100?
– The answer will usually be no because a promise to perform a contractual
obligation already owed to the other party will not constitute good
consideration. I will not have given anything in return for the second promise.
 EXISTING CONTRACTUAL DUTY EXAMPLES

EXISTING DUTY VARIATION

1. Abe contracts with Bob 1. Bob gets behind schedule
to build a house owing to staff shortages
so Abe promises to pay
him extra money to
complete on time
2. Carly agrees to buy
Dave’s house if he 2. Dave promises to reduce
moves out by the end of the house price by 1% if
the month. he can stay a further
month before moving out

3. Hume agrees to accept

3. Hume lends Kant £5000
£3500 in full settlement
of Kant’s debt
EXISTING CONTRACTUAL DUTY TYPES
Increasing Decreasing
Pacts Pacts
• Promise to pay MORE for • Promise to accept LESS for
the same the same

• Variation to an existing • Part-payment of debt

agreement variations

• “I will struggle to complete • “I can’t pay you the £1000 I

your extension my owe you because I have lost
Christmas because 2 of my my job. I have £600 in
workman are ill. I will give savings. Okay, I promise to
you an extra £1000 to buy in accept £600 and clear the
more manpower if you whole debt of £1000, so you
complete the extensions as won’t owe me any longer
we agreed” the extra £400”
Stilk v Myrick (1809) 2 Camp. 317
• Facts: This was an action for seaman's wages, on a voyage from London to the Baltic
and back. In the course of a voyage some of the seamen desert, and the captain not
being able to find others to fill their place, promises to divide the wages which would
have become due to them among the remainder of the crew. When the ship returned
to London, the captain refused to honour his promise and one of the seamen sued for
the extra amount.
• Held: The captain’s promise to divide the wages of the seamen who deserted the
ship to the remaining seamen was void for want of consideration.
– There was no consideration for the captain’s promise: the sailor who had sued
had already promised to sail the ship for its entire voyage.
• But see Hanson v Royden (1867) LR 3 CP 47 where a seaman was promoted
during the course of the voyage and undertook additional duties: these were
held to constitute consideration for a promise to pay him extra wages.
Hartley v Ponsonby (1857) 7 E & B 872
• Facts: After the desertion of seamen, a ship was left short of hands in harbour, before the
voyage was completed. The master of the ship, to induce the remaining seamen to perform
the rest of the voyage, promised to pay them a sum of money in addition to their wages.
They accordingly performed the rest of the voyage with the diminished number of hands.
One of the remaining seamen brought an action against the master for the sum promised.
– The jury found that the seaman made the agreement without coercion, for the best
interests of the owners who could not have obtained additional hands at a reasonable
price but it was unreasonable for so large a ship to proceed on the completion of the
voyage with the diminished number of hands.
• Held: On the basis of jury’s finding, which the Court understood to mean that it was unsafe
to proceed with the voyage, it was held that the plaintiff was entitled to recover, as the
seamen were not bound, by their original contract of service, to proceed with the
diminished number of hands; and their undertaking to do so was therefore a good
consideration for the master's promise.
EXISTING CONTRACTUAL DUTY

Harris v Watson [1791] Peake

102 Hartley v Ponsonby
[1857] 7 E & B 872
Stilk v Myrick [1809] Camp.
31; Esp. 129

UNENFORCEABLE ENFORCEABLE
No new promisee New promisee
detriment detriment

Within E/D Beyond E/D

Williams v Roffey Bros & Nicholls
(Contractors) Ltd [1991] 1 QB 1
• Facts: The plaintiff entered into a subcontract with the defendants, who held the main
building contract, to carry out carpentry work in a block of 27 flats for an agreed price of
£20,000. The plaintiff got into financial difficulty because the agreed price was too low
for him to operate satisfactorily and at a profit. The main contract contained a time
penalty clause and the defendants, worried lest the plaintiff did not complete the
carpentry work on time, made an oral agreement to pay the plaintiff an additional sum of
£10,300 at the rate of £575 for each flat on which the carpentry work had been
completed. Approximately seven weeks later, when the plaintiff had substantially
completed eight more flats, the defendants had made only one further payment of
£1,500 whereupon the plaintiff ceased work on the flats. The plaintiff then sued the
defendants for the additional sum promised.
• Held: The agreement for payment of the additional sum was enforceable and did not fail
for lack of consideration.
– Note that Stilk v Myrick was distinguished.
EXISTING CONTRACTUAL DUTY: THE ‘PRACTICAL BENEFIT’
APPROACH

Williams v Roffey Bros. & Nicholls(Contractors) Ltd.

