Contract A - Consideration and Estoppel

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What is consideration?

There is no such thing as a gratuitous contract. A promise to give is unenforceable. 

Promises generate contractual rights ONLY IF SUPPORTED BY CONSIDERATION. Consideration is anything which the law recognises as capable of supporting a promise, rendering it contractually enforceable. 

THE PRICE OF A PROMISE. What ONE contracting party is getting IN RETURN FOR his promise. Not a motive. Giving to charity is entirely gratuious as there is no consideration - charity could not sue if changed your mind. 

SOME RIGHT, INTEREST, PROFIT OR BENEFIT ACCRUING TO ONE PARTY or some FOREBEARANCE, DETRIMENT, LOSS OR RESPONSIBILITY GIVEN, SUFFERED OR UNDERTAKEN BY THE OTHER. 

Either a BENEFIT TO THE PARTY MAKING THE PROMISE

or a DETRIMENT INCURRED BY THE PARTY TO WHOM THE PROMISE IS MADE. 

EITHER ONE WILLL SUFFICE. 

Giving a benefit or taking away a disbenefit.

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Bilateral vs unilateral contracts

Bilateral - A/B promise supply. A#'s promise in exchange for B's promise. Promise by A is consideration for B's promise and vice versa. 

Unilateral - A makes promise to pay money IF B performes a specific act. B provides consideration by doing the specified act, eg, Mrs Carlill using the smoke ball was to her detriment and to the benefit of the Carbolic Smoke Ball Co. Commencement of performance is consideration for the promise made by A. 

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What is a deed?

Deed is a signed document. Enforceable in its own form. Presence or absence of consideration becomes irrelevant if the promise is enclosed in a deed. Needs to state that it is a deed and have a signature. Often adopted to make gratuitous promises binding. 

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COMBE V COMBE (1951)

Request count as consideration? Even trivial things are accepted as consideration. Asking for something from the other party is consideration. 

In this case a couple divorced and the husband promised to pay the wife an allowance of £100 per year. The wife then forbore from applying to the court for a maintenance order. The husband failed to pay and the wife sued, but the Court of Appeal held that there was no contract. The wife argued that she had provided consideration by not taking her husbnd to court, it was held that, on the facts, the wife's forebearnace was a RESULT OF the husband's promise, and not IN RETURN FOR IT. NOT A BARGAIN. 

Even though legal proceedings CAN constitute consideration this did not as it was not part of the deal, only her own decision. Gratuitous promise. 

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TWEDDLE V ATKINSON (1861)

CONSIDERATION MUST MOVE FROM THE PROMISEE. 

HOWEVER IT NEED NOT MOVE TOWARDS THE PROMISOR. 

As long as there is a detriment to the promisee there does not need to be a benefit to the promisor. PRIVITY OF CONTRACT. A promise cannot be enforced that has not been paid for. 

In this case, the claimant'f ather and father-in-law agreed to pay the claimant £300 collectively for consideration of the marriage. The claimant then tried to claim the money. Despite being named in the agreement and the fact that the contract was made for his benefit, William had given no consideration for the promise and therefore had no claim due to not being privy to the contract. Between Tweddle and the father-in-law there was consideration due to the mutual promise, but he could not enforce the bargain because he was not privy to the contract. 

The Contract Law Act 1999 now provides that as long as consideration was given by someone, a third party may enforce a contract for his own benefit. 

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THE EURYMEDON [1975]

The contract between the cargo owner can carrier contained an exemption clause that extended it to the third party stevedores who then attempted to enforce the exemption clause. Did the stevedores give consideration in return for the cargo owner's promise of the benefit of the exemption clause? The consideration was held to be that they performed the contract with the carrier. The consideration did still move from the promisee (the stevedores) to the carriers, but did not move towards the promisor (the cargo owners)

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CHAPPEL & CO LTD V NESTLE CO LTD (1960)

CONSIDERATION NEED NOT BE ADEQUATE BUT IT MUST BE SUFFICIENT. 

