CONSIDERATION
In legal terms, consideration refers to something of value that is
exchanged between parties in a contract. It is an essential
element for a contract to be legally binding. Consideration can
be money, services, goods, or even a promise to do something or
refrain from doing something.
● Mutual Exchange: Both parties must provide something of
value. If one party gives something without receiving
anything in return, it is not considered a valid contract.
● Legal Value: The consideration must have legal value. This
means it must be something that the law recognizes as
having worth.
● Not Always Monetary: Consideration does not always
have to be in the form of money. It can also be a promise or
an action.
● Past Consideration: Generally, past actions or promises do
not count as consideration for a new contract.
Consideration must be present or future.
Currie v. Misa (1875): In this case, the court held that
consideration must be something of value, which can be either a
benefit to one party or a detriment to the other.
● Importance: It established that consideration must be
sufficient but need not be adequate (the parties can agree on
the value).
Thomas v. Thomas (1842): In this case, the court ruled that a
nominal amount can constitute valid consideration.
● Importance: The case illustrated that even a small
consideration (like a £1 payment) can be enough to support
a contract if both parties agree.
Byrne & Co v Leon Van Tienhoven & Co (1880): This case
dealt with the revocation of an offer. The court found that
consideration must be present when an offer is accepted.
● Importance: It highlighted that once consideration is
exchanged, the offer cannot be revoked without legal
consequences.
CONSIDERATION MUST BE SUFFICIENT BUT NO
NEED TO BE ADEQUATE
When we say that consideration must be sufficient but need not
be adequate, it means that for a contract to be valid, the
consideration exchanged between the parties must have some
value recognized by law (sufficient), but it does not have to be
equal in value (not adequate).
Sufficient Consideration:
● Consideration must be something that the law considers
valuable. This can be money, services, or a promise. If one
party provides something of value, it is considered
sufficient.
Not Adequate:
● The law does not require that the value of what is
exchanged is fair or equal. For example, if one person sells
a car worth $10,000 for $1,000, the consideration is still
valid because it is sufficient, even though it is not adequate.
urrie v. Misa (1875): This case established that consideration
needs to be something of value. The court emphasized that the
consideration provided must be sufficient but does not have to
match the value of what is received.
● Importance: It reinforced that parties can agree on terms
that may seem unfair, but as long as there is consideration,
the contract stands.
Chappell & Co Ltd v. Nestle Co Ltd (1960): In this case,
Nestlé’s offer to pay for records in exchange for chocolate bar
wrappers was challenged. The court ruled that the wrappers
were sufficient consideration, even though their value was
minimal compared to the records.
● Importance: This case illustrates that even small or
seemingly worthless items can constitute sufficient
consideration in a contract.
Thomas v. Thomas (1842): Here, the court ruled that even a
nominal amount (like £1) could serve as sufficient consideration
for a contract.
● Importance: It shows that as long as the parties agree on
the terms, the actual value exchanged does not have to be
fair.
EXISTING OBLIGATIONS AS GOOD CONSIDERATION
Existing obligations as good consideration refers to the idea
that performing a duty or obligation that one is already legally
bound to do cannot be considered valid consideration for a new
contract. In simpler terms, if you are already required to do
something, doing it does not count as a new benefit in exchange
for a promise or payment.
● Already Bound: If someone is already obligated to
perform a task (like completing a contract), they cannot use
that same task as consideration for a new agreement.
● Public Duties: If a person is performing a duty that they
owe to the public (like a police officer enforcing the law),
that duty also cannot be used as consideration.
● Legal Requirement: The law does not recognize existing
obligations as valid consideration because there is no new
value being exchanged.
Stilk v. Myrick (1809): In this case, two sailors were promised
extra pay to complete a voyage after two crew members
deserted. The court ruled that the sailors could not claim the
extra pay because they were already obligated to complete the
voyage.
● Importance: This case established that performing an
existing duty cannot be used as consideration for a new
promise.
Hartley v. Ponsonby (1857): Here, the court allowed a sailor to
claim extra pay after the crew was reduced and they had to work
harder. The difference was that the sailor was not obligated to
work under the new, harsher conditions.
