Consideration
Offer + acceptance +
intention + consideration
Consideration is what one party is giving or promising
in exchange for what is being given or promised by
the other party. It is the price for the promise.
It is giving benefit or taking away disbenefit.
It must be of value (at least to the parties), and is
exchanged for the performance or promise of
performance by the other party (such performance
itself is consideration).
Example
If X sells her IPad to Y for 100,000/-. Y will receive the
benefit of the IPad and her detriment will be the
surrender of the 100,000/- of her cash to X
CURRIE v MISA
CLASSIC DEFINITION
A valuable consideration, in the
sense of the law, may consist
either in some right, interest, profit,
or benefit accruing to the one
party, or some forbearance,
detriment, loss or responsibility,
given, suffered, or undertaken by
the other. Lush J
An Act or promise offered by the one party and
accepted by the other party as price for that others
promise.
A variable consideration may consist of some right
interest profit or benefit accruing to the one party or
some loss forbearance detriment or responsibility given
suffered or borne by the other.
What is the basis of
consideration?
Exchange/Reciprocity?
Benefit and detriment?
Request?
Reliance?
A reason for enforcing the promise?
Types of Consideration
EXECUTORY CONSIDERATION-An agreement to carry
out a future act.
Jane promises to deliver a turkey to James on
Christmas Eve. Payment upon delivery..
Executed Consideration
EXECUTED CONSIDERATION- Where one party has
carried out their side of the bargain. The other party
has not yet, hence their consideration is executory.
Example
David pays Roberto 10,000/- to perform a magic show
at his sons birthday party next Saturday.
Rv Clarke
Unilateral Contracts- Contracts for Rewards.
Rules of consideration
Consideration must be sufficient but need not be
adequate. (Thomas v Thomas)
Consideration must move from the promisee. though
not necessarily to the promisor
Consideration must not be in the past.
Consideration Must Move
From The Promisee
The Person who seeks to enforce the contract must
show that they provided consideration it is not enough
to show that someone else provided it.
If David (promisor) asks Robert (Promisee) to pay
Carole a sum of money as consideration for David’s
promise to Robert, that will be good consideration.
Tweddle v Atkinson: a person can only enforce a
promise if they have provided the consideration
themselves, it cannot move from a third party.
Consideration Need Not Be
Adequate but must be Sufficient
The Value to each of the parties need not be equal
but it must be legally sufficient.
Joanna agrees to sell her horse to Hope for 20,000/-.
The agreement to pay 20,000/- will be sufficient
consideration. The fact that it is not adequate does
not matter , there is some economic value.
Chappel &co Ltd v Nestle Co Ltd
Williams v Roffey Bros.
Past consideration
Past consideration will not constitute good
consideration. Actions done before the promise
That is the General Rule : With English law being English
law, there are however a number of exceptions to this
general rule.
However if it’s clear that the only reason someone
would do an act is in expectation of a reward, then
even if consideration is past it WILL be valid.
SCENARIO A SCENARIO B
Maureen agrees to pay her Samuel a neighbour decides to
neighbour, Sam a sum of 20,000/- paint the outside of Maureen’s
to paint her house whilst she is in house whilst she is on holiday.
holiday. Sam completes the task Maureen returns from her holiday
whilst Maureen is on holiday and and is delighted with Samuels kind
leaves her an invoice for he act. She promises to pay him
agreed sum of 20,000/- Samuel 20,000/-. Maureen later refuses to
can enforce payment. pay Samuel . Samuel Cannot
enforce payment.
GOOD CONSIDERATION PAST CONSIDERATION
Re McArdle (1951)
A Father left his property to his adult children. Prior to
the sale of the property one of the sons had been
living in the property and had undertaken
improvements. After the work had been carried out,
his siblings agreed to contribute to the payment for
the work out of their share of the proceeds of the
property sale.
The agreement was unenforceable as it was secured
after the work had been carried out thus amounting
to past consideration.
Lampleigh v Braithwaite
(1615) 80 ER 255
This case is the exception
Braithwaite had killed a man. He asked Lampleigh to
obtain a King’s pardon for him. Lampleigh secured the
pardon and in recognition of his hard work and expenses,
Braithwaite promised to pay him £100. He later refused to
pay.
Courts Held:
Whilst payment had not been discussed at the time of
the request, it was clear that both of the parties would
have anticipated payment for the activity. The court
held that Braithwaite's request constituted an implied
promise of payment.
Conditions for the exception to
the past consideration rule
The Act must have been carried out at the promisors
request
The parties must have understood that the act would
be rewarded in some way
The payment must have been capable of legal
enforcement had it been promised beforehand.