The law is not concerned with the VALUE of consideration. It is for the parties to agree on the price to be paid for the goods or services. Consideration therefore need not be adequate. Price of the promise need not be the economic equivalent of the contract. HOWEVER, it will be considered INSUFFICIENT if it has NO LEGAL VALUE. So it cannot be the price of the promise if it was done before the promise or if the promisor was already entitled to it. 

In this case, Nestle ran a promotion to sell their chocolates. They offered records to the public for 1s6d each plus three Nestle chocolate wrappers. These wrappers were thrown away, but despite this the courts held that they were a valuable part of the consideration. 

EVEN A PEPPERCORN WOULD BE CLASSED AS VALID CONSIDERATION. A promise has no contractual enforceability unless there is SOME value attached to it. So, a party may convert a gratuitous promise into a binding agreement by applying a nominal consideration. 

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THOMAS V THOMAS (1842)

A man before his death expresssed the wish that the wife should remain in their house. She paid £1 per year to the executors of the will. They eventually tried to evict the wife, but because she had paid the ground rent this was good consideration,e ven though it was anominal amount. 

Consideration must have value in the eyes of the law and be moving from the plaintiff.

IT MUST BE SUFFICIENT - tangible, real, and possess actual value. 

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WHITE V BLUETT (1853)

The court decided it was NOT good consideration for a son to refrain from pestering his father over the content of his will ine xchange for the cancelling of a debt owed to him by the son. It was held that there was no legal value to the consideration as he was refraining from doing something he had a choice not to do anyway. 

In WARD V BYHAM a promise to keep a child happy was good consideration.

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R V ATTORNEY GENERAL FOR ENGLAND AND WALES (2003)

AN AGREEMENT TO DROP A LEGAL CLAIM WILL AMOUNT TO GOOD CONSIDERATION. Forebearance from suit, or refraining from enforcing legal rights, will class as good consideration. 

In this case a member of the SAS was told by the Ministry of Defence to sign a confidentiality agreement or be returned to his former regiments. Such forebearance of not returning him to his former regiments was considered to be good consideration to support the confidentiality agreement. 

Therefore forebearance does not necessarily HAVE to involve legal proceedings. 

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COOK V WRIGHT (1861)

Even if the claim is a hopeless or worthless one, provided the party makes the forebearance in good faith - bona fide - and believes the cliam to be valid, forebearance will amount to good consideration. 

In this case, Government Commissioners were charging the defendant, an agent, with expense liability and threatened enforcement proceedings if the defendant did not pay. The defendant agreed to pay the installments. 

Provided that the claimant is acting in good faith believing the defendant to be liable, the defendant's promise is held to be supported by consideration in their forebearnace to bring proceedings. 

HOWEVER, THESE CLAIMS MUST BE MADE IN GOOD FAITH. If you know a legal claim is invalid and the promisee is attemtping to use the judicial process to extort money out of another person, this is blackmail and is NOT good consideration. 

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EASTWOOD V KENYON (1840)

CONSIDERATION MUST NOT BE PAST. 

Past consideration is consideration that pre-dates the promise it is supposed to support. The chronology prevents it from being given in return for the promise. 

PAST CONSIDERATION = NO CONSIDERATION

In this case, a father died, leaving his estate to his young daughter. Eastwood, the father's executor, borrowed £140 to pay for Sarah's upbringing, but when she came of age, she married Kneyon who promised Eastwood he would discharge the debt. However, Kenyon failed to honour his promise, but it was held that there was NO CONSIDERATION FOR THE PROMISE and it was unenforceable, because the consideration had been executed before in the form of looking after Sarah. 

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ROSCORLA V THOMAS (1842)

R bought  a horse from T. Following the sale, the claiamnt asked about the horse's termperament and was promised that it was sound, but it was not. The claimant tried to sue because of the defendant's promise but there was no consideration for the promise because the sale had already gone through. 

