Consideration

Question 1

Consideration

Answer 1

Consideration is the price for which the promise of the other is bought. It must be ‘something of value’ which is recognised by the courts as amounting to consideration. Traditionally, the doctrine of consideration has been defined in terms of either a detriment to the promisee or a benefit to the promisor.

Question 2

Currie v Misa

Answer 2

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

Question 3

Dunlop v Selfridge(1915)

Answer 3

the House of Lords explained consideration in terms of purchase
and sale – the claimant must show that he or she has bought the defendant’s promise, by doing,
giving or promising something in return for it.

Question 4

(Consideration must move from the promisee )

Answer 4

The rule that consideration must move from the promisee means that a person can only enforce a promise made to them if they can show that they have provided consideration
for that promise.

Question 5

Price v Easton (1833)(Consideration must move from the promisee )

Answer 5

Price owed the plaintiff £13 and agreed to work for the defendant who promised to pay Price’s wages to the plaintiff, but in the event failed to do so. It was held
that the plaintiff could not recover the £13 from the defendant as no consideration had moved from the plaintiff.

Question 6

Tweddle v Atkinson [1861] (Consideration must move from the promisee )

Answer 6

A couple were getting married. The father of the bride entered an agreement with the father of the groom that they would each pay the couple a sum of money. The father of the bride died without having paid. The father of the son also died so was unable to sue on the agreement. The groom made a claim against the executor of the will. Held: The claim failed: The groom was not party to the agreement and the consideration did not move from him. Therefore he was not entitled to enforce the contract. William Tweddle was also unable to enforce the contract due to the common law rule on privity of contract.

Question 7

Executory consideration

Answer 7

Executory consideration arises where promises are exchanged to perform acts in the future:
for example, if I promise to deliver you an extra-large pizza and you promise to pay on delivery. This is a bilateral contract (a promise in exchange for a promise) and is enforceable: therefore, if I deliver your extra-large pizza and you do not pay, then I can sue you for breach of contract.

Question 8

Executed consideration

Answer 8

Executed consideration arises where one party performs an act in order to fulfil a promise made by the other. This situation is typical of ‘reward’ contracts: if I offer £100 to anyone who can provide information that helps me track down my long-lost sister and you do so, then I am bound to pay you under this unilateral contract.

Question 9

(Past consideration)

Answer 9

Past consideration is when something has been done before a promise is given in return. As a general rule, it is not sufficient to make the promise binding. Therefore, if I clean your windows and, once I am done, you promise to pay me £10 for doing so, then I cannot enforce your promise since I did not clean your windows in return for that promise – the promise was made after the act was done.

Question 10

Re McArdle 1951

Answer 10

A son and his wife lived in his mother’s house. On her death, the house was to pass to
the son and three other children. The son’s wife paid for both repairs and improvements to the property. The mother then made her four children sign an agreement to pay her
daughter-in-law back from the proceeds of her estate. The mother died and the children
refused to pay. The daughter-in-law’s claim was unsuccessful. She had already performed the act before the promise to pay had been made. Therefore, her consideration was past and the promise to pay was unenforceable.

Question 11

Roscorla v Thomas(Past consideration)

Answer 11

After the sale of his horse, the defendant told the claimant that the horse was ‘sound’, but it was later found out to be otherwise. The court held that the defendant’s promise was unenforceable, as it was made after the sale and so, the consideration was past.

Question 12

(Exceptions to the past consideration rule)

Answer 12

An exception to this general rule is when the consideration is provided at the promisor’s request and it is understood that payment will be made in return. Therefore, if services are rendered on request and where both parties understand that payment will be made, the promise may be enforceable even though the consideration is past.

