Courts not likely to rely on past consideration in commercial transactions
Lampleigh v. Brathwait
Braithwait (murderer) asked Lampleigh to obtain pardon for him from King after he had murdered someone. After plaintiff had done this, the defendant promised to pay the plaintiff. The defendant breached promise and argued consideration was past
Court held for the plaintiff: Benefit had been conferred without promise to pay. Mere voluntary courtesy will not be consideration;
If the defendant had paid, however, he would not be able to get his money back since it would be considered a mutual gift.
Past consideration is no consideration, BUT if consideration is done at request of the promisor where law would imply reward, will be binding
Eastwood v. Kenyon
Plaintiff was guardian of a minor and spent money on the estate. The plaintiff borrowed money from Blackburn, the minor agreed to pay. The minor married the defendant.
Court found the defendant not liable on oral agreement:
Although the plaintiff had given benefit to Sarah when she was a minor, there was no request by Sarah for this to be done. The act was gratuitous, therefore the promise to pay was not enforceable
Basic Principle; If a promise is made after the execution of the act, then the promise is nothing more than a voluntary benefit which the promisor is offering to give.
Roscorla v. Thomas
Plaintiff bought horse from defendant who made no promise regarding quality of horse at time of purchase.
later, after contract, defendant promised plaintiff that horse was not over 5 years old and was sound; horse was vicious, ungovernable and ferocious; plaintiff sued and defendant argued no consideration
Court held for defendant: said general rule is the promise must be co-extensive with the consideration; consideration past and executed will not support other promises unless one could otherwise be implied by law
Caveat Emptor: “buyer beware” Seller has no liability to buyer, unless there is an explicit or implicit warrantee or promise to quality at the time the actual bargain was made.
Sale of goods Act; when buying goods from commercial vendors, there is an implied warrantee that goods are fit for the purpose they were sold for. This is only for commercial vendors and not for used cars or horses.
Pao On v. Lau Yiu Long
Plaintiff sold building to defendant; part of defendant’s payment was block of shares including a company to plaintiff in return for promise not to sell shares for a set period of time;
after initial promise, plaintiff wanted new protection should the value of the shares drop and threatened not to sell property;
In subsequent agreement the defendant agreed to repurchase the shares to protect the plaintiff form decrease in value.
Plaintiff wanted to be able to insist on a higher buy back price if the value of the shares went up
Mutual rescission of the 1st agreement. 2nd agreement to buyback @ agreed price or market price (whichever was higher)
The shares dropped in value and the plaintiff wanted to sell at the agreed upon price. The Defendant refused on these grounds:
Past consideration
Economic duress (plaintiff wouldn’t sell building unless they had the second agreement)
On Point 1:
The fact that the plaintiff wouldn’t sell until certain time was consideration for the agreement. The second agreement was consideration because the plaintiff accepted the time restrictions. There we an agreement that there would be a benefit.
On Point 2:
Duress would vitiate, in general, a contract. Court said there was no evidence that the defendant did not enter into the contract voluntary for several reasons:
Independent legal advise was secured
Defendant took no steps to avoid the contract
There was no protest at the time of the contract
The defendant didn’t suggest any other options at the time of the contract.
… Therefore there was no economic distress, not the courts position to unmake a bad deal.
General position: IF a promisee has already done everything they are supposed, then after promisor promises compensation, this is past consideration, not enforceable because the court treats it as gratuitous promise and will not enforce a gift.
High standard on economic duress; higher than Williams v. Roffey because there, was modification of contract and here issue is formation of contract; assumption is can expect commercial pressure in making of contract
Note: as in Raggow, if mutually rescind the contract, then avoid consideration problem
Remember Smith v. Dawson: you do not have the legal right to perform or not to perform and pay damages (you can do this but it is not a legal right)
