Promissory Estoppel
Consideration is an: 'Act of 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'1
In simpler terms, consideration means 'something for something'. If A has an apple computer and promises to sell it to B for £600 and B promises to buy the
apple computer from A for £600 then there is a binding contract. However, if A has an apple computer and promises to give it to B and B promises nothing in return, there is no contract as it is only a promise which is not enforceable by law. This may be shown by numerous cases. In Re McArdle [1951] CH 669 a promise was made to pay £488 but such payment was not made. The payment could not be enforced in a court of law as there is no exchange of promises.
There are some cases when the law does not recognize consideration as sufficient to constitute a legal contract. For example, you might call the emergency services and state that your friend is in dire conditions and if they arrive within 5 minutes you will compensate them financially. In such a scenario there clearly is an exchange of promises, a monetary amount is given in return for the rescuing of a friend. However, the emergency services is already under an existing obligation to arrive as soon as possible if the situation demands it, therefore there is no sufficiency of consideration for a legal contract to be formed. This example is only illustrative as in real life circumstances may not be so black and white. While in the simple scenario the court will most surely find a lack of consideration, in most cases it will go to great lengths to find such consideration as valid in law, which may be illustrated by the case of Ward v Byham [1956] 2All ER 318.
The court might also find a lack of consideration when they are bound by a previous contract. This may be straight forward in as far as if two people have entered into a contract and one of them promises to do something which they have already promised to do, then clearly there is no sufficiency of consideration as illustrated in Stilk v Myrick (1809) 2 Camp 317. However, it may be more complicated if one of the contractual parties is made aware that unless further exchanges of promises are made, then the other party would be unable to fulfil their part of the bargain. The case of Williams v Roffe & Nicholls (contractors) Ltd [1990] 1 All ER 512 may illustrates this point further. This case seems to be rather controversial, however once the details of the case are read, it seems clear that although the other party is already under a contractual obligation to fulfil his part of the bargain, hence no sufficiency of consideration, unless further exchanges of promises were made, the other party in fact would be unable to fulfil his part of the bargain, therefore the decision taken in this case seems rather fair, albeit controversial as it does not fit easily within well established principles.
Although it is stated above that there must be an exchange of considerations and that it needs to be considered as sufficient by the law, in certain cases a promise can be enforced, especially in commercial situations, as it is assumed that there is an intention to enter into a legally binding contract. Such promises are enforced under the doctrine of promissory estoppels which was developed by Lord Denning in Central London Property Ltd v High Trees House Ltd [1947] KB 130. This is a case of reducing the rent during war time, hence a promise since a contract already existed to pay the certain amount of rent. When promising to reduce the rent therefore nothing was given in return. Once the war ended, the rent went to its previous price. The owner tried to acquire the full amount of the rent for the war time aswell. However the owner could not do so as Lord Denning stated that:
'I prefer to apply the principle that a promise intended to be binding, intended to be acted on and in fact acted on, is binding so far as its terms properly apply'
The Pinnel's Case (1602) 5 Co. Rep 117a should have applied, which states that 'payment of a lesser sum is no satisfaction for the whole', in which case they would have been able to get their money back. Lord Denning however relied on the reasoning of the nineteenth century case of Hughes v Metropolitan Railway Co. Ltd (1877) 2 App Cas 439. In which the landlord gave his tenant six months notice to repair the premises let. Before the notice expired they entered into negotiations for the sale of the reversion. The negotiations broke down so the landlord brought an action of ejection once the six months notice expired. It was held that the opening of negotiations amounted to a promise that while the negotiations were continuing, no action would be taken to enforce the notice. The tenant had done nothing on reliance on this promise, hence the six months notice ran from the date of the failure of negotiation rather than the original date of the service of the notice. Lord Cairns stated that when two parties:
'enter upon a course of negotiations which has the effect of leading one of the parties to suppose that the strict legal rights arising under the contract will not be forced... the person who might have enforced those rights will not be allowed to enforce them.'