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LAMPLEIGH V BRAITHWAITE (1615)

AN EXCEPTION TO THE RULE OF PAST CONSIDERATION. 

A man had been killed by Braithwaite, who then asked Lampleigh to obtain a King's pardon for him. Braithwaite promised Lampleigh afterwards £100 in recognition of the costs borne by him, but the £100 was never paid. Even though the action should have failed because consideration was in the past, the request and the promise were held to be part of a continuing sequence of events and was enforceable. 

If A asks B to do something and Later promsies something in reutrn, A's promise WILL BE enforceable because it is SUPPORTED BY CONSIDERATION - What B did at A's request. A REQUEST IS CONSIDERATION? In Eastwood V Kenyon, Kenyon had not asked Eastwood to look after Sarah. 

It must alos have been intended all along that the services would not be gratuitous, so the exception is not truly and excpetion, because the service was rendered in RETURN FOR AN IMPLIED PROMISE OF PAYMENT. 

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COLLINS V GODEFROY (1831)

CONSIDERATION WITH NOT BE FOUND IF THE PARTY IS LEGALLY OBLIGED TO DO IT. 

If you are under a public duty to do something irrespective of the contract, then the performance of this duty or a promise to perform it will not count as good consideration for the promise. As the promisor would be gaining nothing of value - no price. 

In this case, Collins received a subpoena to testify on the defendant's behalf. This required him to appear as a witness for Godefroy at trial. Godefroy promised to renumerate Collins for attending, but it was found that this promise was held to have no consideration as Collins was obliged to attend the trial without any payment whasoever. 

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GLASBROK BROS V GLAMORGAN COUNTY COUNCIL [1925]

IF YOU GO BEYOND YOUR LEGAL/PUBLIC DUTY, THIS WILL AMOUNT TO GOOD CONSIDERATION. 

In this case a colliery owner requested the police to provide a garrison for his colliery as protection during a srike which he promised to pay for. It was held that there was consideration as the police had provided a special service over and aboe their normal duty. The promise to pay was therefore binding. 

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WARD V BYHAM (1956)

A promise by a father of an illegitimate child to the mother to pay a weakly allowance was made if she promised that the child would be well-looked after and happy. Of course the mother was under a legal duty to look after her child, but the Court of Appeal held the mother had gone over and above her legal duty by making sure the child was 'well' looked-after AND happy. 

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WILLIAMS V WILLIAMS [1957]

A wife deserted her husband and he agreed to pay her a set amount each week if she maintained herself and did not pledge her husband's credit. The wife was oblgied to do this anyway. The husband then ceased payments and the wife attempted to enforce the promise. The Court of Appeal found good consideration in the wife's promise to maintain herself on the basis that she could have returned to the husband...however this was a fictitious scenario and is unlikely to be decided the same way today. 

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SHADWELL V SHADWELL (1860)

If there is a pre-existing contractual obligation owed to a third party? Already under a contractual obligation? Can this amount to consideration?  A PROMISE TO PERFORM A PRE-EXISTING OBLIGATION ALREADY OWED TO A THIRD PARTY AND ACTUAL PERFORMANCE OF SUCH AN OBLIGATION CAN BOTH COUNT AS GOOD CONSIDERATION. 

In this case Shadwell was engaged to be married- a cotnractually binding commitment at the time. His uncle wrote to him saying because he was delighted, he promised to pay him £150 per year. Shadwell got married but later alleged his uncle had failed to honour this promise and sued. The uncle pleaded no consideration, but the consideration was held to be Shadwell's marriage, even though he was already contractually obliged to marry his fiancee. The promise was decided to be an inducement ot marriage, and the uncle derived some intangible benefit from the marriage. The letter was a REQUEST. 

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THE EURYMEDON [1975]

The consideration provided by the stevedores to the cargo-owner's promise to extend the benefit was their promise to perform their existing contract with the carrier. No new promise. 

