Chapter 3 consideration

1. Definition and Purpose of Consideration

• Consideration is a core requirement of a valid contract (unless the contract is made by deed). It refers to the idea that each party must provide something of value in return for the other party’s promise.

• In simple terms, consideration is the legal 'something in return' which makes a promise enforceable.

Core Principle:

Legal Definition:

• In Currie v Misa (1875): Consideration is defined as a benefit to the promisor or a detriment to the promisee.

2. Forms of Consideration

2.1 Executory Consideration

• This is where a promise is exchanged for another promise.

• Typical of bilateral contracts (e.g., A agrees to sell a car to B, and B agrees to pay £5,000 in a week).

2.2 Executed Consideration

• Where an act is given in return for a promise.

• Typical of unilateral contracts (e.g., A promises to pay £100 to whoever finds and returns her lost dog).

3. Legal Requirements of Valid Consideration

3.1 Consideration Need Not Be Adequate

Principle:

• The law does not require that the consideration be of equal value to the promise it supports.

Explanation:

• What matters is that something of value is given, not whether it is a fair or proportionate exchange.

Example:

• Payment of £1 is legally valid consideration for a car worth £50,000, so long as both parties intend to be bound.

Rationale:

• Courts do not interfere in private bargains simply because they are unbalanced — unless vitiating factors apply (e.g., duress, misrepresentation).

3.2 Consideration Must Be Sufficient

Principle:

• The consideration must be of a kind that the law recognises as having legal value.

Valid forms of sufficient consideration:

• Money

• Goods

• Services

• Refraining from doing something one has a legal right to do (in some contexts)

Invalid forms:

• Natural love and affection

• Moral obligation

• Refraining from complaining

• Performing an existing public duty

Case Examples:

• White v Bluett (1853): A son's promise not to complain was held not to be valid consideration.

• Hamer v Sidway (USA): Promise to refrain from drinking, smoking, gambling was held to be sufficient consideration — giving up a legal right.

4. Past Consideration is Not Good Consideration

General Rule:

• An act performed before a promise is made cannot amount to consideration for that promise.

Key Principle:

Example:

• Helen looks after Carl’s cat while he’s on holiday, as a favour. When Carl returns, he promises to pay her £30. This is unenforceable — the service was not performed in exchange for the promise.

Exception to the Rule:

From Re Casey’s Patents [1892] — three conditions must be satisfied:

1. The act was done at the request of the promisor

2. There was a mutual understanding that the act would be compensated

3. The contract would have been enforceable had the promise been made in advance (i.e., legal intention was present)

If all three are satisfied, the subsequent promise can be enforceable.

5. Contractual Variations

General Principle:

• Just like the formation of a contract, a valid variation to a contract also requires:

  • Agreement

  • Consideration

  • Intention to create legal relations

Common Issue:

• Often the variation benefits only one party (i.e., only one party gives something new).

6. Alteration Promises to Pay More

Traditional Rule (Stilk v Myrick [1809]):

• Performing an existing contractual duty is not valid consideration for a promise to pay more.

Exception: Practical Benefit Doctrine

Williams v Roffey Bros & Nicholls (1991):

• Subcontractors were struggling financially; main contractor offered more money to complete the job on time.

• Court found practical benefit (e.g., avoiding penalty clause, avoiding having to find other workers) was sufficient consideration.

Rule Established:

• If the promisor gains a practical benefit or avoids a disbenefit as a result of the promisee performing their existing duty, this can amount to valid consideration.

BUT:

• If the promise to pay more was made under economic duress, the variation is voidable (see Chapter 12).

7. Alteration Promises to Accept Less

Common Law Rule: Foakes v Beer (1884) and Pinnel’s Case (1602)

• Part payment of a debt, without more, is not valid consideration to discharge the full debt.

• In Foakes v Beer: Part payment of principal debt did not discharge liability for interest, as no fresh consideration was given.

Common Law Exceptions:

• A promise to accept part payment may be enforceable if the debtor provides something additional or different, such as:

  • Early payment

  • Payment in a different form (e.g., goods instead of cash)

  • Payment at a different place

• As stated in Pinnel’s Case, a “horse, hawk, or robe” can amount to valid consideration if accepted by the creditor.

8. Promissory Estoppel

Definition:

• An equitable doctrine that prevents a party from going back on a promise if it would be inequitable to do so.

Key Case: Central London Property Trust v High Trees House [1947] KB 130

Facts:

• Landlord agreed to reduce rent during WWII.

• After the war, landlord sought to claim arrears and revert to full rent.

• Court held: could not claim wartime arrears due to promise and reliance, but full rent could resume after war ended.

Requirements for Promissory Estoppel:

1. A clear and unequivocal promise to waive strict legal rights.

2. Reliance by the promisee (need not be detrimental).

3. It must be inequitable for the promisor to go back on the promise.

4. The doctrine can only be used as a defence (a "shield, not a sword").

5. It only suspends, not extinguishes, legal rights.

6. The party invoking estoppel must have ‘clean hands’ (i.e., acted fairly).

Application:

• May be raised where a creditor promises to accept part payment of a debt and then later tries to claim the remainder.

• Estoppel may prevent the claim, depending on facts and fairness.

9. Summary Rules and Flow Structures

9.1 Valid Consideration – Core Requirements

9.2 Alteration Promises to Pay More

Flowchart Logic:

1. Is the promisee simply performing an existing duty?

   • If yes → Is there a practical benefit?

     • If yes → Valid consideration

     • If no → Not enforceable

   • If promisee exceeds their duty → Valid consideration

2. Was the promise made under duress?

   • If yes → Variation is voidable

9.3 Alteration Promises to Accept Less

Flowchart Logic:

1. Is the promise supported by fresh consideration?

   • If yes → Promise is binding

2. If not, can promissory estoppel be used?

   • If yes → Creditor estopped from claiming remainder

   • If no → Creditor can sue for full amount