Contract Law Consideration

Nick would be suing Angela claiming the full arrears and the return of the car. Nick can only succeed if he can prove there is no consideration.

Consideration can be defined by Sir Frederick Pollock, approved by Lord Dunedin in Dunlop v Selfridge Ltd [1915] AC 847 where each party must give something in return from what is gained from the other party; ‘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.’ The traditional definition in Currie v Misa (1875) LR 10 Ex 153; (1875-76) LR 1 App Cas 554 has been criticised where ‘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’.

Due to Angela falling ill, Nick accepts half the original amount of rent being payment of a lesser sum but the rule at common law being the rule in Pinnel's Case (1602) 5 Co Rep 117a, is that the payment of a lesser sum will not satisfy the full amount and is not good consideration. Pinnel’s Case (1602) 5 Co Rep 117a establishes the principle that a promise to accept less and not to sue for the balance was unenforceable unless the promisee gave some new consideration for it. In Pinnel’s case Cole owed Pinnel £8-10s-0d but paid £5-2s-2d at an earlier date at Pinnel’s request, claiming that his earlier payment of the lesser sum discharged him of paying the full debt. However it was held that part-payment in itself was not consideration.

There are exceptions to the rule where consideration may be provided being if the being if the creditor agrees to accept earlier payment of a lesser sum, if the payment is made in a different form or if the payment is made in a different place.

This rule in Pinnel’s case was confirmed by the House of Lords in Foakes v Beer [1884] 9 App Cas 605. Mrs Beer held Dr Foakes liable on a judgement debt and agreed that she would not take further action if Foakes paid £500 and the rest in instalments. After Foakes repaid his debt accordingly, Mrs Beer claimed for the interest the judgment debt carried being £360. The House of Lords held that Mrs Beer was entitled to the interest as Mrs Beer’s promise to not take further action was not supported by consideration from Foakes as he had done no more than what he was contractually bound to do. And so this promise was unenforceable.

Angela would argue that Nick promised to release her from contractual obligation and where there is no consideration, a further exception to the rule in Pinnel's Case is in the equitable doctrine of promissory estoppel. This is where a promisor promises not to enforce his legal rights, so for Nick not to recover the rest of the money, and the promisee relies on this promise, equity will prevent the promisor from going back on his/her promise where it would be inequitable to do so.

The equitable exception of the doctrine of promissory estoppel originated from the judgment made by Lord Denning in the case of Central London Property Trust Ltd v High Trees House Ltd [1947]. The High Trees tenant company was a subsidiary of the landlord company where they had a 99 year lease for a payment of £2500 per annum of rent. Due to World War II the Defendants could not get enough tenants and in 1940 the landlord company agreed to reduce the rent to £1250. After the war in 1945 the flats were fully let and the landlord company sued for payment of the full rental costs from June 1945 onwards, i.e. for last two quarters of 1945.

Based on previous judgments such as Hughes v Metropolitan Railway Co [1877] UKHL 1, where it shows that the application of the doctrine means that in some cases although there is an absence of consideration it may be enforceable, Denning J held that the full rent was payable from the time that the flats became fully occupied in 1945 as their promise to accept only half was intended to apply during war conditions.

Certain requirements must be met in order to use this Doctrine being that there must be an existing contractual obligation between the parties which is clear in Nick and Angela’s case being in a 9 month contract, there must be clear and unequivocal terms which here Nick made the promise for Angela to pay less until fully recovered.

The promisee must have altered his/her position to his/her detriment in reliance therefore it would be in inequitable to go back on the promise but I believe that Nick could argue here that there was no reliance as Angela is in a better financial situation. It must be inequitable for the promisor to go back on his promise and it was said in Coombe v Coombe [1951] 2 KB 215 that the doctrine may only be raised as a defence: ‘as a shield and not a sword’, this is applicable for Angela’s case.

The lottery win by her husband Willy would not have any relevance in this case as he is not contractually obliged in any way to give Angela money being a third party husband.

It may be argued that Angela is acting with ‘dirty hands’. She continued to pay the reduced rent for a week even though she had recovered from her illness and this may insinuate she was acting inequitable. Another argument against Angela is that she made a significant financial gain 3 months after paying the reduced amount and she has a duty to Nick to inform him of any change in circumstances as in the case of With v O’Flanagan [1936] Ch 575. Angela has a duty to inform Nick in the chance of circumstances in regard to her financial gain. However Angela may argue that there was only one clear term made being that she can pay the reduced amount until she is fully recovered.

I believe Nick would not be successful in trying to claim for the full arrears as in the High Trees case where only the last 2 quarters or 1945 were recoverable, where Angela would use the defence of Promissory Estoppel, she would perhaps need to pay the full arrears from when she had financial gain with the inheritance money. I think this is fair. However if Nicks argument of stating there is no reliance for the defence of promissory estoppel is successful, she would need to pay for the full arrears. As for the return of the car, he would most likely be unsuccessful in this claim if Angela pays the rent owed as she would be fulfilling her contractual obligation to Nick.


* Poole J (2010) textbook on Contract Law. 10th ed . Oxford OUP * Richards P (2011) Law of Contract , 10th ed. Essex. Pearson. * Poole J (2010) Casebook on Contract 10th ed, Oxford. OUP *