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HARTLEY V POSNSONBY (1857)

PERFORMANCE OF A PRE-EXISTING CONTRACTUAL DUTY?

The basic traditional rule has been that it is NOT GOOD consideration to do or promise to do something you are already contractually bound to the other party to do. What you are doing provides no legal detriment and is of no benefit to the other aprty to receive performance they are already entitled to.

CONSIDERATION IS REQUIRED FOR THE VARIATION OR DISCHARGE OF AN EXISTING ON.

A BILATERAL VARIATION is where a contract is varied ALTERING THE OBLIGATIONS OF BOTH PARTIES. This is allowed. If the promise is altered, eg, bringing forward delivery date, or altering speicification or changing the goods, this consideration will lie in the new obligation. 

In this case, seamen signed on for a voyage around the word, but nearly half the crew cancelled. The remaining crew were promised additional money to continue with the voyage, and the promise was held to be enforceable as they could have refused to continue due to the much harder work. They were no performing an extra obligation of much harder work, and so their harder work was consideration for the promise of them being paid more. 

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STILK V MYRICK (1809)

WHERE IT IS A UNILATERAL VARIATION, THE TRADITIONAL RULE IS CASES OF AN EXISTING CONTRACTUAL OBLIGATION WAS THAT THE OBLIGATIONS ARE NOT ALTERED ON BOTH SIDES. 

Sailors were signed onto a voyage during which two sailors deserted. Myrick the captain promised to split their wages between the remaining crew if they worked the home to port. They waere already contractually obliged to do this however, and so the captain's promise was unenforceable as no consideration had been provided by the sailors. 

The reasoning of this case is difficult to pinpoint. Tow law reporters give different acounts. Espinasse reports that it was decided for just and proper policy in order to avoid economic blackmail, but he was highly regarded as being an unreliable reporter and so more credence is given to Campbell's report exmphasising that Stilk provided no consideration for Myrick's promise of extra payment. 

The concern at the time was about economic duress, as it was not a vititating factor at that time. 

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WILLIAMS V ROFFEY BROS & NICHOLLS (1990)

In the 1980s, the Court of Appeal began to re-evaluate the law - now, PERFORMANCE OF, OR PROMISING TO PERFORM, A CONTRACTUAL DUTY OWED BY A TO BE WOULD BE GOOD CONSIDERATION FOR A FRESH PROMISE BY B IF SUCH PERFORMANCE CONFERRED A PRACTICAL BENEFIT ON B. Now that English law has developed a doctrine to deal with duress, the courts are more willing to distinguish. 

In this case, Roffey, the main contractor, had promised to refurbish a block of 27 flats. They sub-contracted the carpentry work of 27 flats and roof to Williams, under a fixed price of £20,000. However, the claimant had financial difficulty and D was worried that C would not complete the work on time making D late and would incur a penalty charge under the main contract. So, D promised C an extra £10,300 payable at £575 for each completed flat. Only one further payment was made before C ceased work on the flats. He had completed 8 more flats, but only been paid £1,500 extra. D engaged other carpenters, incurring a week's penalty charge under the main contract. C sued for the extra payment. The builders argued no consideration. It was held that there was consideration and awarded damages of £3,500. 

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Performance of a pre-existing contractual duty.

Williams v Roffey Bros & Nicholls did not overrule Stilk v Myrick, in that consideration was still required in principle. However, it was seen that because the law has extended the doctrine of duress into economic coercion so that the doctrine of consideration is no longer needed to address these concerns regarding economic blackmail. 

WILLIAMS V ROFFEY STILL REQUIRES CONSIDERATION, IT IS JUST MUCH EASIER TO FIND. Provided that BY THE PROMISE TO PERFORM, OR PERFORMANCE OF AN EXISTING CONTRACTUAL DUTY, THE PROMISOR 'OBTAINS IN PRACTICE A BENEFIT, OR OBVIATES A DISBENEFIT'. 

