Self-test questions: Consideration Estoppel and Formalities

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1. Sara wishes to sell her car, worth £20,000. John is interested in buying the car. Sara is very wealthy and tells John that she does not want money for the car, but will be happy to accept John's artwork and merchandise of the band the Rolling Stones. The artwork is worth approximately £2,000. In relation to the general statement 'consideration must be sufficient, but need not be adequate', which one of the following statements is true?

Consideration must genuinely be of equivalent value to the promise it supports and so a promise in relation to the artwork and merchandise will not be valid consideration because they are worth must less in economic terms than the car. correct incorrect

Consideration need not have any value and so a promise in relation to the artwork and merchandise can be valid consideration despite the fact they are worth much less in economic terms than the car. correct incorrect

To be 'sufficient', consideration must have some economic value, but that value need not be equivalent to that of the promise in question and so a promise in relation to the artwork and merchandise can be valid consideration. correct incorrect

Consideration need not have any economic value or be of equivalent value to the promise it supports. correct incorrect

Consideration is not a requirement for a contract between two private individuals and for this reason any difference between the value of the car and the artwork and merchandise is irrelevant. correct incorrect

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2. Lucille is setting up a business. Her aunt, Karen, has promised to give £5,000 to Lucille as a 'start up gift'. Lucille is very grateful and in anticipation of receiving the money orders stock and equipment which, without Karen's promise, she would not have purchased. Lucille has received the invoices for the stock and equipment, but Karen has now changed her mind and decided to spend the money on a cruise. Lucille wants to hold Karen to her promise. Which one of the following statements regarding the doctrine of promissory estoppel is true?

Promissory estoppel can be used to form a contract as a pragmatic alternative where it is difficult to identify consideration, so Lucille can use it to hold Karen to her promise. correct incorrect

Promissory estoppel requires detrimental reliance by Lucille. correct incorrect

Promissory estoppel only applies to promises relating to rights in land and for that reason does not apply in this scenario. correct incorrect

Promissory estoppel has only a suspensory effect and cannot extinguish legal rights. correct incorrect

Promissory estoppel applies only in the context of promises relating to alterations of existing contracts and does not remove the need to establish consideration to support formation promises, so does not apply in this scenario. correct incorrect

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3. Carly employs Belinda as a consultant in her firm. Belinda is paid £45,000 plus a 'discretionary bonus'. Over the past year, Carly's firm has doubled its profits and, therefore, Carly decides to pay an additional £8,000 to Belinda for 'all your help and hard work throughout the past year'. Belinda is delighted and buys a new car in anticipation of the extra money being given to her. Subsequently, Carly changes her mind and refuses to pay the extra £8,000 to Belinda. Which one of the following statements most accurately summarises the legal position?

Carly is estopped from changing her mind but she can, on giving reasonable notice, return to the original contract and rely on the fixed annual salary clause. correct incorrect

Carly's promise is unclear and therefore unenforceable. correct incorrect

Belinda has not provided valid consideration for the additional £8,000 because the promise refers exclusively to her performance over the past year, which amounts to a 'past consideration' only. correct incorrect

Belinda can claim the extra £8,000 because she was carrying out Carly's instructions over the past year and it was reasonable for her to have expected this extra payment in the light of the 'discretionary bonus' clause in her contract. correct incorrect

Belinda can claim the extra £8,000 on the basis there is a collateral unilateral contract relating to the bonus. correct incorrect

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4. Lyla owes a debt of £2,000 payable to Alex on 1 June. Alex agrees to accept £1,800 as final settlement of Lyla's debt due to Lyla's financial difficulties. Lyla pays £1,800 on 1 June. Alex is now insisting that Lyla must pay the outstanding balance of £200. Which one of the following most accurately summarises the legal position?

Lyla will be able to raise a promissory estoppel to hold Alex to his promise to accept £1,800 and so Alex cannot claim the balance. correct incorrect

As Alex included the phrase 'final settlement', it is clear this is more than merely a statement of his present intention, so he cannot claim the balance. correct incorrect

Whether Alex can claim the balance will depend on whether or not this is a commercial arrangement. If it is, there is a presumption that Alex intended to be bound and so he will not be able to go back his promise and claim the balance. correct incorrect

Lyla is under no legal oblation to pay the balance as long as she can prove that she relied on Alex's promise to accept £1,800 to her detriment. correct incorrect

Alex's promise to accept £1,800 is not binding without more as there is no consideration to support it. correct incorrect

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5. Ingy has agreed to employ Axis Ltd to deliver and erect a conservatory at an all-inclusive price of £10,000. Midway through erecting the conservatory, Axis informs Ingy that the business is facing financial difficulties and it will be unable to complete its performance obligations. Ingy agrees to pay an extra £5,000 to Axis if Axis completes the work because she has just found a buyer (Bart) for her house and Bart wants to move in quickly. On completion, Axis receives £10,000 from Ingy but claims the extra £5,000. Ingy refuses to pay on the ground that Axis has not provided any consideration for the additional payment. Which one of the following statements is the most likely to be true?