Question 13

Lampleigh v Braithwaite (1615)(Exceptions to the past consideration rule)

Answer 13

Braithwaite had killed another man and asked Lampleigh to secure a pardon.
Lampleigh went to considerable effort and expense to secure the pardon for Braithwaite
who subsequently promised to pay Lampleigh £100. Braithwaite then failed to pay the
£100. Lampleigh sued. Lampleigh’s claim was successful, even though, on the basis of past consideration, his efforts were in the past in relation to the promise to pay. The court, however, considered that the original request by Braithwaite in fact contained an implied promise that he would reward and reimburse Lampleigh for his efforts: therefore, the previous request and the subsequent promise were part of the same transaction and were enforceable.

Question 14

Re Casey’s Patents(Exceptions to the past consideration rule)

Answer 14

he defendant promised that in consideration of the claimant’s services, he would give him a one-third interest. When the defendant claimed that the promise was not binding, the court held that the claimant’s services were clearly meant to be paid for.

Question 15

(Exceptions to the past consideration rule #2

Answer 15

A second exception is the bill of exchange. Under s.27 Bills of Exchange Act 1882, an antecedent debt or liability may be consideration for receipt of a bill of exchange.

Question 16

Exceptions to the past consideration rule #3

Answer 16

A third exception is found under s.29 Limitation Act 1980.

Question 17

Pau On v Lau Yiu Long

Answer 17

Lord Scarman in Pau On v Lau Yiu Long stated that for past consideration to be valid:

the act must have been done at the request of the promisor;
the parties must have understood that the act was to be remunerated;
the promise of payment if it had been made in advance, must have been legally recoverable.

Question 18

(Consideration must be sufficient but need not be adequate)

Answer 18

As long as the consideration has some value (sufficient to render the promise enforceable) the
courts will not concern themselves with its adequacy (whether it represents a good bargain). For
instance, if I freely decide to offer to sell you my brand new camera for 20p and you accept, then
this is sufficient to render the contract binding even though it is seemingly not a fair exchange.

Question 19

Thomas v Thomas (1842)(Consideration must be sufficient but need not be adequate)

Answer 19

A husband expressed a wish that his wife should be allowed to remain in their house
after his death. This was not written in his will. After his death, his executors allowed his
wife to stay at a rent of £1 per year. They later tried to dispossess her. The payment of the ‘peppercorn’ rent was sufficient consideration for the contract to be enforceable. The husband’s wish alone, however, would not have been sufficient consideration for the contract to be enforceable.

Question 20

Chappell v Nestle(Consideration must be sufficient but need not be adequate)

Answer 20

Nestle ran an offer that customers could get a copy of a record by sending 1s 6d and 3 Nestle chocolate wrappers. Nestle claimed that the consideration was only the 1s 6d, but the court held that the wrappers did form part of the consideration, despite the wrappers being useless to Nestle.

Question 21

PERFORMANCE OF AN EXISTING DUTY

Answer 21

Where a promisee already owes the promisor a legal duty, then in theory performing that duty should not itself be consideration. Existing duties can be divided into: public duties, contractual duties to the promisor, and contractual duties to a third party.

Question 22

(Public duties)

Answer 22

Performance of existing public duties, i.e. duties that are legally obliged to perform, is not consideration.

Question 23

Collins v Godefroy (1831)(Public duties)

Answer 23

A police officer was promised a sum of money by the defendant in a trial in return for the
officer giving evidence, since it was important to the defendant that the officer did so. The
officer had already been subpoenaed to do so. The promise to pay was unenforceable since there was no consideration given by the police officer for it. He was already under a legal duty to attend court.

Question 24

Glasbrook Brothers Ltd v Glamorgan County Council(Public duties)

Answer 24

The police believed mobile police patrol was sufficient to guard during the strike. The mine owners offered to pay the police to be stationed full-time during the strike. When they refused to pay, the court held that the police had provided an extra service which did amount to consideration.

Question 25

Harris v Sheffield United Football Club Ltd(Public duties)

Answer 25

It was held that since the football club CHOSE to hold matches on Saturday afternoons to get maximum attendance (unlike in Glasbook Brothers where the owners could not call of the strike), this created a bigger risk to law and order, so the necessity for the large police presence was self-induced. Hence, the police had to be paid.