In genuine renegotations, the PRACTICAL BENEFIT derived by the promisor from the performance of the promisee's contractual obligation, this should be regarded as good consideration. 

Where one party to a contract promises extra payment for satisfying the contract in return for a new benefit or the avoidance of a detriment there is a binding agreement provided there is no economic duress and provided there is an extra benefit to be recieved by B owing to the contract being completed. 

PERFORMANCE OF, OR A PROMISE TO PERFORM, AN EXISTING OBLIGATION CAN AMOUNT TO GOOD CONSIDERATION FOR THE OTHER PARTY'S PROMISE TO VARY THEIR OBLIGATION, GENERALLY BY INCREASING THE CONTRACT PRICE.

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The rule in Pinnel's case.

PART-PAYMENT OF DEBT. 

When a debtor owes money to a creditor, consideration is required if the debtor's obliation to repay the debt is varied in any way. 

BILATERAL VARIATIONS: if the debtor agrees to pay an instalment of the debt earlier than the due date, and the creditor agrees to give th debtor more time to pay the balance or reduce the amount, there is CONSIDERATION ON BOTH SIDES and the VARIATION TO THE REPAYMENT IS CONTRACTUALLY BINDING. 

UNILATERAL VARIATIONS: if the creditor agrees to accept part of the debt only and let the debtor off paying the rest? Is this concession binding on the creditor? The general rule has been that the payment of a smaller sum for a larger debt is not good consideration and does not discharge the debtor's obligation to pay the full amount. THIS WAS ESTABLISHED IN PINNEL'S CASE IN 1602. 

PART PAYMENT OF A DEBT IS NOT GOOD CONSIDERATION FOR A PROMISE BY THE CREDITOR TO FOREGO THE BALANCE. 

HOWEVER, IF A THIRD PARTY MAYS PAYMENT ON THE AGREED BALANCE THAT THE BALANCE IS FOREGONE THIS IS BINDING. 

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FOAKES V BEER (1884)

The rule in Pinnels' case was affirmed by the House of Lords in this case. 

FOAKES V BEER. Dr Foakes owed Mrs Beer just over £2000 it was due immediately and interest was payable until fully paid. Dr Foakes asked for more time to pay so they entered into an agreement where he paid £500 then half-yearly instalments. In return, Mrs Beer agreed not to claim interest. Foakes repaid. Mrs Beer sought to recover the interest. It was held that there was no consideration for Mrs Beer's promise not to sue for the interest since Foakes was doing no more than his contractual obligation in paying the balance. 

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D C BUILDERS V REES (1965)

DC Builders were goig out of business and were owed £500 for the abalnce of work completed. Rees offered to pay £300 in final settlement. D C Builders reluctnatly accepted, then brought an action for the remaining balance and succeeded. (it was irrelevant that they paid in cheque instead of cash).

If some variation is made by the other party as well, eg, payment on an earlier date, in a different place or currency, this makes it a bilateral variation and is good consideration, provided the other party agreees to the variation. 

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ESTOPPEL

The law makes a distinction between those who rely on the release of a debt and those who do not, and offer protection to those acting in reliance of the creditor's release of part of the payment of a debt using PROMISSORY ESTOPPEL. 

ESTOPPEL is a principle embodying that if you say and do something and someone relies on you, you cannot then resile from your position - you will be ESTOPPEDfrom doing so. It is a principle founded in equity. Restricts peoples freedom to go back on a belief he induced in someone else. 

Even though nothing provided for consideraiton, equity steps in. 

THE DOCTRINE OF PROMISSORY ESTOPPEL PREVENTS A CREDITOR FROM GOING BACK ON A PREVIOUS PROMISE. 

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CENTRAL LONDON PROPERTIES V HIGH TREES HOUSE LTD (

The promissory estoppel journey began with Lord Denning. 

