CONSIDERATION

Consideration was defined in Currie v misa as”a promise of something of value given by promisor in
exchange for something of value given by promise.”

Things of value include goods,money,an act,forbearance from an act,services or promise thereof.

In Dunlop v selfridge alternative definition of consideration was provided as:“a detriment accrued by
promisee and benefit by promisor”.

Consideration is thus exchange of something in contract that gives it enforceable characteristic.

CONSIDERATION MUST MOVE FROM PROMISEE

Court in Tweddle v atkinson held “consideration must move from promisee but not necessarily to
promisor.Consideration might be provided for benefit of 3rd party.”

“Only parties to contract can sue under the rule of privity”:Tweddle v atkinson

CONSIDERATION NEED NOT BENEFIT PROMISOR

Court in Jones va padavattan stated:“Consideration need not benefit promisor.”

Consideration might be provided by promisee while suffering detriment but for interest and advantage of 3 rd
party.

CONSIDERATION MUST NOT BE PAST

“Past consideration is not good consideration”:roscola v Thomas

It must be provided “in exchange or in return”of thing of value.Consideration should be given after the
promise of payment is made.

An act promised or thing given before promise to pay is made,is past consideration.Performance was already
done;it was not done in return of promise for payment.Consideration is past where voluntary act had been
already done,and service rendered,and subsequently promise of reward is made.Earlier performance is not
given in exchange of consideration.

To ascertain whether consideration is past one,is a question of fact.Words used in agreement are not
conclusive:Re mcardle

EXCEPTIONS

Exceptions to rule in Re mcardle were summerised in Pao On v Lau Yiu by Lord Scarman:
1. where the act is done and service rendered at request of promisor,then subsequent promise of
payment is not past consideration.Request for service was accompanied with unspoken and unsaid
understanding that it will be recompensed.The rule was laid down in Lampliegh v brathwait

2. “there was understanding of remuneration”:re casey’s patent.It was understood by parties that
service will be compensated for,through some monetary or other form of benefit.The service was not
provided out of goodwill,but rather with assumption that it will be later compensated.

3. “The promise would be legally enforceable had it been made prior to the acts constituting
the consideration”.

CONSIDERATION MUST HAVE ECONOMIC VALUE

Thing promised must be commercial and marketable commodity.It cannot be sentimental,emotional or

In Thomas v Thomas complying with spouse wishes and in White v bluett requesting promisee to stop
complaining and whimpering were invalid consideration.However in ward v byham keeping child healthy and
happy,and being given discretion to choose to live with either parents were accepted by courts as
consideration.

CONSIDERATION MUST BE SUFFICIENT

“Consideration must be sufficient.It need not be adequate.Peppercorn is good consideration even if promisee
does not like pepper.”

Court is not concerned with adequacy of consideration as it deems parties free to contract.Parties can
contract on basis that fits them the best.There must be some benefit accrued by promisor,no matter how
trivial or negligible it is.

1 pound along with promise to keep residence in reasonable condition was sufficient consideration in
Thomas v Thomas.And wrappers,though inherently worthless,helped in sale of product thus was valid
consideration in chappel v nestle.

CONSIDERATION CAN BE A PROMISE NOT TO SUE

“Consideration can be a promise not to sue in return for payment”.

Where promisee has right to civil claim against promisor but he relinquishes that right in return for promise
of payment then that forbearance of act and covenant not to sue are valid consideration:Allied bank v
broom.
Promise to not enforce civil claim can be implied:Allied bank.Intention to actually sue must be present.It
must not be mere bluff:Miles v new Zealand.

The fact that promisee honestly but mistakenly believed that he has a valid and enforceable claim at law,but
it later transpires that he has not ,his promise of forbearance is still good consideration.

In combe v combe court ruled that:”one party promise not to enforce an existing claim can only provide
consideration if promise is given in return was actually induced by promise not to enforce the claim.”

In the case the promisee(wife) has promised not to sue for allowances but promisor,husband, had not asked
her to withhold her claim.Since her consideration was not given in return for husband asking her to withhold
claim,her consideration was invalid.

