Contract Law

Lecture 5 and 6
Textbook

Shaukat Mahmood and Nadeem

Shaukat, Contract Act 1872, 7th Edition
2006
CONSIDERATIONS:

Considerations is when one party approves the benefit right or profit and the other party suffers a
determent loss or responsibility and vice versa. Consideration only needs to be sufficient & not
adequate. i.e selling of car at Rs.20 is valid. Consideration is the act of each party exchanging
something of value to their detriment. A sells A’s automobile to B. A is exchanging and giving up A’s
automobile while B is exchanging and giving up B’s cash. Both parties must provide consideration.
Consideration may be sufficient. It need not be adequate.
Past Consideration: section 25(2) - 25. An agreement made without consideration is void, unless–
(2) it is a promise to compensate, wholly or in part, a person who has already voluntarily done
something for the promisor, or something which the promisor was legally compellable to do, or unless
Consideration from the past which was not provided to induce a promise is “past consideration” and usually
does not create an enforceable contract. Where the promisor had received the consideration before the date of
the promise, the consideration is past consideration or executed consideration. Voluntarily doing something
for someone is not consideration. A see’s B’s lawn needs to be cut so A voluntarily does so. B comes home
from work and is so pleased that B gives A $30 for cutting the lawn. The following week A cuts B’s lawn
again without B asking A to do so. A now asks B for $30 for cutting the lawn and B refuses to do so. A claims
they have a contract since A has provided consideration by mowing B’s lawn, even though it was voluntary. A
is incorrect. B is not obligated to provide consideration to A. There is no contract. However, if B had asked A
to mow the lawn, but did not set the price, A would probably be able to enforce the contract after mowing the
lawn because B requested he do so. Past consideration is bad consideration. A rendered some services to B in
the month of June. In July, B promised to pay A Rs. 500. The consideration of A is past consideration.
 As general rule, consideration is not valid for pre-exciting duty. However, if the acts done go
beyond the scope of pre-exsisting consideration for such acts become valid.
 Case law

1. Lampleigh v Braithwait
The defendant, Braithwaite, killed a man. He asked the plaintiff, Lampleigh to secure
him a pardon from the king. The plaintiff spent many days doing this, riding and
journeying at his own cost across the country to where the King was and back again.
Afterwards, the defendant promised to pay the plaintiff £100 in gratitude. He later failed to
pay the money. The plaintiff sued. The defendant argued that the plaintiff had acted before
any promise to pay was given by the defendant. Therefore, he had only provided past
consideration for a promise given in the future. The court considered whether this past
consideration was sufficient to create a valid contract. The court found in favour of the
plaintiff. The promise was indeed given after the plaintiff had acted. However, the plaintiff
had acted upon a request made by the defendant. The court considered that the original
request by the defendant contained an implied promise to pay the plaintiff for his efforts.
Promise to pay a time-barred debt
If part payment of debt is made at earlier date along with something else of monitory value that will be considered
as valid considerations. When a debt is barred by limitation, the debtor can waive the benefit of that plea and
promise to discharge the debt. Such a promise is enforceable. A time-barred debt can be taken as valid consideration
for a subsequent promise. Example: A owes Rs. 1,00,000 to B, but the debt is time-barred under the
Law of Limitation Even so, if A gives a written promise to B to pay 50,000, it is deemed a valid contract.

1. Pinnels Case:

Facts
The defendant owed the claimant a sum of money. The defendant offered to pay half the amount in satisfaction of
the full debt, and the claimant agreed. However, the claimant later changed their mind and sued for the remainder of
the debt.

Issue(s)
Did the defendant’s part-payment of the debt provide consideration for the claimant’s promise to discharge the full
debt? Part-payment of a debt cannot be consideration to discharge the full debt.

Decision
The Court held in favour of the claimant. The part-payment was not valid consideration.

Other
The Court noted, obiter, some situations in which payment of a lesser value might still be good consideration:
 Early payment;
 Payment at a different place than specified in the agreement;
 Payment using a chattel.
The justification for these exceptions was that it was for the claimant to decide whether these things were more
valuable to him than full payment of the debt.
In order for part payment debt to be valid. As per pinnel’s case two elements need to be
satisfied: earlier date and something else with the monitory value.

 CASE LAW ON PRE-EXISTING DUTY

1. Stilk v Myrick (pre-existing duty)

The judgment is belongs to the defendant. At the beginning , there have 11 sailors in a ship,
but at the end just remain 9 sailor. Then the captain was agreed to pay more wages for extra
work. But the captain failed to do that and get sued. The court stated that although was less 2
sailor, but didn’t affect the work also. The remaining sailors have their obligation to do all
job. So, the captain no needs to give them extra wages. The claimant was under an existing
duty to work the ship back to London and undertook to submit to all the emergencies that
entailed. Therefore he had not provided any consideration for the promise for extra money.
Consequently he was entitled to nothing.

