THE COPPERBELT UNIVERSITY
SCHOOL OF BUILT ENVIRONMENT
ES340 LAW OF CONTRACT AND TORT
CONSIDERATION
THE NATURE AND SUBJECT MATTER OF CONSIDERATION
The doctrine of consideration is concerned with the issue of enforceability of contractual promises.
Consideration is the primary basis on which promises are enforceable in English law. The mere fact that
the parties have reached an agreement does not necessarily mean that it is automatically legally
enforceable. For a contract to be enforceable, it must either be supported by consideration (a mutual
exchange, not a gift) or be expressed in form of a deed (a written in a formal document) in the case of a
gift. The significance of the element of consideration essentially refers the mutuality of exchange
between the parties – that is to say, one party to an agreement must give or make a promise in exchange
of what is being given or promised from the other in order to be able to enforce that promise. In other
words, an agreement is not usually binding unless each party gives something in return for what is gained
from the other party. Therefore consideration can simply be described as the price for which the promise
of the other party is bought. For example, the contract may involve the transfer of goods in exchange for
payment of a sum of money. In this case the payment of the money is treated as consideration for the
transfer of the goods, or alternatively the transfer of ownership of the goods is consideration for the
money paid. On the contrary, if the goods were to be handed over without any payment, this would be a
gift, and would not be enforced by the law. In summary, the doctrine of consideration doctrine deals with
two main issues:
Which promises are enforceable? Those which have been paid for.
Who can enforce the agreement/ undertaking? The party who has paid for it - often expressed as
consideration must move from the promisee.
FUNCTIONS OF CO NSIDERATION
It is very important to understand that consideration is not only required at the formation of the contract,
but also where the parties wish to vary (modify) or discharge their contract by agreement. At the contract
formation stage, the primary function of consideration is to prevent the law’s involvement in dealing with
gratuitous transactions, because they are often informal and as such, a promisor who gets nothing in
exchange arguably deserves the freedom to change his mind. Whereas at contract variation stage, the
function of consideration is to prevent one from making a promise to vary the contract out of improper
pressure and in a way entirely favourable to the promisee.
DEFINITION AND REQUIREMEN TS O F CONSIDERA TION
Consideration can be broadly defined as a promise to confer something of benefit on the other party or a
promise a do something detrimental to one’s self or both. The issue of what constitutes a valuable
consideration in terms of a benefit and detriment as established in Currie V Misa (1975) may include some
right, interest, profit accruing to one party (benefit), or some forbearance, loss or responsibility given,
suffered or undertaken by the other (detriment). Another important requirement is that consideration
must have some economic value in the eyes of law rather than an emotional or sentimental one. In White
v Bluett (1853), a father promised not to make his son repay money he had borrowed, if his son promised
not to keep boring him with complaints. It was held that the son’s promise was not sufficient
consideration to make his father’s promise binding, because it had no economic value.
FORMS OF CONSIDERATION
Consideration can be executory or executed.
a) Executory consideration – consists of mutual promises from both parties – i.e. a promise of
performance given in return for a promise of performance. For example, a promise to paint a house in
return for a promise of payment.
b) Executed consideration is the completed performance by one party made at the time of entering into
a contract, and leaving an outstanding obligation of performance by the other party. For example, in
bilateral contracts the carrying out of work or supply of goods in circumstances that show an obvious
expectation that a payment will be made. In unilateral contracts, the example of executed
consideration may be illustrated by a case of advertisements of a reward, which becomes a binding
promise when the act is performed.
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RULES OF CONSID ERATION
i) Consideration must be sufficient but need not be adequate
This rule effectively means that the courts will not inquire into the adequacy of consideration, as long as
something valuable in the eye of the law is exchanged for it. The reason supporting this rule stems from
the fundamental theory of freedom of contract, which promotes the idea that the parties entitled to make
their agreement in whatever form, and on any terms they wish. Therefore the mere fact there is an
apparent imbalance in the value of what is being exchanged for or one party appears to be making a bad
bargain is not itself a sufficient catalyst for the court’s interference. In other words, the courts have no
comparative advantage in determining at what price goods should be sold. Although the sufficiency and
adequacy of consideration may be confusing to mean the same thing, the words have a different meaning
in the legal context. The word sufficiency in legal terms means that what is promised must have some
recognisable economic value, real, and be tangible. The word adequacy means what is being given as
consideration must correspond in value to the other party’s consideration.