In this case, the landlord of Central London Properties granted a long lease of a block of flats in London to High Trees at an annual rent of £2,500. When WWII broke out, High Trees had trouble leasing them and the landlord agreed to reduce the rate by half. By the end of the war, the flats were fully let and the landlord brought proceedings to claim the full balane of the rent due in 1945. Denning held that the balance was payable but only because the concessrionary reduction was expressed to only cover the war eyars. IF the receiver had attempted to claim the balance of the war years, he would be estopped from doing so. The landlord's concession was regarded as effective despite an abesence of consideration. 

The time had come to recognise that a promise made with the intention to be binding should be enfroced, regardless of an absence of consideration. 

THIS WAS A RADICAL NEW APPROACH TO THE PROBLEM OF UNILATERAL VARIATIONS IN PAYMENTS OF DEBTS. Even if not supported by consideration, they could be treated as binding if it is ACTED UPON and it would be INEQUITABLE if that promise were withdrawn.

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HUGHES V METROPOLITAN RAILWAY (1877)

In this case a landlord served a notice to his tenant to carry out certain repairs to the leased property within 6 months. The tenants replied saying they would but wondered if the landlord would want to buy out their leasehold interest. They entered negotations and the tenants put off the reparis. Negotiations broke down and the tenants began the repairs, but had not scompleted them before th original six month was complete. The landlord attempted to forfeit the lease, but it was held that he could not as he needed to allow six months for the breaking down of negotiations. 

If one party has by his words or conduct made to the other a promise and the other aprty has ACTED UPON IN the one who gave the promise cannot be allowed to revert. 

THE DOCTRINE OF PROMISSORY ESTOPPEL. 

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TOOL METAL MANUFACTURING CO V TUNGSTEN ELECTRIC CO

Does promissory estoppel extinguish the creditor's rights or suspend them?Suspensory?

In this case TM granted TECO  a licence to deal with hard metal alloys which they patented. TECO had to pay comepensation to TM if they sold more than the stated quantity of alloys. When war broke out, TM agreed to forego the contractual compensation and none was paid. In 1944 agreements to create a new one broke down and TM claimed that compensation was payable from 1945 onwards. It was held that TM could withdraw the concession not to claim the compensation upon giving REASONABLE NOTICE.They could restart their obligation to make compensation payments from then on. 

SO PROMISSORY ESTOPPEL CAN BE SUSPENSORY.

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COLLIER V P&MJ WRIGHT (HOLDINGS) LTD (2007)

Here the three partners were jointly liable to the creditor for the whole debt. Two of them disappeared. The third partner the claimant alleged that the creditor had agreed to accept one-third of the outstanding sum from him in settlement and he had paid this. 

The payment could not consistitute consideration due to the Rule in Pinnel's case backed up by the House of Lords in Foakes v Beer. 

However, P&MJ WRIGHT HOLDINGS promise was sustainable in equity and the defendants were estopped from resiling on their promise. 

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Sword or shield?

Defending claims? Can promissory estoppel be used as a cause of action? NO -  Williams in the case of Williams v Roffey Bros & Nicholls could not rely on estoppel to claim the extra payments he had been promised. IT IS FOR DEFENCE PURPOSES ONLY, NOT BRINGING CLAIMS. 

The equitable doctrine does not create new causes of action where none existed before, onyl prevents a aprty from insisting on his strict elgal rights where it is unjust to allow him to enforce them, having regard to dealings having taken place between the parties. 

FURTHER USE OF CONSIDERATION?

Civil law jurisdictions manage without consideration. But needs to be some reason to enforce a promise and to abolish consideration would mean placing more weight on contractual intention or more formal requiremeents. Filter required to remove inappropriate promises for the courts. Filtering out gratuitous promises. More likely to be informal. 

IF CONSIDERATIO WERE ABOLISHED, A REPLACEMENT FILTER WOULD BE NEEDED.

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