[1991] 1 QB 1 per, Glidewell LJ

An ‘alternative’ (NOT a replacement) to Stilk v

Myrick
PRACTICAL BENEFIT
Glidewell LJ in Williams v Roffey Bros. defines a ‘practical
benefit’ as existing when the promisor :

Obtains in practice a benefit, or obviates a disbenefit, and

[the] promise is not given as a result of economic duress or
fraud…then the benefit to the promisor is capable of being
consideration … so that the promisor’s promise will be
legally binding
Practical Benefit is found only when 2 conditions are
satisfied:

(1) There is some real benefit in kind to the promisor – they have
good reason for paying more for an already agreed upon performance.

(2) The promisor’s additional promise has not been extracted under
duress – i.e., is a freely made promise.
PART PAYMENT OF A DEBT
• When a loan agreement is made, the debtor makes a promise to pay back all the
debt (usually plus interest).
– Debtor: person who owes money to a creditor.
– Creditor: person who is owed money or a seller who provides goods ‘on credit.’
• A promise to accept part payment in discharge of the whole debt is not good
consideration for the debtor’s promise to pay such a sum as the debtor is already
obliged to pay that part of the debt (and the remaining debt).
• It follows that a promise by a creditor to accept a smaller amount in discharge of a
larger amount is not binding and the creditor can still sue for the full amount of the
dent.
• But: the promise may be binding if the debtor goes beyond the existing
obligation at the creditor’s request.
Pinnel’s case (1601) 77 E.R. 237
• Pinnel brought an action of debt on a bond against Cole, of 161.
for payment of 81. 10s. the 11th day of Nov. 1600. The defendant
pleaded that the plaintiff accepted less in full satisfaction.
• It was resolved by the whole Court, that payment of a lesser
sum on the day in satisfaction of a greater, cannot be any
satisfaction for the whole, because it appears to the Judges that
by no possibility, a lesser sum can be a satisfaction to the
plaintiff for a greater sum.
Pinnel’s case (1601) 77 E.R. 237

Established the part payment of a debt rule:

‘Payment of a lesser sum on the day in satisfaction of a

greater sum cannot be any satisfaction for the whole.’

A common law exception example and rationale:

But the gift of a horse, hawk, or robe in satisfaction is good. For it shall
be intended that a horse, hawk, or robe, might be more beneficial to
the plaintiff than the money, in respect of some circumstance, or
otherwise the plaintiff would not have accepted of it in satisfaction.
Foakes v Beer (1884) LR 9 App Cas 605
• Facts: Mrs Beer had obtained a judgment against Dr Foakes for £2,090
19s. Sixteen months later, Dr Foakes asked for time to pay. A written
agreement was made under which Mrs Beer undertook not to take “any
proceedings whatsoever” on the judgment, in consideration of an
immediate payment by Dr Foakes of £500 and on condition of his paying
specified instalments “until the whole of the said sum of £2,090 19s. shall
have been paid and satisfied.” Some five years later, when Dr Foakes had
paid £2,090 19s., Mrs Beer claimed £360 for interest on the judgment debt.
• Held: Mrs Beer’s claim was upheld.
– The actual result of the case does not appear to be unjust because it
seems that, in making the agreement, Mrs Beer intended only to give
Dr Foakes time to pay and not to forgive interest.
D & C Builders Ltd v Rees [1966] 2 QB 617

• Facts: The defendant owed £482 to a firm of builders. Six

months after payment had first been demanded, the
defendant's wife (acting on his behalf) offered the builders
£300 in full settlement. The builders accepted this offer as
they were in desperate straits financially and there was
some evidence that the defendant's wife knew this.
• Held: On the basis of Foakes v Beer, the builders were
nevertheless entitled to the balance.
Is a promise to accept a lesser amount of money
which you are owed, enforceable?