Axis was probably only performing its contractual duty, so has not provided any extra consideration for the £5,000. correct incorrect

Axis exceeded its contractual duty and is therefore entitled to the extra £5,000. correct incorrect

Ingy is estopped from going back on her words and is bound to pay the extra £5,000. correct incorrect

Axis is probably entitled to the extra £5,000 because Ingy has derived a practical benefit from the new arrangement. correct incorrect

Axis is entitled to the extra £5,000 because it can use the previous request device, as Ingy had previously requested that Axis completes the work. correct incorrect

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6. Phillippe employs Amir to paint the outside walls of his house for the sum of £2,300. When Amir completes the painting, Phillippe refuses to pay because he is suffering 'liquidity problems'. One month later, Phillippe wins a local lottery competition. He contacts Amir by telephone and tells him that he will pay the outstanding £2,300 provided Amir also paints the window frames at the front of the house for an additional £100. Amir agrees and paints the frames. Phillippe is now refusing to pay Amir more than the original £2,300. Which one of these statements most accurately summarises the legal position?

Amir is only entitled to £2,300 because otherwise it would infringe the principle in Foakes v Beer (1884) 9 App Cas 605. correct incorrect

Amir is entitled to full payment (£2,300 plus £100) because he exceeded his contractual duty by painting the window frames (The Atlantic Baron [1979] QB 705). correct incorrect

Amir is only entitled to £100 because the previous painting of Phillippe's house is past consideration and cannot be used as justification for the payment of the £2,300 (Re McArdle [1951] Ch 669). correct incorrect

Amir is entitled to full payment (£2,300 plus £100) because Phillippe has received a practical benefit in the shape of his newly painted window frames (Williams v Roffey Bros [1991] 1 QB 1). correct incorrect

Amir is only entitled to £2,300 because otherwise it would infringe the principle in MWB Business Exchange Centres Ltd v Rock Advertising Ltd [2016] EWCA Civ 553, [2017] QB 604. correct incorrect

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7. Which one of the following cases is an authority for the principle that performance of an existing contractual duty owed to a third party may be consideration for a promise?

New Zealand Shipping Co Ltd v A M Satterthwaite & Co Ltd, The Eurymedon [1975] AC 154. correct incorrect

Ward v Byham [1956] 1 WLR 496. correct incorrect

Stilk v Myrick (1809) 2 Camp 317. correct incorrect

Williams v Roffey Bros [1991] 1 QB 1. correct incorrect

MWB Business Exchange Centres Ltd v Rock Advertising Ltd [2016] EWCA Civ 553, [2017] QB 604. correct incorrect

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8. Edwin is Raul's landlord. Edwin offers to reduce Raul's rent for six months because Raul is in financial difficulty. Raul is very pleased and pays the reduced rent for two months. At this point, Edwin demands full payment of rent for those two months because he has seen Raul's announcement on social media that he has secured a new job with a significant salary increase. Which one of the following statements most accurately summarises the legal position between Edwin and Raul?

Raul must pay the full rent for all six months because the reason for reducing the rent no longer exists. correct incorrect

Raul has provided sufficient consideration for Edwin's promise to reduce the rent and is, therefore, entitled to refuse Edwin's request. correct incorrect

Edwin is estopped from going back on his words and is bound to accept the reduced rent until completion of the six months. correct incorrect

Edwin can return to the original contract and claim full rent for the future after a reasonable period following the demand, but is unable to recover the extra rent for any time before that period elapses. correct incorrect

This is an alteration to an existing contract and so there is no need for Raul to provide any additional consideration to hold Edwin to his promise to accept the reduced rent for six months. correct incorrect

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9. Which one of the following consideration rules can be extracted from Pao On v Lau Yiu Long [1980] AC 614?

A promise to perform an existing contractual duty owed to a third party can be valid consideration. correct incorrect

Performance of a duty imposed by law is generally not valid consideration for a promise. correct incorrect

Performance of an existing contractual duty owed to a third party may be valid consideration for a promise. correct incorrect

Part payment of a debt is valid consideration. correct incorrect

Part payment of a debt by paying a smaller sum in advance of the agreed payment date is valid consideration. correct incorrect

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10. Daisy owes Beth £10,000. With the knowledge that Beth has run into some financial problems, Daisy starts to pressurise Beth to agree to a reduction of the debt. Beth finally agrees to accept £8,000 in full satisfaction of the debt. Beth receives £8,000 from Daisy and now brings an action to claim the balance. Which one of the following statements most accurately summarises the legal position?

Beth is not entitled to the balance, because it is clear she received some practical benefit from the payment of £8,000. correct incorrect

Beth is not entitled to the debt because her accepting £8,000 amounts to a collateral unilateral contract. correct incorrect

Beth is not entitled to the balance, because she is estopped from revoking the promise to accept £8,000 in full satisfaction of the whole debt. correct incorrect

Beth is entitled to the balance unless her agreement to accept £8,000 is in writing. correct incorrect

Even if Daisy can show that Beth's promise is supported by consideration, Beth may be entitled to the balance if she can prove that her agreement to accept £8,000 was made under duress. correct incorrect

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11. Which one of the following statements relating to formality requirements for a binding contract is true?