Thomas v Thomas (1842)
The claimant was a widow whose husband had stated that if he died before his wife, she should be allowed
to live in his house for the rest of her life, after which she was to pass to his sons. When the man died, the
defendant was his executor, agreed that the widow could continue to occupy the house in return for a
promise that she would pay £1 a year and keep the house in good repair. Despite this agreement, the
defendant tried to evict the widow, so she sued for breach of contract. The defendant brought up an
argument that the earlier promise was not binding as there was no consideration for his promise.
Held: that the widow’s promise to pay £1 and keep the house in good repair was sufficient consideration to
make the owner’s promise binding.
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ii) Consideration must not be past
This general rule means that a benefit conferred before a contract is made is not consideration for a
present promise or act because it confers no benefit on the promisor and involves no detriment to the
promisee in return for the promise. Put simply, past consideration can be defined as a benefit that is
already given or some act already performed, which is not induced by the other party’s act or promise in
return at the time of making the contract. The requirement of a valid consideration is that it must be given
in return for a promise or act of the other party at the time of entering into a contract. The general rule
that past consideration is no consideration at all may be illustrated in the following situations. Firstly,
where performace pre-dates the promise to be enforced – i.e. the benefit is already confered, or the act
is already performed before the other party’s promise was made and is independent of that promise.
Secondly, where consideration has already been given for a reciprocal promise and cannot buy
additional promises from the same promisor. For example, A promises to pay B K5000 for 1 mobile
phone, A cannot rely on the same K5000 to enforce B’s later promise to give A an additional phone.
Roscorla v Thomas (1842)
The claimant purchased a horse from the defendant for £30. After the sale was concluded the defendant
told the claimant that the horse was ‘sound and free from any vice’. In fact, this turned out to be far from the
truth as the horse had a vicious temperament and bit people. The claimant sued on this promise.
Held: That the defendant’s promise was unenforceable because it was made after the sale. This was
because the payment of the price as consideration was complete before the assurance was given by the
defendant. The claimant’s consideration was past, and gave nothing new in return for the defendant’s
promise. If the promise of the horse’s condition had been made before the sale, the claimant would have
provided consideration for it at the time of buying the horse.
Exceptions to the past consideration rule
Where an act or service has already been performed and a subsequent promise is made to pay for it or
confer some other benefit on the promisee, the subsequent promise is enforceable if:
(a) the act or service was performed at the request of the other party (promisor);
(b) it was clearly implied at the time of the request by both parties that the act or service was to be
paid for; and
(c) the promise would have been legally enforceable if it had been promised in advance, for example,
price variation clause.
In Lampleigh v Brathwait (1615), where the defendant (sentenced to death) asked the claimant to obtain a
pardon from King James I. The claimant was successful. The defendant’s subsequent promise to pay
£1,000 to the claimant was held to be enforceable.
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iii) Consideration must move from the promisee
This rule means that only a person who has given something of value may enforce a promise made to
him. In other words, A can enforce B’s undertaking to A provided that A has performed or promised to
perform B’s undertaking. This rule entails that a person who has given no consideration may not sue on a
contract. Under the rules of contract law, the parties to a contract must provide consideration, it follows
that a person who receives a benefit under a contract may not enforce his rights under the contract,
unless consideration has been given. Put simply, no stranger to the consideration may sue on a contract
Tweddle v Atkinson (1861)
Tweddle and Guy agreed that Guy would give £200 and Tweddle would give £100 to Tweddle’s son, the
claimant, after his marriage to Guy’s daughter. Guy died before the £200 was paid and the claimant sued
Guy’s estate for the money.
Held: The claimant had not provided any consideration for Guy’s promise to pay £200 and therefore he
could not take legal action under the contract.
iv) A compromise of a legal claim or forbearance to sue on the claim
amounts to consideration
This rule provides that if one party has a possible civil claim against the other, a promise not sue amounts
to consideration in return for a promise given.