Pinnels Case [1602] 5 Co Rep 117a

(Affirmed in Foakes v Beer [1884] 9 App Cas
605)
Accord and Satisfaction: so, payment of lesser sum in satisfaction
of larger amount is not good consideration to discharge a debt

What is ‘good satisfaction’ (consideration)? – evidence of

‘additional detriment’ (Common Law Exceptions as established in the
Pinnel’s case):
 ‘Hawk, Horse, Robe’
 Payment in different place
 Payment at an earlier time
 Composition with creditors
ESTOPPEL
• Principle of E-stop-pel.
– A principle of ‘justice and of equity.’
• Definition
– A principle which prevents a person, who, by his words or conduct, leads another
to believe something in a certain state of affairs from going back on such words
or conduct when it would be unjust or inequitable for him to do so.
– Freeman v Cooke [1848] 2 Ex. 654
• ‘Where one by his words or conduct wilfully causes another to believe in the existence
of a certain state of things and induces him to act on that belief or to alter his position
the former is precluded from (going back on his word).’
• Types of estoppel:
– Estoppel by representation.
– Estoppel by convention.
– Proprietary estoppel.
– Promissory estoppel.
PROMISSORY ESTOPPEL
• Application of the general principle of estoppel to promises made to forego
(or ‘waive’) your strict contractual rights to claim your full debt as per the
agreement.
• Raising PE prevents (or ‘estopps’ or ‘stops’) the promise maker going back
on their contractual promise when someone has relied on this promise and
where to deny it any form of legal validity (principally because it is not
supported by consideration) would create injustice or ‘inequity’.
• PE is therefore a defensive rather than offensive legal tactic, used to
deflect (on the grounds of fairness) a promisor’s attempts to enforce their
common law contractual rights – can’t do it if the courts thinks it will create
unfairness.
– Used as a shield and not a sword.
BIRTH OF PROMISSORY ESTOPPEL
• Hughes v Metropolitan Railway Co (1877) LR 2 App Cas 439.
• The High Trees Case
– Central London Property Trust v High Trees House [1947] 1 KB 130
• Why is this a radical case?
– Circumvents the rule on part-payment of debts as seen in
Pinnel’s Case and Foakes v Beer.
– Is this the end of the consideration doctrine?
» No: courts only apply this doctrine when a number of
conditions apply.
» It is not intended to replace the doctrine of
consideration. (Denning in Combe v Combe)
APPLICATION
• The application of PE was used as a legal device to
get around the common-law rule of part-payment
of a debt in Pinnel’s Case.
• It only works as an ‘equitable’ principle.

– i.e. you do not have a ‘right’ to estoppel; rather,

judges will raise it to prevent any inherent
unfairness arising by a strict application of
common-law principles.
 Hughes v Metropolitan Railway Co
(1877) LR 2 App Cas 439 - Facts
• A notice to repair, within six months, houses held on lease by the Metropolitan
Railway Company, was given on the 22nd of October, 1874, to expire on the 22nd
of April, 1875.
• It was answered by a letter of the 28th of November, suggesting that the lessor
might like to purchase the premises.
• The lessors' solicitors, by letter of the 1st of December, asked the price demanded,
and were told, by letter on the 30th of December, that it was £3000.
• The lessors' solicitors on the 31st of December, 1874, wrote to say that,
considering the condition of the premises, “the price is out of all reason. We must
therefore request you to reconsider the question of price, having regard to the
previous observations, and to the fact that the company have already been served
with notice to put the premises in repair, and we shall be glad to receive in due
course a modified proposal from you.”
Hughes v Metropolitan Railway Co (1877) LR 2 App Cas 439 -
Facts

• No further communication on this subject took place till the 19th

of April, 1875, when the agent for the company wrote to say that
as “the negotiations had not resulted in a sale” the company
would take in hand the repairs.
• On the 20th of April the solicitors for the Appellant wrote,
declaring that “the negotiations” had been broken off in December
last, and that there had been ample time since then to complete
the repairs.
• On the 22nd of April the notice expired, and on the 28th the
ejectment was served.
Hughes v Metropolitan Railway Co (1877) LR 2 App Cas 439 - Judgment

The company was entitled in Equity to be relieved against the

forfeiture, for that the letters at the end of November and at
the beginning of December had the effect of suspending the
notice, and that the suspension did not come to an end till the
31st of December, till which time the operation of the notice
was waived, so that no part of that time could be counted
against the tenant in a six months' notice to repair.
Central London Property Trust Limited v High
Trees House Limited [1947] K.B. 130 - Facts

• By a lease under seal dated September 24, 1937, the claimant company
let to the defendant company (a subsidiary of the claimants) a block of
flats for a term of ninety-nine years from September 29, 1937, at a ground
rent of 2,500l. a year.

