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Contract Law: Principle of Past Consideration

Question

Task: Explain the concept of past consideration.

Answer

Introduction
Consideration is the amount paid as demanded by the promiser in return for the commitment. In several regions, the amount paid for the commitment wasn't an integral component of a contract, so if the sides had attained a binding contract, it would be more than enough. The past consideration received is deemed not to be a reasonable one. Before or after the undertaking, it should come into existence. If the agreed value predates the promise made, it would not be considered good [1].

In Roscorla v. Thomas, 1842, case, the agreement was non-binding to the members since the sole price paid for a commitment was about a stallion's performance. The same applied to the special agreement that took place before the guarantee was made. [2].

There have been several allowances that make a decent past consideration. These are:

The price had been given at the request of the individual making a commitment

The entities appreciate the compensation for the action;

The commitment of the act that it would've been binding has occurred and in development.

All these above conditions are evident in the case [3]. In fact, the defendant demanded that the claimant hold 60% of the stock and at that phase the participants agreed that the conduct would be repaid by a guarantee [4]. However where the obligation was already compelled by the promiser's arrangement, the common principle was that it is not a reasonable consideration to address an established contractual duty unless some added benefit was given. But still, the outcome would have been different if the promise to perform the responsibility in respect of the contract was committed to a third party. In an issue in which a third party was owed the binding commitment of the promise, the fulfilment of that commitment was regarded as a reasonable past consideration of the pledge of the promiser.

Furthermore, in this case [5], it was stated that just an act of that duty was not a reasonable factor where a commitment was legally bound to undertake out a certain duty. This helps to avoid corruption such as the officer's ransom for completing tasks that they were already required to do. If the entity does more than just fulfill an available duty, however, it would be considered a good factor [6].

However, at the moment there are two separate exclusions to the price commitment paid, which are:

Declarations of Past Consideration under Screening
Wherein, the collateral estoppel principle operates. Since this principle is meant to enforce obligations in certain cases in which it would be unacceptable not to do so, however for the amount paid it wasn't really a real alternative.

The concept was sensible in definition and operates where it would be unfair not to hold on to the pledge for the promiser. This was initially established in the dispute of [7]but had been withdrawn for several years till it was reinstated in [8] by the court. The court in this regards upheld that the code demonstrated as pseudo estoppels and maybe more evidently as contractual estoppels were that if one side to a contract concurs not to implement its freedoms in the lack of a new amount paid for the commitment. Instead, in favor of the other side, fairness would be removed. Nevertheless, this fairness was susceptible to the necessary condition:

That his position was misrepresented by the other party;

That the promiser might rescind from his commitment on the issuing of a reasonable notification which doesn't need to be an official statement, granting the promise a realistic opportunity to redo his tasks;

The certainty becomes final and irrevocable only if the promisee resumes his stance [9]

In this situation, there was another form of commitment which the courts would impose without past consideration and it was also claimed that the promisee must uphold the deal if:

  • It was created for the purpose of establishing a legal relationship;
  • The promisor understood that the promisee will enforce it.
  • It was enforced by the agreement to the harm of the promisee.

The court concluded that in this case, as it'd be unjust to impose these rights, the claimant would be prohibited from exercising his lawful freedoms. It also classified equitable estoppels as a circumstance wherein a promiser will be prevented to enforce their complete legal rights and benefits if he would have rendered a past consideration to limit this freedom [10]

Thus, estoppels could serve as protection in such situations to defend the promiser who operated with the pledge in a variable fashion but it may not emerge as a reason to act. Hence, it can be regarded as a guard than a weapon.

The importance of the case resides in the ‘said in passing’ decision statement issued by the court stating that an assurance that planned to be binding, intended to be proceeded upon, or actually acted on, is binding to the extent that its requirements are appropriately applied. In implementing this decision, it was also asserted that the homeowner was obligated to have a certainty to embrace a cheaper rent during the wartime, despite the fact that the renter did not provide an amount for it. There have been other requirements for this principle that have to be followed that have been established in this situation. There are certain limitations, such as:

Existence of a Promise
A specific promise must be made that aims to modify the contractual duty.

There were also some drawbacks, however, regarding the principle of estoppels, such as:

This only extended where the sides are already in a reachable legally binding partnership;

This gave only a safeguard to a claim made by the promiser that contravened the pledge so that it would not make an accusation.

In this [11] trial, a judge also confirmed that he acknowledged the decision that High Trees will be utilised to undermine a creditor's ability to pay the full value of a loan in certain cases [4].

Australia's contract law has extended further than the perceptible level in the case of High Trees to situations in which there’s no legal relationship between the entities before hand, and the rule can be viewed like a tool, and not only a shield. The judgment issued in the Waltan stores case broadened the principle of promissory estoppel founded in the High Trees case making way for the recognition and application of fair estoppel in the following case laws [12]. Equitable estoppels are called the principle which acknowledges that it would be inexcusable for one party to gain any kind of advantage over the other party as a consequence of forgery ensuing in steps taken by the other entity which lead to a negative outcome for their own self. A pre-existing legal agreement therefore didn't depended upon by this principle.

Hence it was found that perhaps the concept of past cost payment not being good consideration is no longer appropriate because of the development of the exclusion of Promissory estoppels towards this doctrine of past consideration in the situation of the High Trees. Furthermore, in the case of Waltan Stores, the case of the High Trees was not nullified by any argument, but only the principle of estoppels was established more shortly. Thus, this rule is still applicable today.

References
[1] L. Siliquini-Cinelli, " Taking (legal) traditions seriously, or why Australian contract law should not be codified: An unconventional inquiry," U. Queensland LJ, vol. 34, p. 99, 2015.

[2] H. Prince, "Forward, Contract Law Present and Future: A Symposium to Honor Professor Charles L. Knapp on Fifty Years of Teaching Law," Hastings Law Journal, vol. 66, p. 871, 2015.

[3] Pao On vLlau Yiu Long, AC 614, 1980 .

[4] E. a. L. Q. McKendrick, "Contract Law: Australian Edition," Macmillan International Higher Education, 2015.

[5] Glasbrook Brothers Ltd. v Glamorgan County Council [1924] UKHL 3, 1924.

[6] L. CONTRACT, CONSIDERATIO N, 2017.

[7] Hughes v Metropolitan Railway Co., 2 App. Cas. 439, 1877.

[8] Central London Property Trust Ltd v High Trees House Ltd [1947] KB 130, 1947.

[9] K. Maharaj, "An Action on the Equities: Re-Characterizing Bhasin as Equitable Estoppel," Alta. L. Rev., vol. 55, p. 199, 2017.

[10] A. Savelyev, "Contract law 2.0:‘Smart’contracts as the beginning of the end of classic contract law," Information & Communications Technology Law, vol. 26, no. 2, pp. 116-134, 2017.

[11] Collier v P & MJ Wright (Holdings) Ltd [2007] EWCA Civ 1329, 2007.

[12] P. Martin, "Estoppel: Binding promise without a contract: Court of appeal considers proprietary estoppel," LSJ: Law Society of NSW Journal, vol. 23, p. 93, 2016.


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Past Consideration Contract Law Assignment


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