However in case of Allied bank v broom promisee had not asked promisor not to sue,yet his consideration of
forbearance was valid.Court found that promise not to sue was implied in return for promise to provide
security.

3rd PARTY RIGHTS

After Contracts(rights of 3rd parties) 3rd parties of contract for whose benefit contract was formed,can sue
and enforce terms drafted for their benefit.This is the case even though they were not parties to contract and
they had provided no consideration.

EXISTING LEGAL DUTY

Performance of existing legal duty is not good consideration as promisor is acquiring benefit he is already
entitled to and promisee accruing detriment he would have accrued anyways.Promisor does nothing beyond
that what he is already obliged to do so he is not providing anything in consideration.

1.EXISTING PUBLIC DUTY

Legal duty can arise under statute or common law.Promising its performance is not good consideration such
as a public officer promises service in return of payment or police officer promising to provide protection and
juror to hear claim and witness to give evidence.Under law they are bound to perform such duty.They are
providing nothing to promisee more than what he is already entitled to;this is not valid consideration as court
found in the case of collins v godefroy.The principle is justified on grounds of public policy and for legal
reasons.Public officials should not be allowed to accept monetary gifts and bribery for their duty.

Same rule was applied in recent case of Leeds United v Chief Constable(2013).

However,where promisor goes beyond legal duty and provides extra service,then his conduct amounts to
valid consideration.Police have legal duty to protect life and limb and property and maintain peace and
order.But providing extra forces for protection of C mines amounted to consideration in glasbrook v
glamorgan.However in case of Harris v sheffild D induced larger danger that required more police.In such
case provision of extra personnel was not consideration but rather legal duty of police.

Case of ward v byham shows that courts are willing to stretch doctrine of consideration and find contract
when there is none,on grounds of public policy.Court stated that mother went beyond her duty under statute
to look after child by promising assurance to keep child happy.This was an extra service that provided benefit
to promisor so it could amount to consideration under definition of benefit and detriment laid out in Dunlop.

Lord Denning stated that such factual benefit was good consideration.However paradoxically court in foakes
v beer stated that practical benefit can amount to consideration in contract of suppl of goods and
services.However Dennings view can be justified on basis that homemaking and childcare are recognised as
unpaid services.

2.Existing Duty To 3rd Party

If there is a contract between 2 parties for benefit of 3rd party,then one of them makes further contract with
3rd party to provide him goods or services,which he is already entitled to under the original contract,then
that further contract is supported by consideration.Under the original contract,promisor is already bound to
provide services to 3rd party and already suffering detriment.He does not go beyond that.3rd party is not
getting any benefit than that which he is already owed.Despite this consideration is valid.The principle was
upheld in new zealand shipping v AM sutton and Pao on v lau, andThe Eurymedon.

Similarly in scotson v pegg court found that performance of existing duty to 3rd party amounted to
consideration on basis of benefit and detriment theory.Promisor suffered detriment in performance of his
duty and promisee some benefit.However in the case there was some suggestion that promisor went beyond
his existing duty so his extra act was consideration,rather than detriment incurred being consideration.

In controversial case of shadwell v shadwell court found that promise to uncle to marry fiance was good
consideration to make uncle happy.D suffered financial detriment by marriage.However court neglected the
fact that marriage also brought him emotional and financial benefits.Probably benefits outweigh
detriments.Uncle in turn got benefit by having to seeing his nephew married and settled.However under
authority of white v bluett seeing someone happy is not good consideration as the sentiments and emotions
have no economic value.However court accepted that as good consideration as it did in ward v byham.

It seems that courts are changing principles of consideration and accepting emotional sentiments as
consideration especially in contracts of domestic and familial nature.

3. Existing Contractual Duty

Performance of existing contractal duty is not consideration:stilk v myrick

However if promisor “goes beyond his contractual duty and does something extra that he is not bound to do
under the contract then that extra act amounts to consideration”:Hartley v ponsonby.Alternative
explanation was that journey became more dangerous than it was at the time of contract because of
departure of crew member that original contract became frustrated and new contract was concluded.

Existing contractual duty can be to supply goods or services or repay debt.