● Importance: This case illustrates that if the terms of the
obligation change significantly, new consideration may
arise.
Williams v. Roffey Bros & Nicholls (Contractors) Ltd (1990):
In this case, the court held that a promise to pay additional
money to a builder to complete a project on time could be
enforceable because the builder’s performance benefited the
promisor.
● Importance: This case shows that if the performance of an
existing obligation provides a practical benefit, it may
constitute good consideration.
PAST CONSIDERATION
Past consideration refers to a situation where something has
been done or given before a promise is made. In contract law,
past consideration is generally not recognized as valid
consideration for a new contract. This means that if you do
something for someone and then they promise to pay you later,
that promise is usually not enforceable.
● Timing: For consideration to be valid, it must be given at
the same time as or after the promise is made. If the act or
payment has already happened before the promise, it is
considered "past."
● No Bargain: The essence of a contract is that both parties
are bargaining and providing something of value in
exchange. If one party is merely acknowledging something
that has already happened, there is no real bargain.
● Exceptions: There are some exceptions where past
consideration may be recognized, such as when a past act
was done at the request of the other party and was intended
to be rewarded.
Roscorla v. Thomas (1842): In this case, a horse was sold, and
afterward, the seller promised that the horse was sound and free
from defects. The court ruled that the promise was not
enforceable because the consideration (the sale) had already
occurred.
● Importance: This case established that promises made
after a past consideration cannot be enforced.
Re McArdle (1951): In this case, a family member completed
renovations on a house. After the work was done, the other
family members promised to pay for the renovations. The court
held that the promise was not enforceable because the work was
completed before the promise was made.
● Importance: This case further illustrates that past
consideration does not constitute valid consideration for a
contract.
Pao On v. Lau Yiu Long (1980: Here, the court ruled that if a
party performs an act at the request of another party and expects
to be paid, that past act can sometimes be considered as valid
consideration, particularly if it was intended to be rewarded.
● Importance: This case shows an exception where past
consideration can be recognized if certain conditions are
met.
PROMISSORY ESTOPPEL
Promissory estoppel is a legal principle that prevents a party
from going back on a promise, even if a formal contract does not
exist, provided that the other party relied on that promise to their
detriment. In simple terms, if someone makes a promise that
another person relies on, and it would be unfair to break that
promise, the promisor may be held to their word.
● Promise: There must be a clear and definite promise made
by one party.
● Reliance: The other party must rely on that promise in a
way that leads them to take action or refrain from taking
action.
● Detriment: The reliance must result in some kind of
detriment or disadvantage to the party who relied on the
promise.
● Justice: It would be unfair or unjust to allow the promisor
to break their promise after the other party has relied on it.
Central London Property Trust Ltd v. High Trees House Ltd
(1947):
During World War II, the landlord agreed to reduce the rent for
tenants. After the war, the landlord tried to claim the full rent for
the entire period. The court held that since the tenants relied on
the reduced rent, the landlord could not go back on the promise.
● Importance: This case is often cited as a classic example
of promissory estoppel.
D & C Builders Ltd v. Rees (1966): In this case, a builder
agreed to accept a lower payment than originally agreed upon
after the client promised to pay the full amount later. The court
ruled that the client could not rely on the promise because it was
made under duress.
● Importance: It illustrates that reliance must be reasonable
and made without any improper pressure.
Waltons Stores (Interstate) Ltd v. Maher (1988):Here, Maher
was led to believe that a contract was in place and began
construction of a store based on Waltons' promise. Waltons later
backed out, but the court held that Maher relied on their promise
to his detriment.
● Importance: This case reinforced the principle of
promissory estoppel, emphasizing reliance and detriment.
THE EQUITABLE CONCEPT OF PROMISSORY
ESTOPPEL
The equitable concept of promissory estoppel is a legal
principle that prevents a party from breaking a promise when the
other party has relied on that promise to their detriment. It is
based on fairness (equity) rather than strict legal rules.
