Consideration: Bona Fide Compromises of Disputed Claims

Contracts (O’Byrne)Consideration: Bona Fide Compromises of Disputed Claims (Zellers)The following is an excerpt from Treitel:(i)VALID CLAIMSPromise to release a valid claim is good consideration…(ii)INVALID AND DOUBTFUL CLAIMS• Claims known to be invalid. [There is no consideration] if the sole considerationprovided by A is his forbearance to enforce a claim which is clearly invalid andwhich he either knows to be invalid or does not believe to be valid. Thus apromise by a bookmaker not to sue his client for the amount of lost bets was noconsideration for a promise made in return by the client….• Doubtful claims. Where the claim is doubtful in law, a promise to abandon itinvolves the possibility of detriment to the potential claimant and of benefit tothe other party. Such a promise is therefore good consideration for a counterpromisegiven by the latter party: e.g. for one to pay a sum of money to theparty promising to abandon the claim.• Claims wrongly believed to be valid. A promise by A to abandon a claim is alsogood consideration for a counter-promise made by B, even though A’s claim isclearly bad in law, if it is believed by A to be a valid one [citing Callisher]. Onereason which has been given for this rule is that otherwise “in no case of adoubtful claim could a compromise be enforced” [citing Callisher] but this doesnot explain why the rule applies where A’s claim is not merely ‘doubtful’ butclearly bad. Another suggested reason for the rule is that A suffers detrimentbecause “he gives up what he believes to be a right of action” but, in general,consideration must be something of value, not something believed to be of value.….The rule that a promise by A to abandon a claim which is clearly bad, but believedto be valid, is good consideration for a counter-promise from B is subject to a number ofsafeguards. There must a reasonable claim (i.e. one made on reasonable grounds) andA must honestly believe that his claim had at any rate a fair chance of success. He mustnot conceal from B any facts which, if known to the latter, would enable him to resistthe claim. And he must show that he seriously intended to enforce the claim. [footnotesdeleted throughout.]

2Zellers caseI. Threatened action #1:Zellers (would-be plaintiff) threatens to sue D.C.B.(the mom) (would-be defendant) for $225.00 ascompensation for damages Zellers says is sustaineddue to the son's shoplifting.The mom paid Zellers $225.00 in exchange for which Zellers promised not to sue her(i.e.: the alleged consideration from Zellers supporting the mom's payment isforbearance to sue.)II.Action #2 (subject matter of this case)D.C.B. (plaintiff; the mom) seeksto recover the $225.00 she paid toZellers discussed above.Zellers (defendant) resistsaction on basis that it providedconsideration to the mom viaforbearance.Legal issue: Was payment by D.C.B. supported by consideration from Zellers? Whathas Zellers given up in exchange for the payment of $225.00 from the mom?