Consideration: sufficient but
not adequate
Thomas v Thomas (1842) 2 QB 851
Something of value
Motive of respecting testator’s wishes: not consideration
1l rent and promise to keep in repair: consideration
Chappell v Nestlé [Rockin’ Shoes]
“A contracting party can stipulate for what consideration
he chooses. A peppercorn does not cease to be good
consideration if it is established that the promisee does
not like pepper and will throw away the corn.” Lord
Somervill
Intangible returns
Hamer v
White v Bluett Sidway
Payment of sum in
return for refraining
Father from:
promised son “drinking liquor, using
tobacco, swearing
to discharge and playing cards or
him from debt billiards for money until
[he] should become
if son promised 21 years of age”
to stop
complaining
Pre-Existing Legal Duties
Under general law
Pre-existing duties which are imposed by the contract
Duties which are already owed to a third party
Stilk v Myrick
Facts: sailor bringing an action for unpaid wages, he
was on a trip in the Baltic and halfway through the
voyage he was promised extra money following the
desertion of ship by two crew members. Promise was
to share two salaries between the two remaining crew
however the money was not paid.
Held:sailor isn’t entitled to extra money.
Williams v Roffey Brothers –
Glidewell LJ
i. Contract between A & B
ii. Before A has completely performed his obligations B has
reason to doubt whether A will, or will be able to,
complete his side of the bargain;
iii. B promises A £ in return for A’s promising to perform on
time;
iv. As a result of giving his promise, B obtains in practice a
benefit, or obviates a disbenefit;
v. If there is no economic duress or fraud by A;
vi. THEN the benefit to B is capable of being consideration
for B’s promise, so that the promise will be legally
binding
‘it decided that in varying a contract, a promise to
perform a pre-existing contractual obligation will
constitute good consideration so long as a benefit is
conferred upon the promise.
FORBEARANCE TO SUE
If one person has a valid claim against another (in
contract or tort) but promises to forbear from
enforcing it, that will constitute valid consideration if
made in return for a promise by the other to settle the
claim.
Alliance Bank v Broom (1864) 2 Dr & Sm 289.
EXISTING PUBLIC DUTY
If someone is under a public duty to do a particular
task, then agreeing to do that task is not sufficient
consideration for a contract.
Collins v Godefroy (1831) 1 B & Ad 950.
If someone exceeds their public duty, then this may
be valid consideration. See:
Glassbrooke Bros v Glamorgan County Council [1925] AC
270.
EXISTING CONTRACTUAL DUTY
If someone promises to do something they are already
bound to do under a contract, that is not valid
consideration. Contrast:
Stilk v Myrick (1809) 2 Camp 317.
Hartley v Ponsonby (1857) 7 E & B 872.
The principle set out in Stilk v Myrick was amended in
Hartley. Now, if the performance of an existing
contractual duty confers a practical benefit on the
other party this can constitute valid consideration.
EXISTING CONTRACTUAL DUTY OWED TO A
THIRD PARTY
Shadwell v Shadwell
“it would be a valid consideration for the court to
enforce a contract if a pre-existing duty was
performed, so long as it was for a third party.”
PART PAYMENT OF DEBT
A promise to accept a smaller sum in full satisfaction
will be binding on a creditor where the part-payment
is made by a third party on condition that the debtor is
released from the obligation to pay the full amount.
Hirachand Punamchand v Temple [1911] 2 KB 330 - A
father paid a smaller sum to a money lender to pay his
son's debts, which the money lender accepted in full
settlement. Later the money lender sued for the
balance. It was held that the part-payment was valid
consideration, and that to allow the moneylender's
claim would be a fraud on the father.
If one person owes a sum of money to another and
agrees to pay part of this in full settlement, the rule at
common law (the rule in Pinnel's Case (1602) 5 CoRep
117a) is that part-payment of a debt is not good
consideration for a promise to forgo the balance
Example
Thus, if A owes B £50 and B accepts £25 in full
satisfaction on the due date, there is nothing to
prevent B from claiming the balance at a later date,
since there is no consideration proceeding from A to
enforce the promise of B to accept part-payment. This
is because he is already bound to pay the full amount,
an agreement based on the same principle as Stilk v
Myrick (1809). It also protects a creditor from the
economic duress of his debtor.
PINNEL’S CASE
FACTS:In Pinnel's Case (1602), Cole owed Pinnel £8-10s-
0d (£8.50) which was due on 11 November. At Pinnel's
request, Cole payed £5-2s-2d (£5.11) on 1 October,
which Pinnel accepted in full settlement of the debt.
Pinnel sued Cole for the amount owed. It was held
that part-payment in itself was not consideration.
However, it was held that the agreement to accept
part-payment would be binding if the debtor, at the
creditor's request, provided some fresh consideration.
Consideration might be provided if the creditor agrees
to accept:
Promissory Estoppel
ESTOPPEL: The barring of a party from affirming a
particular claim (or fact) inconsistent with a previous
position that a party took, through words or conduct,
especially where a representation has been acted or
relied upon by others.
CONSIDERATION NEED NOT BE ADEQUATE BUT MUST
BE SUFFICIENT
Consideration Must Move From The Promisee (But Thomas v Thomas
Not Essention That It Moves From The Promisor)
White v Bluett
Tweddle v Atkinson [1861]
Ward v Byham
Chappell v Nestle
CONSIDERATION
Performance of pre-existing obligation cannot (
usually) amount to consideration . Public duty
Past consideration is not good consideration imposed by law
Re Mcardle Collins v Godefroy
Lampleigh v Braithwaite Contractual obligation
Pao On v Lau Yiu Long Stilk v Myrick
Williams v Roffey Bros &Nicholls (1990)
