consideration - cases and principles

Rules of consideration

Consideration need not be adequate but must be sufficient.

The parties to the contract have to agree between themselves that the value of exchange is acceptable.

N.B. the law is not concerned with promoting equality of the consideration between the parties, even if it looks unfair to an outside observer,

Sufficiency means that consideration must be real and have some value.

Consideration definition (Currie v Misa 1875)

Some right, interest, profit or benefit accruing to one party or some forbearance, detriment, loss or responsibility given, suffered or undertaken by another.

Every contract requires consideration because it’s a bargain where both sides agree to give something to the other in some sort of exchange. An agreement is binding if it is supported by consideration.

Thomas v Thomas 1842

A widow was allowed to stay in her home and was required to pay a nominal £1 annual rent. The executors had carried out the wishes, that weren’t in the will, of the dead husband.

They later decided to evict her but they were unable to do so - the £1 a year was adequate consideration for the contract.

Executed consideration

Where the exchange takes place when the promise becomes binding.

Executory consideration

Where the exchange takes place in the future - a promise made for future actions.

Chappell v Nestle 1960

Here customers were able to claim a recording of a song at a fraction of the normal RRP if they send in chocolate bar wrappers. The wrappers were consideration for the record.

White v Bluett 1853

The son owed his father money and had given him a promissory note saying that he would pay his debt. On the father’s death, the son claimed that his father had agreed to write off the debt, if the son had stopped complaining.

The court held - there was no proper consideration here - the son had no legal right to complain. Further, natural love and affection do not count as consideration for the purposes of the law.

Ward v Byham 1956

The two parties were parents of an illegitimate child. The father agreed to let the mother look after the girl, subject to the contents of the letter he had sent. The letter said that he would pay £1 a week providing the mother can prove she was well looked after and happy and was free to decide where she anted to live. When the father stopped paying the money, the mother brought a claim for the weekly £1 - the father said the mother was under a duty to maintain the child.

The court held that the father had to keep his promise to pay. Her love and affection were considered to be consideration,

Past consideration is no consideration

This means that the thing being claimed as being consideration has no value where it. Has already been done at the time the agreement was made. The exception to this rule is where there is an implied term to pay for a particular task.

Re McArdle 1951

Mrs McArdle paid for work to be carried out on a bungalow where she lived with her husband and mother-in-law. Her father in law had died, leaving the property to her husband and his brothers and sisters.

They agreed to pay her £488 from the estate for the work done.

Held - this promise came after the work was done, so was considered to be past consideration and therefore of no value.

Re Casey’s Patent 1892

• The claimant worked on patents for a company that later promised a third share of the patents.

• The company refused to give him the shares, saying their consideration was past consideration for a contract and therefore inapplicable.

• The court decided that he was entitled to the patents - when he had worked on the patents it was implied he would receive some share.

Lampleigh v Braithwaite 1615

Braithwait had been convicted of murder and was about to hang. Lampleigh agreed to negotiate a Royal Pardon for him which he did, and Braithwait escaped hanging. Braithwait then promised to pay him £100 which he then refused to pay, saying that there was no obligation as it was past consideration.

Held - the actions taken were at Braithwait’s request, and so important that a fee must be implied.

Consideration must move from the promisee

In a bilateral contract, both parties are a promisor and a promisee. The important rule here is that consideration must move from the promisee, this means that a person cannot sue or be sued under a contract unless he or she has provided consideration for it.

N.B. third parties and consideration - privity.

Tweedle v Atkinson 1861

The fathers of a young couple agreed in writing to give them some money. One of the wife’s fathers died before giving over the money. The executors of the estate refused to I’ve the money to the couple and the husband sued them.

Held - even though he was named as a recipient of the money, the agreement was between the fathers, so the husband himself had not provided any consideration and was not a party himself.

The performance of a pre-existing duty doesn’t count as the consideration for a new contract.

The performance of a duty that already exists, and is required by law cannot be counted as consideration. Something additional has to be done for there to be consideration.

Collins v Godefroy 1831

Policemen are under duty to attend and give evidence at trials if summoned. The defendant really wanted the policeman to attend so he promised the policeman money to attend. He didn’t pay the money.

No consideration here as he was already under a duty to be in court.

Contrast to Glasbrook.

Still v Myrick 1809

There was an agreement to sail for an amount paid monthly. Two crew members deserted part way through the voyage - the captain asked the remaining crew to do the extra work and said he would share wages of the two deserted, on completion of the voyage, he refused to pay.

The court said that the crew members had already agreed to do everything required in the event of an emergency.

Held - no pre-existing contractual obligation was not sufficient consideration to create a contract.

Glasbrook Bros v Glamorgan County Council 1925

During a strike at a coal pit, the owner requested additional policing saying he would pay for this. Once the strike was over, he refused to pay on the basis that the police are duty bound to protect.

The court disagreed because the police were doing more than their duty required. As the police had provided more officers and in a different way to their normal practice, there was consideration.