In Alliance Bank Ltd v Broom (1864) broom had an overdraft of £22,000 with the bank and the bank asked
him to provide some security. Mr Broom promised to do so, but never and consequently the bank sued him.
Mr Broom argued that there was no consideration for his promise to provide security.
Held: that the consideration was provided by the bank’s implied promise not to sue for a while rather giving
Mr Broom time to provide security, even though they eventually sued him afterwards.
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CONSIDERATION IN THE PERFORMA NCE OF EXISTING DUTIES
Can the performance of, or the promise to perform an act which the promisee is already under a legal
obligation to carry out, ever amount to consideration?
Performance of an already existing duty does not constitute consideration. The general rule is that where
a promisee already owes the promisor a legal duty, the performance or promise of performance of an
existing duty by the promise will usually not amount to consideration. The rationale is that the promisee
suffers no legal detriment and the promisor only obtains the benefit which they were already entitled.
Existing duties are divided into three main categories namely, public duties, contractual duties owed to
the promisor and contractual duties owed to a third party.
I) Consideration in the Performance of Public Duties imposed by the Law
A promise by a person to do something which the general law already obliges him to do will not amount
to good consideration. A person carrying out duties which they are required to do under the general law
(i.e. independent of contract such as a police officer protecting citizens) doing that alone will not provide
consideration. The rationale is to discourage persons with public duties from demanding additional
contractual payments or other benefits for carrying out those duties. However, there is an exception to the
above rule which states that where a promisee is under a public duty, but does something extra to what
they are bound to do under that duty, that extra act or performance can amount to consideration.
Collins v Godefroy (1813)
Collins was summoned as a witness in a trial and was legally bound, under a court order, to give evidence
in a court case, which Godefroy was pursuing. Godefroy promised to pay Collins six guineas if he attended
court and gave evidence.
Held: Godefroy’s promise to pay was unenforceable as Collins was obliged by the general law to attend and
give evidence in court and, therefore, Collins had provided no consideration for the promised payment.
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Glasbrook Brothers v. Glasmorgan County Council (1925) - a promise to exceed a duty imposed by the
general law will amount to good consideration.
Glasbrook Brothers were the owners of a coal mine in South Wales. During a miners’ strike at a coal mine,
the owners of the colliery wanted additional police officers to guard the mines premises. The police
suggested that regular checks by a mobile force could provide adequate protection, but the owners insisted
that the officers should be deployed on the premises. The owners offered to pay police £2,200 to cover the
extra cost of having the police stationed at the mine full time during the strike. When the strike was over, the
mine owners refused to pay, arguing that the police had only carried out their existing public duty to
maintain law and order at the mine and therefore had provided no consideration for their promise to pay.
Held: The promise to pay for the additional police officers was binding. The police had discretion as to how
and where best to deploy their forces. If the police believed that adequate protection could have been given
by a mobile force then any greater protection could amount to consideration for the owners of the mine’s
promise.
ii) Consideration in the Performance of Existing Contractual Duty to the Promisor
Traditionally, the position of the law was that performance of an existing contractual duty owed to a
promisor was not consideration (See Stilk v Myrick (1809)). The basic concern of courts here has been to
minimise the risk of extortion and duress. Now distinction needs to be drawn between contractual duties
to supply goods or services and contractual duties to pay debts.
(a) Contractual duties to supply goods or services
The most common modern-day consideration problem involves the performance of (or promise to
perform) a pre-existing duty already contractually owed to the other party. For example, A agrees to pay B
£3,000 to paint his house, and subsequently A agrees to pay an additional £1,000 to B for the same job.
If one party’s promise to perform an existing contractual duty to supply goods or services confers an
additional practical benefit to the other party, then , as long as no duress is involved, it will be sufficient
consideration to make a promise given in return binding. The most important practical application of
consideration in the performance of existing contractual duties to supply goods or services is in the area of
one-sided contract modification/ variation. This rule was upheld in the recent decided case of Williams v
Roffey (1990)), where the court held that the defendant’s promise to pay extra amount on the contract
was supported by valuable consideration: (1) in return for Williams completing the job on time, (2) Roffey
would avoid losing money under the penalty clause stipulated in their agreement with the owners of the
building, (3) the cost and inconvenience of finding another contractor to finish the job, and (4) had also
benefited from the altered working arrangements.