CONTRACT FOR SUPPLY OF GOODS AND SERVICES

“If one party’s promise to perform existing contractual duty to supply goods or services,confers an additional
practical benefit to other party,then provided that there is no duress or fraud,it is sufficient consideration to
make promise given in return binding,even though they are only agreeing to carry out their existing
obligation.”:Williams v roffey

In the case promise of extra payment under stilk v myrick should not be successful as contrators were under
their contractual duty bound to work;they did not go beyond that.Yet court accepted that extra benefit that
hirer got from same work amounted to consideration.

Glidewell LJ highlighted practical benefit accrued by promisor:it would ensure that contract is completed in
time and penalty clause is evaded;evade cost and inconvenience of finding alternative;they were are
benefitted by change of working style.

Concept of practical benefit is vague and ambiguous.In stilk captain got practical benefit from having ship
sailed yet that benefit was not consideration but in william it was accepted.Distinciton behind it was that in
stilk promise of extra payment was induced by duress as ship needed to sailed back which was hard with
limited crew.Captain had no other option available.

However even in williams promise of payment was made under fear and pressure that time will run out and
penalty clause will arise.However here hirer had choice of hiring someone else for the job rather than make
renewed offer to contractors,so in truer sense they were not under duress to make offer.

However it is unclear why reasoning of practical benefit is limited to contracts of goods and services while
even in other contract party might acquire practical benefit such as in shadwell,the benefit of marrying and
in ward.

PART PAYMENT OF DEBT

In Pinnels case court laid down rule in relation to part payment of debt:

“Lessor amount can be satisfaction of full amount if some consideration is provided by debtor in return for
promise to forego outstanding sum

Payment of a lesser sum on the day in satisfaction of the greater cannot be any satisfaction,but a change in
time or mode of payment or addition by debtor of a tomtit or canary or like will suffice to constitute
consideration for creditor’s promise to forego his debt.

If debtor pays earlier or in a more convenient place or time at promisor’s request or gives something else as
well as part payment,creditor is recieving some benefit and debtor some detriment,this is fresh consideration
for creditor’s new promise to accept part payment and not insist on getting whole sum.“

The same principle was upheld in foakes v beer.

The rule is justified on the basis that something extra or additional(eg early payment or granting of goods
instead of cash)is done than is originally promised so it can be valid consideration.

In the case of re selectmove court ruled that principle of practical benefit cannot be applied to part payment
of debt.It is only applicable to contracts of “supply of goods and services”(roffey).The argument that creditor
gets practical benefit from part payment of debt than not receiving anything at all,was rejected by court in
selectmove but accepted in COA inMWB business v Rock ad.
C was owed money to IRC.C argued that practical benefit was provided by him to IRC by staying in business in
the sense that there was assurance to IRC that debt will be paid off in return for promise of lesser sum.He
stated that such practical benefit was consideration for promise to forego sum.Court rejected.

However in later case of COA MWB business v Rock ad,court ruled that practical benefit acquired by
promisor through promisee’s promise to pay lesser rent,was good consideration to not enforce remaining
sum of debt.HL did not comment on issue on appeal.The point has not been clarified as of yet.Under HL
authority in selectmove this is unacceptable but in recent case of mwb it was accepted.Law might be changed
in future.

Case could be distinguished from selectmove because here promise was made to accept lesser sum.In
selectmove debtor owed same sum of money.Even if there was no consideration such as claim could be
successful under promissory estoppel.

Practical benefit approach of roffey was criticised in Caribbean Trading v Trafigura(2004)by Colman J who
questioned its correctness.Decision was not in accordance withlong-standing principle that”consideration
must move from the promisee”.

EXCEPTION

1. Disputed claims

Pinnels rule does not apply to claims that are disputed as whether sum is owed and how much:cooper v
parler

In such case part payment without consideration is acceptable.

2. unliquidated claims

3. Compostition agreement

4. Payment by 3rd party

“Creditor who accepts part payment of debt from 3rd party in settlement of full cannot sue for outstanding
sum”:hirachand v temple

5. Promissory estoppal
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