Hartley v Ponsoby 1857

• similar to the facts of Stilk, but here 19 of the 55 crew members deserted, which meant that there was a lot more work for the remaining crew and, as the court noted, under dangerous conditions. The owners had said that they would pay extra for this additional work, but then refused to pay.

• Held - there was a great change in circumstance and workload, which amounted to consideration.

Williams v Roffey Bros and Nicholls (contractors) Ltd 1990

This is a building (commercial) case. Roffey Bros were builders who subcontracted the carpentry on a number of flats to a carpentry firm, Williams. Williams had underquoted for the work and ran into difficulties which meant they wouldn’t finish the work on time. So, Roffey agreed to pay them an additional £10,300 if they finished the work on time. This happened but then Roffey refused to pay up, claiming Williams was only doing what he had been contracted to do,

Held - the extra benefit of not having to pay a sum for a delay to the original client, is consideration.

Shadwell v Shadwell 1840

The defendant (the uncle) promised to pay the claimant £150 a year, until his, the claimant’s income reached 600 guineas. In consideration, (here, in return) the claimant was to marry a Miss Nicholls. However, he was already engaged to marry her.

Held - the promise to marry was seen as consideration so the contract to pay the £150 was seen as enforceable.

Scotson v Pegg 1861

A purchaser of coal, X, paid the defendant to carry and unload it. The claimant, supplier of the coal, had also paid the defendant to carrrt and unload the coal. The claimant argued that the defendant being under a duty to carry and unload the coal for X wasn’t consideration for his own deal with the defendant.

Here, the court disagreed - an existing contractual duty owed to a third party to a contract can amount to a valid consideration for a new promise.

A promise to accept part payment for an existing debt in place of the whole consideration is not consideration.

Pinnel’s case 1602

Pinnel sued Cole for £8 and 10s, which Cole owed on a bond. The debt was due on 11th November. Cole argued that, at Pinnel’s request, on 1st October, he had paid £5, 2s and 6d, which Pinnel had accepted as full settlement of the debt.

Although Pinnel won, the court noted that the earlier date payment was sufficient for new consideration (e.g. a change in the term), but they did state that the payment of a lesser sum on the day that’s due (i.e. if he had paid on 11th November) would not be satisfaction of the greater debt.

The creditor could claim the rets even if the parties had agreed that a part payment would be full settlement of the whole debt.

Foakes v Beer 1884

Dr Foakes owed Mrs Beer £2090. They agreed that he would pay the sum in instalments by a particular date, and if he did so, no further action would be taken. Later, Mrs Beer decided to sue for the interest she was entitled to after Dr Foakes refused to pay it.

Held - following Pinnel’s case, Mrs Beer was successful.

Development of principles to achieve justice in a particular case. Equitable principles.

First, the principle of accord and satisfaction - or there is an agreement without duress, and there is consideration, the settlement with something others have money in full or part payments can be final.

Second, the principle of promissory estoppel is an equitable principle. Where a party to an existing contract agrees to vary the contract and the other party relies on that promise, then the promisor cannot go back on the agreement.

Central London Property Trust Ltd v High Trees House Ltd 1847

The owner of the propety agreed with a company that leased out its flats, that during WW2 it would only charge half rent.

After the war, finding tenants was easy so the landlord claimed the full ent for the period after the war ended.

The tenant company hadn’t provided any consideration for the rent reduction during the warm, but they had relied on the promise voluntarily so the promise was valid.

Held - the owner was entitled to full rent after the war but couldn’t claim back the rent missed during the period of the war - estoppel operated against this.

Re Selectmove Ltd 1995

Here, the Inland Revenue agreed with Selectmove that he could pay the tax they owed in instalments. They started to do this but then the Inland Revenue claimed the entire debt and waited to put the company into liquidation.

The company argued promissory estoppel - they had they had relied on the arrangement with the Inland Revenue.

However, Selectmove had failed to pay the agreed instalments on time, which was part of the agreement so the IR could claim the whole debt - promissory estoppel didn’t apply.

D and C builders v Rees 1965

The builders wanted £480 in payment for work already done. Mrs Rees said she would only pay them £300 saying that if it wasn’t accepted then the builders would get nothing and so go bankrupt. The builders reluctantly accepted this as full and final settlement. The builders then claimed for the full balance and succeeded. Mrs Rees could not claim estoppel because the payment was made under pressure and was therefore, inequitable.

Hamer v Sidway 1891

Story (D) agreed with his nephew William (P) that if P would refrain from drinking, using tobacco, swearing, and playing cards or billiards for money until he became 21, D would pay him $5,000. When P became 21, he wrote a letter to D stating that P had performed his part of the agreement and had earned the $5,000.

Held - valuable consideration may consist either in some right, interest, profit, or benefit accruing to one of the parties or some forbearance, detriment, loss, or responsibility given suffered, or undertaken but the other party. It was sufficient that P restricted his lawful freedom of action within certain prescribed limits upon the faith of D’s agreement.