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Roffey, a building firm, entered into a contract with the owners to refurbish 27 flats. This contract contained
a penalty clause stating that if the flats were not refurbished in time then a sum of money was payable to
the owners. The defendants then subcontracted the carpentry work to Williams (‘the carpenter’) for a price
of £20,000. After finishing work on nine of the flats, the carpenter got into financial difficulties because his
contract price was too low and because he failed to supervise his workmen adequately. The builders were
concerned that they would be liable under a penalty clause in the main building contract if the carpenter did
not finish the remaining 18 flats on time, so they changed the working arrangements so that one flat was
finished at a time and promised to pay him an extra £10,300 (at the approximate rate of £575 on each
completed flat). Williams completed the carpentry work on eight more flats but the builders paid him only
£1,500 extra and refused to pay him any further sums, claiming that the agreement was unenforceable as it
was not supported by consideration. Williams therefore stopped work on the flats and sued for the amount
he had not been paid.
Held: The promise that the defendant had made was enforceable against them. By carrying on and doing
the carpentry work as originally agreed the defendants had received a benefit from the claimants by
avoiding paying the damages under the penalty clause for failing to complete the contract on time, and also
benefited from the altered working arrangements and from not incurring the cost and inconvenience of
having to find another carpenter . This was a benefit to the defendants because it resulted in their gaining a
commercial advantage. It therefore amounted to fresh consideration.
(b) Contractual duties to pay debts
If a debtor offers to pay a reduced sum back to the lender in full and final settlement and the lender
agrees to accept it, this agreement will only be binding if the debtor provides some extra element that can
be treated as consideration. Stated another way, where some person owes another person money, a
promise by the latter to accept a smaller repayment will only be binding if the debtor provides some extra
element as consideration (leading decision is Pinnel’s Case (1602)).
Pinnel sued Cole for the recovery of a debt. Cole stated that he had paid part of the debt and that Pinnel
had accepted the part-payment in full satisfaction for the whole debt.
Held: The court stated that payment of a lesser sum on the date the debt is due to be paid cannot be
settlement for the whole debt. The court added that if payment were made on an earlier date or some other
item was given, even if the item was worth financially less than the debt, this would be good consideration
for the whole debt.
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Foakes v Beer (1884)
The defendant, Mrs Beer, obtained a high court judgment for a debt of £2090 19s owed by the claimant, Dr
Foakes. She agreed in writing with Dr Foakes that she would not take further court action to enforce the
judgment if Dr Foakes paid off the debt by instalments. Nothing was mentioned of the interest which had
accrued on the debt. Dr Foakes paid the debt off in accordance with the agreement but then Mrs Beer sued
him for the interest on the debt.
Held: Mrs Beer was legally entitled to the interest on the debt because Dr Foakes had not provided any
consideration for her promise to accept less than due to her.
iii) Consideration in the Performance of Existing Contractual Duty owed to a Third Party
It is possible for a person to give the same consideration to two different people, thereby creating two
valid contracts. If a contracting party promises to provide a benefit to a third party which they were
already bound to provide under the contract, this promise can still be good consideration for a promise
made by the third party.
Example situation: A promises C that A will perform contractual obligation already owed to B; the
performance of that obligation can amount to good consideration for promise made by C to A, provided
that B instructed A’s performance goes to a third party (C) B.
Scotson v Pegg (1861)
Scotson contracted with A to supply a cargo of coal to A, or to anyone A nominated. Scotson was instructed
by A to deliver the coal to Pegg who was a third party to the original contract between Scotson and A. Pegg
promised to unload the coal at a stated rate of pay. He subsequently failed to do the agreed unloading.
Scotson sued Pegg, claiming that their promise to deliver the coal to him was consideration for his promise
to unload it. Pegg claimed this could not be consideration, since Scotson was already bound to supply the
coal under the contract with A.
Held: The court upheld Scotson’s claim: delivery of the coal was consideration because it was a benefit to
Pegg, and a detriment to Scotson in that it prevented them from having the option of breaking their contract
with A (in which case they would just pay damages to A) and having no liability to Pegg.
