Re: Can a Discretionary Benefit Constitute Consideration?
Dear Gerald:
There are also some cases that suggest that a discretionary
benefit can be certain enough to enforce (and hence one would
think that it could count as a consideration) if the discretion is
sufficiently limited or not unbridled so that the promise is not
the illusory (if I feel like it) type, see eg:
Greenberg v.
Meffert. (1985), 50 O.R.
(2d) 755 (C.A.). ROBINS J.A.,
interpreting a contract whereby the payment of a commission to a
terminated
real estate agent was "at the sole discretion" of the company,
held
as follows. "In my opinion, the company's discretion in this
matter is not
unbridled, firstly, because the nature of this contract and the
subject-matter
of the discretion are such that the company's decision should be
construed as
being controlled by standards and secondly, because the exercise
of the
discretion, whether measured by subjective or objective
standards, is subject
to a requirement of honesty and good faith. Provisions in
agreements making
payment or performance subject to 'the discretion,' 'the
opinion' or 'the
satisfaction' of a party to the agreement or a third party,
broadly speaking,
fall into two general categories. In contracts in which the
matter to be
decided or approved is not readily susceptible of objective
measurement--matters involving taste, sensibility, personal
compatibility or
judgment of the party for whose benefit the authority was
given--such
provisions are more likely construed as imposing only a
subjective standard. On
the other hand, in contracts relating to such matters as
operative fitness,
structural completion, mechanical utility or marketability,
these provisions
are generally construed as imposing an objective standard of
reasonableness … .
In any given transaction, the category into which such a
provision falls will
depend upon the intention of the parties as disclosed by their
contract. In the
absence of explicit language or a clear indication from the
tenor of the
contract or the nature of the subject-matter, the tendency of
the cases is to
require the discretion or the dissatisfaction to be reasonable …
. This
construction imposes the least hardship in that it produces a
result that
cannot be said to be unfair or unjust to either of the parties.
Other things
being equal, I think it preferable that provisions of this kind
be construed as
implying the less arbitrary standards of the objective test … ."
Jason Neyers
Professor of Law
Faculty of Law
Western University
N6A 3K7
(519) 661-2111 x. 88435
On 06/12/2013 5:34 AM, Gerard Sadlier wrote:
Dear Andrew and Mindy
Thank you very much for both your responses, which are very helpful
and in particular for the cases you mention!
Kind regards
Ger
On 12/6/13, Mindy Chen-Wishart <mindy.chen-wishart@law.ox.ac.uk> wrote:
And then there is Luxor (Eastborne) Ltd v Cooper (1941) which seems right up
your street. The House of Lords denied a real estate agent’s claim for a
£10,000 commission payable on completion of a sale when the agent found
buyers but the owners refused to complete. The commission was the equivalent
of a Lord Chancellor’s annual payment for work done within eight or nine
days, and the court held that the common understanding was that estate
agents take ‘the risk in the hope of a substantial remuneration for
comparatively small exertion’ (at 126).
So the court can 'construe' the nature of the agreement entered by the
parties and find the 'discretionary' element you mention even if it were not
express.
If it was express "I will do X unless I change my mind", (or 'if I feel like
it'), then it seems more questionable whether there is anything more than
illusory consideration. There would also be a question of the parties'
intention to create legal relations. what would be the remedy for such a
contract? could it even be breached?
But then, the question of discretionary promise may arise with respect to
complete exclusions of liability, or very wide / complete power to
cancel/terminate the contract.
best,
Mindy
On 6 Dec 2013, at 02:03, Andrew Robertson
<a.robertson@unimelb.edu.au<mailto:a.robertson@unimelb.edu.au>>
wrote:
Dear Ger,
Whether the arrangement you describe can constitute a binding contract
depends on whether A remains free to withdraw even after B has performed
the specified steps. If B is free to take the specified steps or not as he
or she chooses then the arrangement is clearly not a bilateral contract,
but could constitute a unilateral contract if A becomes bound to confer
the benefit if B takes the specified steps. If A remains free to withdraw
from the arrangement and refuse the benefit even after B has performed
then A¹s promise is clearly illusory and the arrangement is not binding on
either party.
Views differ on the question whether an offeror under a unilateral
contract can withdraw after the offeree has embarked on performance: see
Daulia Ltd v Four Millbank Nominees Ltd [1978] Ch 232 and the decision of
the Full Court of the Federal Court of Australia in Mobil Oil Australia
Ltd v Wellcome International Pty Ltd (1998) 81 FCR 475.
With best wishes,
Andrew
On 6/12/2013 9:39 am, "Gerard Sadlier"
<gerard.sadlier@gmail.com<mailto:gerard.sadlier@gmail.com>> wrote:
ear all,
I am looking for cases on the question whether there can be
consideration in an arrangement where 1 party "A" agrees to confer a
benefit on the other party "B" in say 3 months, if B takes certain
steps but both A and B retain the right to terminate the arrangement
at any time before conferral, for any reason whatever.
Can such an arrangement constitute a binding contract before the steps
are taken and the benefit conferred?
In practical terms, the benefit is that neither party thinks that the
other will resile, though both accepts that they are free to do so.
Comments welcome.
Kind regards
Ger