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Formation of Contracts - Consideration - Coggle Diagram
Formation of Contracts - Consideration
What is consideration?
a promise by one party to give, do or refrain from doing something in return for similar by the other party.
Both parties need to give consideration
What is executory and executed consideration?
Executory consideration: where the promise to do something in the future.
Executed Consideration: where the promise has already been completed.
What is past consideration?
promise made after the act has been completed.
There are exceptions
If it was given at the other parties request
There was an understanding that some remuneration / benefit would be given for that consideration.
What is a request with the implied promise to pay?
When a request is made for a service and the request implies a promise to pay for it, then completing the service is consideration.
3 conditions must be present
Must be carried out by request
both parties need to contemplate the payment will be made
If the payment has been promised before the act, then the contract would have been legally enforceable.
Consideration needs to be of adequate value
Consideration can be of any value, the court does not affect the freedom to contract
Consideration needs to be sufficient
Consideration needs to be real, legal and certain
Consideration being a duty imposed by law.
A person who has a legal public duty cannot use this as consideration
When they go beyond this legal duty this can amount to consideration
Consideration under different contracts
The same consideration can be used as long as they are separate contracts
Consideration in an existing contract
In the past an obligation owed to a party in an existing contract could not be used as consideration for a new promise with the same party.
(Ship cases)
This was modified in Williams v Roffey Bros case
Part Payments of Debts
Paying a less of a debt does not settle the whole debt
The full debt is only settled when extra consideration is given
The extra consideration is
Paying the debt earlier
Offering extra goods or material value as well as some monetary value
Offering no financial consideration but goods of value
Promissory Estoppel
An equitable principle of law preventing a promisor going back on his word.