• In the early part of 1940, owing to war conditions then prevailing, only a
few of the flats in the block were let to tenants and it became apparent
that the defendants would be unable to pay the rent reserved by the lease
out of the rents of the flats. Discussions took place between the directors of
the two companies, which were closely connected, and, as a result, on
January 3, 1940, a letter was written by the claimants to the defendants
confirming that the ground rent of the premises would be reduced from
2,500l. to 1,250l. as from the beginning of the term. The defendants
thereafter paid the reduced rent.
Central London Property Trust Limited v High
Trees House Limited [1947] K.B. 130 - Facts

• By the beginning of 1945 all the flats were let but the defendants
continued to pay only the reduced rent. In September, 1945, the claimants
wrote to the defendants claiming that rent was payable at the rate of
2,500l. a year and, subsequently, in order to determine the legal position,
they initiated friendly proceedings in which they claimed the difference
between rent at the rates of 2,500l. and 1,250l. for the quarters ending
September 29 and December 25, 1945.

• By their defence the defendants pleaded that the agreement for the
reduction of the ground rent operated during the whole term of the lease
and, as alternatives, that the claimants were estopped from demanding
rent at the higher rate or had waived their right to do so down to the date
of their letter of September 21, 1945.
 The High Trees case
LANDOWNER LANDLORD
TENANTS
Central London Property Trust High Trees House

1937: “For 99 years you can lease my “I agree to lease your building on these
building for £2500 PA” terms”

“Perhaps we can come to an arrangement so 1940: “I can’t make the payments as I

you can stay in London?” have no tenants”

1940: “You can pay me half rent of £1250 1940: “I promise to pay £1250 PA for
PA for the duration of the war” the duration of the war”

1945: “The war is over. Can I start charging full rent again for the last 6 months of 1945 and
beyond?”

HIGH
COURT
Central London Property Trust Limited v High Trees
House Limited [1947] K.B. 130 – Judgment

(1) That where parties enter into an arrangement which is intended to create legal
relations between them and in pursuance of such arrangement one party makes a
promise to the other which he knows will be acted on and which is in fact acted on by the
promisee, the court will treat the promise as binding on the promisor to the extent that it
will not allow him to act inconsistently with it even although the promise may not be
supported by consideration in the strict sense and the effect of the arrangement made is
to vary the terms of a contract under seal by one of less value; and
(2) That the arrangement made between the claimants and the defendants in January,
1940, was one which fell within the above category and, accordingly, that the agreement
for the reduction of the ground rent was binding on the claimant company, but that it only
remained operative so long as the conditions giving rise to it continued to exist and that
on their ceasing to do so in 1945 the claimants were entitled to recover the ground rent
claimed at the rate reserved by the lease.
 No ‘right’ to
Can be estoppel
nullified by
giving of Equitable Only
‘reasonable
notice’

Can Suspend Prevent

ESTOPPEL:
and Extinguish Injustice
common law caused by
rights common law

WHEN TO
USE
When applying
Pinnel’s Defensive Only
created NOT Offensive
unfairness

Decreasing
‘Shield’ (to be
Pact
‘raised’) NOT a
Agreements
Does not ‘Sword’
Only
overrule
Foakes/Pinnels
REQUIREMENTS
• Pre-existing legal relationship.
• A clear promise made by the promisor promising to ‘forego’ (waive, give
up) their contractual right to full payment (i.e., they’ll accept a lesser
amount).
• Reliance on this promise by the promisee – I.e., they change their position
in some way because of the promisor’s promise.
• Unfair or inequitable consequences for the promisee if the promisor is
allowed to go back on the promise made because of the promisee’s change
in position.

UNLESS: (1) Promisor gives reasonable notice of intention to revert back to

contractual rights; (2) it is possible to return to this position
3.GIFT PROMISES

• A gift promise is gratuitous

and as such
unenforceable.