Chapter 2: Consideration Flashcards
What is the third essential element of a valid contract?
Consideration
Definition of consideration
Consideration is an act or forbearance (or the promise of it) on the part
of one party to a contract as the price of the promise made to him by
the other party to the contract.
DUNLOP PNEUMATIC TYRE CO. v SELFRIDGE (1915)
Definition of consideration simplified
Put more simply, it is the price by which one party bought the other party’s act or promise.
When must a contract by supported by consideration?
All simple contracts must be supported by consideration.
When is a contract not required to be supported by consideration?
Contracts made by deed (speciality contracts) do not require consideration unless the terms of the agreement require it.
What is a deed?
A deed is a formal promise between the parties that must be in writing and signed.
What contracts must be in the form of a deed?
Conveyances and leases for three years or more.
What are 2 occasions when they are capable of being valid consideration?
Both executed and executory consideration are capable of being valid consideration.
What is executed consideration?
Executed consideration is a performed act in exchange for a promise, e.g. paying for goods at the time the goods are delivered.
What is executory consideration?
Executory consideration is a promise given in exchange for a promise, e.g. a promise to pay for goods that are to be delivered at a later date.
Does a consideration need to be sufficient and adequate?
Consideration must be sufficient but need not be adequate.
What is sufficient consideration
Sufficient consideration is consideration which is capable of being given a value.
Chappell & Co v Nestle (1960)
Thomas v Thomas (1842)
What is inadequate consideration?
Inadequate consideration is consideration which is unequal in value. The parties have freedom to contract under any terms they wish and a court will not attempt to make a contract a fair bargain as long as there is some identifiable value.
White v Bluett (1853)
Facts of ‘Chappell & Co v Nestle (1960)’
A promotion by Nestle offered records for a sum of money plus three chocolate wrappers.
Held by ‘Chappell & Co v Nestle (1960)’
The wrappers were part of the consideration even though they had minimal value.
Facts of ‘Thomas v Thomas (1842)’
A promise was made to allow Mrs Thomas to use a house for a rent of £1 per year.
Held by ‘Thomas v Thomas (1842)’
The promise was binding as the consideration has value, even though it was inadequate.
Facts of ‘White v Bluett (1853)’
A son agreed with his father that he would not complain about the father’s will and his rights under it if the father let him off a debt he owed.
Held by ‘White v Bluett (1853)’
The promise could not be measured in value and was too insubstantial to amount to real consideration.
Forbearance/waiver of rights
If one of the parties forfeits his or her rights to something this could be good consideration if it is capable of being assigned a value.
Past Consideration
Consideration is past if it involves something which has already been done at the time the promise is made. Past consideration cannot support a contract.
Re Mcardle (1951)
Facts of ‘Re Mcardle (1951)’
A husband and wife carried out improvements to a house. At a later date promise was made to reimburse the couple.
Held of ‘Re Mcardle (1951)’
The works had been carried out before the promise to pay had been made. Past consideration is no consideration.
What can constitute good consideration?
If an act was done in response to a specific request and payment might be expected in such situation, then there is an implied promise to pay and this will constitute good consideration.
Re Stewart v Casey (Casey’s Parents) (1892)