An oral contract of guarantee is unenforceable because of lack of writing. correct incorrect

A contract for the sale or disposition of an interest in land becomes enforceable once it is put in writing, even if no consideration is supplied. correct incorrect

A contract that fails to comply with a statutory formality requirement is unenforceable. correct incorrect

The law requires that all contracts must be put in writing. correct incorrect

An email footer set up by the sender of the email to appear automatically at the end of an email cannot constitute a 'signature' for the purposes of s. 2 of the Law of Property (Miscellaneous Provisions) Act 1989. correct incorrect

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12. Which one of the following general principles cannot be extracted from the decision in Thomas v Thomas (1842) 2 QB 851?

Consideration must be sufficient but need not be adequate. correct incorrect

Consideration needs to move from the promisee. correct incorrect

Performance of an existing contractual duty owed to a third party is normally not valid consideration. correct incorrect

Mere motive in making a promise, unattached to any element of value, is not sufficient consideration. correct incorrect

Consideration must be something of value in the eyes of the law. correct incorrect

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13. Marie owes £2,500 in rent to her landlord, which was due to be paid over the last two months. Marie cannot afford to pay this rent, but her father, Derek, tells Marie's landlord that he will pay £2,000 in full settlement of Marie's debt. The landlord tells Derek that he will accept £2,000 in full settlement. Derek has made the payment of £2,000 to the landlord, which the landlord acknowledged, but the landlord is now pursuing Marie for the outstanding balance of £500. Which one of the following statements most accurately summarises the legal position?

As the contract is between Marie and her landlord, it is irrelevant that Derek paid part of the debt. The landlord is entitled to the balance from Marie. correct incorrect

As this amounts to a composition agreement between a debtor and her creditors, the landlord cannot change its mind and claim the balance. correct incorrect

As the part payment of the debt was made by a third party, and the landlord accepted that payment in full settlement, the landlord is not entitled to the balance from Marie. correct incorrect

As the settlement of a debt by a third party, where such a settlement amounts to part payment, must be in writing according to statutory formality requirements, the landlord is not bound by the agreement and is entitled to claim the balance. correct incorrect

Marie will be able to raise a defence of economic duress because it is clear that the landlord accepted payment from Derek in circumstances where the landlord still intended to pursue a claim for the balance from Marie. correct incorrect

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14. Kirandip employs Natasha to carry out interior design and decoration work at Kirandip's hotel. Whilst carrying out the work, Natasha realises that she is short of staff and money and is struggling to complete the work. Kirandip promises to pay an additional £5,000 to Natasha, provided Natasha completes the work two weeks earlier than initially agreed, as this will enable Kirandip to reopen her hotel earlier than planned. Natasha completes the work two weeks earlier than initially agreed. Which one of the following statements most accurately summarises the legal position?

By completing the work two weeks earlier than initially agreed, Natasha has gone beyond her existing contractual duty and so is entitled to the additional £5,000. correct incorrect

Natasha will be entitled to the additional £5,000 on the basis of promissory estoppel, because the promise to pay the extra £5,000 was clear and unequivocal. correct incorrect

Natasha has done no more than perform her existing contractual duty and so she is not entitled to the extra £5,000. correct incorrect

Natasha secured Kirandip's promise to pay the additional £5,000 as a result of economic duress and so Kirandip is not required to pay it. correct incorrect

Kirandip's promise to pay the additional £5,000 is enforceable using the previous request device. correct incorrect

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15. Colin owes Darcy £800. Colin is suffering from financial problems and Darcy tells Colin that she will accept Colin's collection of watches, worth a total of £500, in full settlement of the debt. Colin delivered the watches to Darcy. Darcy is now claiming an outstanding balance of £300, representing the total debt less the value of the watches. Which one of the following statements most accurately summarises the legal position?

As the part payment of a debt cannot be consideration, and the collection of watches is worth less than the total value of the debt, the promise to accept the collection in full settlement will not be binding and Darcy can claim the balance of £300. correct incorrect

Although the value of the collection of watches is less than the debt, the watches can be valid payment as 'payment in kind'. correct incorrect

As the collection of watches is worth less than the total value of the debt, it amounts to a part payment of a debt and this will only be binding if Colin gave the watches to Darcy before the day on which he was obliged to make the payment of £800. correct incorrect

Colin is bound to pay the balance of £300, unless he can show that he has detrimentally relied on Darcy's promise to accept the watches, in which case Darcy will be estopped from claiming the balance. correct incorrect

Darcy is estopped from denying that she accepted the watches, but can demand the £300 on reasonable notice under the doctrine of promissory estoppel. correct incorrect