Legal Consideration in Contract Law: Key Cases and Principles

Consideration

A valuable consideration consists of either in some right, interest, profit or benefit accruing to the one party or some forbearance, detriment, loss or responsibility suffered or undertaken by the other.

Consideration simple meaning

Person A gets some kind of positive effect or person B has some kind of negative effect.

Who gives consideration in a bilateral contract?

Both parties.

Whose consideration is important in a dispute?

Disputes will usually focus on one side of the contract.

What are the requirements for consideration?

Consideration needs to be sufficient, there must be a bargain, and consideration cannot be in the past.

What does it mean to be a legally sufficient benefit or detriment?

There is a minimum threshold for consideration; not any factual benefit or detriment will do; only must be adequate (not equivalent in value).

What case is used to explain legally sufficient benefit or detriment?

White and Bluett (1852).

What was the ruling in While v Bluett?

The son had no right to complain so giving up his right is not a consideration; you can't give away something you don't have.

What is a lock out agreement?

Pre contract agreement between buyer and seller that grants the buyer exclusive rights to purchase a property within a specified timeframe.

What is the consideration in unilateral contracts?

Actually performing the act is consideration.

What was the ruling of Chappel & Co ltd v Nestle Co Ltd?

Contracting party is free to choose the consideration it wants even if it is objectively worthless; wrappers are consideration (no royalties have to be paid).

What does it mean for only a bargain to be enforceable?

There must be an exchange: both parties need to get something out of the deal; the benefit needs to be asked for.

How does the case Combe v Combe apply to consideration?

Wife did not provide compensation as her promise was not to sue; this was not a benefit to her husband.

How does the Dunlop pneumatic tyre co ltd selfridge & co ltd case apply to consideration?

Dunlop gave no consideration to Selfridges so contract not enforced; Dunlop can't claim remedies because it's not part of that second contract with the third party.

What did Lord Dunedin say about the Dunlop pneumatic tyre co ltd case?

An act for forbearance (voluntarily giving up legal right) ... is the price for which the promise of the other is bought and the promise thus given for value is enforceable.

What happens during the consideration in unilateral contracts?

The promisor asks for the benefit he derives/ the burden it imposes on the other party.

What case is used for consideration of unilateral contracts?

Shadwell v Shadwell.

Gratuitous promise meaning

Is simply a contract to receive a gift but the condition is not asked for by the promisor (can't be enforced).

Post-Contract Consideration

Consideration is executed after the contract is formed.

Past Consideration

If the consideration predates the contract formation.

Re McArdle Case

The work was done on the house before the promise of payment.

Public Duty and Consideration

Performing an existing and non-contractual duty does not constitute good consideration.

Good Consideration

Public duty can be good consideration as long as it's not against public policy.

Against Public Property

Encourage corruption or extortion.

Collins v Goodefrey

No consideration because the witness was already under an obligation to testify.

Glasbrook Brothers Ltd v Blamorgan CC

Police was contracted to provide security during miner's strike. Performance of public duty is not good consideration, but the police officers went above and beyond this so it is good consideration.

Obligations Owed to Third Parties

Possible that the obligation is owed a third party who's not actually involved in the contract.

Third Party Consideration

Yes, obligation by third party is still good consideration.

Additional Benefit in Consideration

When there is an additional benefit not when the duty is already owed.

Stilk v Myrick Case

Sailors offered extra pay to get ship home after some desertions did not give consideration as they already had a duty to sail the ship home.

Williams v Roffey Bros & Nicholls Case

Promise to pay extra to finish work on time was consideration because the Roffey Bros avoided a penalty in another contract + more favourable payment schedule.

Hartly v Ponsonby Case

Several crew members left this ship, so the work done by remaining crew members was enough to constitute the extra amount offered as they went above and beyond.

Part Payment of Debt

If a debtor pays part of the debt owed and the creditor can still sue for the balance of debt even if the creditor promises to release the debtor from the remaining balance.

Pinnel's Case

Part payment was not satisfaction of the debt. 'Payment of a lesser sum on the day in satisfaction of a greater cannot be any satisfaction of the whole.'

Foakes v Beer Case

Court judgement required the defendant pay the full amount, but they privately agreed to pay part then the rest over several instalments.

Exceptions to Part Payment Rule

Payment of a lesser sum before the due day, the creditor's agreement, is valid consideration to enforce that agreement.

Doctrine of Promissory Estoppel

If a person makes a promise, waiving their full contractual rights in return for no consideration and that promise is intended to be relied upon and is relied upon by the promisee then the promisor would be estopped from going back on his promise and claiming rights.

Hughes v Metropolitan Railway

The case the doctrine of promissory estoppel is rooted in.

Conditions for Promissory Estoppel

Doctrine can only be used as a defence to an action, not as a cause of action where none existed before - it is 'a shield and not a sword.'

BTH Ltd v Marks and Spencer 2001

Court of appeal rejected BTH argument stating promissory estoppel could not create a cause of action, M&S can't be prevented from stopping their contract just because BTH have invested large amounts.