Hartley v Ponsonby – contrast with Stilk v Myrick

Collin v Godefroy
Facts
Godefroy brought an action against a third-party. He obtained a subpoena against Collins to appear as a
witness. Godefroy then offered to pay Collins six guineas if he agreed to attend. This was standard
practice at the time. Collins did not respond. He attended court, but was ultimately not required to give
evidence. Collins then demanded that Godefroy pay him six guineas.

Godefroy refused, arguing that there was no binding contract between them because:

Collins had never accepted Godefroy’s offer; and Collins was already legally bound to attend court. As
such, Collins provided no consideration for the offer.

Issue(s)
Had Collins accepted Godefroy’s offer?
Had Collins provided consideration for Godefroy’s promise to pay him 6 guineas?

Decision
The High Court held in favour of Godefroy. Collins could not rely on his court attendance as
consideration. This was because he was already legally bound to provide that service. In any case,
Collins could not rely on the offer because he had failed to accept it. A person cannot rely on a promise
to perform their existing legal duties as consideration.
 Harris v Sheffield United
Harris v Sheffield United Football Club [FC] (modified) with facts as follows: The
defendants (the FC) argued that they did not have to pay for a large police presence to
secure their stadium during home matches. Police did not patrol inside the football club's
premises and it was noted that a inexperienced ticket agent did check IDs of fans but
carelessly against the hooligan blacklist when they attempted to buy tickets to see the game
at the stadium. Those on the blacklist were not turned away and were actually sold tickets.
Judgment is belongs to plaintiff. In this case, the football club was request for external
“services” from police. So they should pay the police. Whether they want to pay to the
police depends on where the activities was held, is in private place or public place, and also
depends on what the activities was held, (ex: election are clearly is public event)
BATTLE OF THE FORMS:
When two companies are negotiating on their standard form terms. The company on
whose standard form contract, the agreement will be signed that company’s standard terms
will prevail. Essentially both parties want their contract to be the one that governs the
contract. In the battle of form that normally the party that fires the last shot which means
sends a last document will win the battle of the form. In the battle of form both parties will
counter offer in the shape of their own standard from contract. The contract which will
ultimately be signed by both parties will be final and the one parties contract will have no
effect.
CASE LAW: Butler machine tool ltd vs Ex cello
 Ex-Cell-O wished to purchase a machine from Butler. Butler sent out a quotation of
£75,535 along with a copy of their standard terms of sale. The terms included a price
variation clause and a term that the seller's terms would prevail over any terms
submitted by a purchaser. The machine would be delivered in 10 months. Ex-Cell-O
put in an order for the machine at the stated price and sent a set of their terms which did
not include the price variation clause.
The order contained an acknowledgement slip which required a signature by Butler and was
to be returned to Ex-Cell-O. This slip stated that the contract would be subject to the terms
stated overleaf. Butler duly signed the slip and returned it. The machines were then delivered
and Butler sought to enforce the price variation clause and demanded an extra £2,893. Ex-
Cell-O refused to pay. The offer to sell the machine on terms provided by Butler was
destroyed by the counter offer made by Ex-Cell-O. Therefore the price variation clause was
not part of the contract. The contract was concluded on Ex-Cell-O's terms since Butler signed
the acknowledgement slip accepting those terms. Where there is a battle of the forms
whereby each party submits their own terms the last shot rule applies whereby a contract is
concluded on the terms submitted by the party who is the last to communicate those terms
before performance of the contract commences.
 AUCTION
 If there is a conditional bid made in an auction putting the other bidder as disadvantage
as per principle laid down in Harvella investment v/s Royal trust, then no claim. The
auction is also an offer. Considered to be a unilateral offer and not invitation to treat.

 CASE LAW: Harvella investment v/s Royal trust

Facts
 The claimants submitted a fixed price bid for shares in the defendant’s company.
Another party made a referential bid; of a fixed amount more than any other offers

 Issue - Could such a referential bid be allowed?

 Decision - No, claim succeeded

 Reasoning - As the defendants were bound to accept the highest bid, the referential bid
did not have a fixed amount attached to it and as such could not be accepted or even
submitted
 NON COMPETE AGREEMENT: To buying something, restrain someone from
something. A non-compete agreement is made between the employer and the current
potential employee and restrict the employee from working in a competing company in
the same feeble does the agreement have to be made at the beginning of employment.

 VERBAL AGREEMENT: The written is needed and it is a valid evidence. Verbal

agreement need to be executed and witnessed.

 STANDARD FORM AGREEMENT: The terms and conditions included cannot be

negotiate.