Consideration and Promissory Estoppel Notes

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Poole: Contract Law ANSWERS - SELF TEST – ENFORCEABILITY OF PROMISES– INTENTION TO CREATE LEGAL RELATIONS, CONSIDERATION, PROMISSORY ESTOPPEL AND DURESS 1. What is the effect of including an "honour clause" in a written agreement? (2) An "honour clause" has the effect of rebutting the normal presumption of an intention to create legal relations in a commercial agreement (1). Its effect is to render the agreement binding in honour only so that it will not be a legally binding contract. (1)

2. What is the consideration to support a unilateral promise? (1) The consideration to support a unilateral promise is performance of the act requested (Carlill v Carbolic Smoke Ball). (1)

3. Why were the chocolate wrappers held to be part of the consideration in Chappell v Nestle? (1) The chocolate wrappers were held to be part of the consideration because they were requested by Nestle i.e. submitting the chocolate wrappers was part of the act they requested in exchange for their promise. (1)

4. Pao On v Lau Yiu Long is authority for two propositions relating to what can constitute consideration. Explain these propositions (4). (a) Pao On is authority for the previous request device i.e. the past consideration rule can be avoided if it is possible to find a previous request which carried with it an understanding or implied promise to pay (or give some protection)(1). Any act or promise which follows thereafter will not be past consideration in relation to that implied promise or understanding. The later express promise will merely fix the amount of the payment or the exact form of protection (1). (b) Pao On is also authority for the fact that performance or promising to perform an existing contractual duty owed to a third party can be a good consideration to support a promise (1). Therefore the Ps' promise to perform the contractual duty owed to the Fu Chip Company (to retain some of the shares for one year) could be a good consideration to support the Ds' (majority shareholders') promise to indemnify them against losses in that period. (1)

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Poole: Contract Law

5. What was the difference between the approach of the majority of the Court of Appeal in Ward v Byham and the approach of Denning LJ in that case? (2) The majority of the CA in Ward v Byham sought to establish that the promisee had provided consideration by going beyond her legal duty (1), whereas Denning LJ considered that the mere performance of an existing legal duty should be a good consideration if it was, as here, of factual benefit to the promisor. (1)

6. Are the following true or false statements? [6]. [1 point for each statement correctly identified as true or false] (a) The result of Williams v Roffey is that it is no longer necessary to provide consideration to support an alteration promise if duress is absent. False (b) Williams v Roffey is authority for the fact that an alteration promise is enforceable if there is a factual benefit arising to the promisee. False (not factual benefit to promisee and not all alteration promises) (c) Williams v Roffey is authority for the fact that an alteration promise to pay more money is enforceable if there is a factual benefit arising to the promisor from making that promise. True (d) Williams v Roffey has no application to promises on the formation of contracts. True (e) Promissory estoppel has no application to promises on formation of contracts. True (f) Promissory estoppel only applies where there is no consideration to support an alteration promise. True (although it will tend only to be utilised in respect of alteration promises to accept less which are not supported by consideration. This is because alteration promises to pay more are likely to be supported by consideration if factual benefit is easily demonstrated, e.g. Coote’s argument. In some cases this may turn on whether factual benefit is identified subjectively or objectively)....
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