Consideration

Consideration

Principle (AO1)

For an agreement to be a legally binding contract, the agreement must be supported by consideration.

“Both parties must suffer a loss or detriment that is of measurable value (more than mere emotion)” - Objective.

Distinguish between:

• A gratuitous promise - Not Binding

• A bargain - Binding

Consideration may also be Executed or Executory

Meaning of Consideration

Definition (AO1)

Consideration is the benefit or detriment (of objective measurable value) suffered by each party in an agreement (i.e. fuel, money, a promise for money)

Note: A contract must show mutuality of consideration at the time the contract is formed, not after!!!"

Meaning of Consideration

Case

(Currie v Misa) - Case for benefit & detriment

Executory Consideration

Definition (AO1)

X makes a promise in return for promise by Y:

• Promise is to be performed at a future time

• Promise is binding at moment made

  Will happen happen at some point - Yet to be completed

Executed Consideration

Definition (AO1)

X makes promise in return for promise by Y:

• X’s promise binding only if Y performs

• Y not bound to perform.

Both promises have occurred and agreement is complete

Consideration Must be Sufficient (SNNBA)

Principle (AO1)

Consideration must have some value as the price of the promise for which it is given:

• Either benefit to the promisor

  and/or

• Detriment to the promise

Consideration may be:

• Money or goods

• Services or performance

• Undertaking not to do something i.e. not suing when a person has a legal right to do so. (High v Brooks)

Consideration Must be Sufficient (SNNBA)

Cases

(White v Bluett) - Not Sufficient

Father promised son money in return for son ceasing to nag and complain. Emotion is not consideration

(Chappell v Nestle) - Was Sufficient

Consideration consisted of chocolate wrappers, which were deemed sufficient as they had economic value.

Consideration Need Not Be Adequate (SNNBA)

Principle (AO1)

Consideration need not match the (real) value of the promise for which it is given.

This allows for bargains to be made

Consideration Need Not Be Adequate (SNNBA)

Case

(Thomas v Thomas)

Widow allowed to occupy marital home for rent of £1 a year.

The £1 was seen as good consideration even though it was far below the market value

Past Consideration

Definition (AO1)

Where X makes a promise after Y’s performance:

• Y’s performance = past consideration for X’s promise

• Therefore: X’s promise is unenforceable

  = Gratuitous Promise

Exception: Where the act was performed at the promisor’s request and it was implied all along that the goods or services were to be paid for. The later promise is seen as just setting the level of payment.

Past Consideration

Cases

(Re McArdle) - Not enforceable

• W voluntarily improved a family house - not owned by W

• Family, after performance was completed, promised to pay W.

• Not enforceable

(Lampliegh v Braithwait) - Enforceable

Royal pardon case

(Pao On v Lau Yiu Long) - Enforceable

Rules:

1. The original act is performed at request of promisor

2. The parties understood that the promisee would be paid for the act

3. The promise that was eventually made must be one that would have been enforceable if made before the act.

Performance Of Existing Duty

Principle (AO1)

Starting Point: Performance of an existing contractual duty will not be good consideration.

However, it can be good consideration for a new promise provided:

“The promisor receives a practical/commercial benefit from the performance of the duty. i.e. Confidence in the completion of the contract”

Performance Of Existing Duty

Cases

(Stilk v Myrick) - Not Enforceable from ‘performing existing duty’

Captain promised to pay crew extra to cover work of 2 deserters.

(Hartley v Ponsonby) - Enforceable from ‘Going beyond Existing Duty’

Captain promised to pay crew extra to cover work of 18 deserters

(Williams v Roffey) - Enforceable from ‘Practical Benefit’

D received the benefit of not having to find a new carpenter and therefore avoiding the penalty clause in the main contract. - Only applies to goods and services (Re Selectmove)

Part Payment Of Debt

Principle (AO1)

A promise to pay part of a debt is not good consideration for paying off the debt. Already an ‘Existing Duty’

“Payment of a lesser sum cannot be any satisfaction for the whole”

But - “Payment of a lesser sum earlier than the date for full payment may be good consideration (As long as both parties agree)”

Also - “Other items of value may be sufficient for consideration (as long as both parties agree)”

Part Payment Of Debt

Case

(Pinnel’s Case)

(Foakes v Beer)

F owed B money from a court settlement. Both parties agreed that F could pay in installments. B demanded interest (which is always payable on a judgement debt) and sued when F refused. B was entitled to interest despite agreeing to installments. Can be seen as unfair but enforces certainty

Promissory Estoppel

Definition (AO1)

Where A promises something to B, and B relies on that promise to his detriment, then A should be stopped from going back on his promise.

Regarding Part Payment - If A promises to let B off from paying part of the debt, and B relies on this to his detriment, A is estopped from going back on his promise

Can only be used to defend a claim “It is a shield not a sword”

The Doctrine of Promissory Estoppel

Definition (AO1)

A procedure where the courts prevent a party from going back on their promise if the other party has relied on that promise to their detriment. It prevents inconsistency and ensures fairness in contractual relationships.

Promissory Estoppel

Case

(Central London Property v High Trees House)

High Trees rented block of flats but made no profit due to war time conditions. The court held that the landlord could not insist on full rent during the war due to the promise made to reduce rent.

Consideration Must Move From the Promisee
Principle (AO1)

Each of the parties to the contract must ‘give’ some consideration, however, it does not need to move to the other party. (Same effect as doctrine of privity where only parties in a contract are able to enforce or have it enforced on them.)

Consideration Must Move From the Promisee
Case

(Tweddle v Atkinson)

Fathers of bride and groom made an agreement to pay the groom a sum of money on the occasion of marriage. When bride’s father failed to to pay, the groom sued. Not enforceableas the groom provided no consideration.