Essentially, if one person makes a promise that another person
relies on and it would be unfair for the first person to go back on
that promise, the law may enforce the promise, even if there is
no formal contract.
● Promise: There must be a clear and definite promise made
by one party.
● Reliance: The other party must rely on that promise, taking
some action or refraining from action based on the
expectation that the promise will be honored.
● Detriment: The reliance must result in some disadvantage
or harm to the party who relied on the promise.
● Unconscionability: It would be unjust or unfair to allow
the promisor to break their promise after the other party has
relied on it.
Central London Property Trust Ltd v. High Trees House Ltd
(1947): During World War II, the landlord agreed to reduce the
rent for tenants. After the war, the landlord tried to claim the full
rent from the tenants. The court held that the landlord could not
go back on the promise because the tenants relied on the reduced
rent during tough times.
● Importance: This case is often seen as the foundation of
the equitable concept of promissory estoppel.
D & C Builders Ltd v. Rees (1966): A builder agreed to accept
a lower payment than originally agreed upon after the client
promised to pay the full amount later. The court ruled that the
client could not rely on the promise because it was made under
duress.
● Importance: This case shows that reliance must be
reasonable and that promissory estoppel cannot be applied
if the promise was made under pressure.
Waltons Stores (Interstate) Ltd v. Maher (1988): Maher was
led to believe that a contract was in place and began
construction based on Waltons’ promise. When Waltons backed
out, the court held that Maher relied on their promise to his
detriment.
● Importance: This case emphasized that reliance and
detriment are crucial elements of promissory estoppel.
THE REQUIREMENT OF AND LIMITATION ON
PROMISSORY ESTOPPEL
REQUIREMENT
For promissory estoppel to be applicable, several key
requirements must be met:
1.Clear and Definite Promise:
○ There must be a clear promise made by one party. This
promise should be specific enough that the other party
can reasonably rely on it.
2.Reasonable Reliance:
○ The party to whom the promise was made must have
relied on that promise in a reasonable way. This means
their reliance should be logical and justifiable.
3.Detrimental Reliance:
○ The reliance on the promise must result in some form
of detriment or disadvantage. This could be financial
loss or other negative consequences that occur because
the party acted on the promise.
4.Unconscionability:
○ It must be unjust or unfair to allow the promisor to go
back on their promise after the other party has relied
on it.
LIMITATIONS
While promissory estoppel can be a powerful tool, there are
limitations:
1.No Formal Contract:
○ Promissory estoppel typically applies in situations
where no formal contract exists. If there is a valid
contract, the terms of that contract govern.
2.Lack of Formality:
○ The promise must be clear and not vague. If the
promise is uncertain, it may not be enforceable.
3.No Duress or Improper Influence:
○ If the promise was made under duress or undue
pressure, promissory estoppel may not apply.
4.Public Policy Considerations:
○ Courts may deny enforcement if it goes against public
policy or legal principles.
Coastal Oil & Gas Corp. v. Garza Energy Trust (2008):
● Summary: In this case, Coastal Oil made representations
to Garza regarding drilling rights. Garza relied on these
representations to his detriment. The court held that Garza
could enforce Coastal Oil's promise due to his reliance.
● Importance: This case highlights the importance of
reliance and the detrimental effect it can have when a
promise is not honored.
Hoffman v. Red Owl Stores, Inc. (1965):
● Summary: Hoffman was promised a franchise by Red Owl
based on certain conditions. He invested time and money
based on this promise but was ultimately denied the
franchise. The court ruled that he could recover damages
due to his reliance on Red Owl's promise.
● Importance: This case illustrates how reliance and
investment based on a promise can lead to enforceable
claims.
Estoppel by Representation (Kelley v. The State of New
York, 1975):
● Summary: Kelley relied on a representation by the state
that he would receive certain benefits. When the state did
not provide the benefits, Kelley suffered consequences. The
court found that Kelley could rely on the representation due
to his detrimental reliance.
● Importance: This case emphasizes that reliance on a
representation, even in a governmental context, can lead to
enforceability.