Question 26

Where the claimant is bound by the provisions of an existing contractual obligation owed to the defendant

Answer 26

A claimant provides insufficient consideration to support a promise made by the defendant
if the claimant merely performs, or promises to perform, an obligation already owed by the
claimant to the defendant by virtue of a previous contract made between them.

Question 27

Stilk v Myrick [1809] (Contractual duties to the promisor)

Answer 27

The claimant was a seaman on a voyage from London to the Baltic and back. He was to be paid £5 per month. During the voyage two of the 12 crew deserted. The captain promised the remaining crew members that if they worked the ship undermanned as it was back to London he would divide the wages due to the deserters between them. The claimant agreed. The captain never made the extra payment promised. Held: The claimant was under an existing duty to work the ship back to London and undertook to submit to all the emergencies that entailed. Therefore he had not provided any consideration for the promise for extra money. Consequently he was entitled to nothing

Question 28

Hartley v Ponsonby [1857] (Contractual duties to the promisor)

Answer 28

Half of a ship’s crew deserted on a voyage. The captain promised the remaining crew members extra money if they worked the ship and completed the voyage. The captain then refused to pay up. Held: The crew were entitled to the extra payment promised on the grounds that either they had gone beyond their existing contractual duty or that the voyage had become too dangerous frustrating the original contract and leaving the crew free to negotiate a new contract.

Question 29

CONTRACTUAL DUTIES TO SUPPLY GOODS OR SERVICES

Answer 29

However, there was a breakthrough in the law regarding contractual duties to supply goods or services in Williams v Roffey.

Question 30

Williams v Roffey Bros & Nicholls (Contractors) Ltd [1990]

Answer 30

Roffey Bros was a firm of builders contracted to renovate a block of flats. Their own
contract contained a penalty clause for late completion, so it was in their interests to
finish the work on time. They sub-contracted the carpentry work to Williams for £20,000.
Williams fell behind schedule because, they claimed, they had not quoted a high enough
price for the work. Roffey promised to pay Williams an additional sum of £10,300 to
complete the carpentry on time. When the work was complete, Roffey refused to pay,
claiming that the new agreement with Williams was void for lack of consideration (since
Williams were already fulfilling a contractual obligation).The Court of Appeal held that Williams had provided consideration by completing the work on time and therefore Roffey’s promise to pay the additional £10,300 was binding, even though, at first glance, this proposition seemed incompatible with the rule from Stilk v Myrick.

Question 31

Where there is an existing contractual duty owed to a third party

Answer 31

The performance (or promise to perform) an existing contractual duty owed by the promisee
to a third party is also good consideration.

Question 32

Scotson v Pegg [1861]

Answer 32

A purchaser of some coal paid the defendant to carry and to unload the coal. The claimant was the supplier of the coal who had also paid the defendant to carry and unload the coal. The claimant brought an action to recover the money paid arguing the defendant was already under an existing duty to carry and unload the coal and thus provided no consideration. Held: An existing contractual duty owed to a 3rd party to the contract can amount to valid consideration for a new promise. Consequently the claimant could not recover the sums paid and the defendant was entitled to get paid twice for doing the same thing.

Question 33

(Part payment of debt)

Answer 33

The basic common law rule relating to part payment of a debt was stated in Pinnel’s Case.Therefore, payment of a lesser sum may discharge the full debt if some additional
consideration is provided. This may be so if the part payment is made:
■ before it is due (as in Pinnel’s Case);
■ by different means (for instance, if the creditor agrees to accept some property in
lieu of money – even if this is worth less than the value of the debt: remember that
consideration does not need to be adequate);
■ in a different place to that originally specified.
These situations provide sufficient consideration in terms of a benefit to the creditor and a
detriment to the debtor.

Question 34

Foakes v Beer (1883-84)(Part payment of debt)

Answer 34

Dr Foakes owed Mrs Beer £2,000 after she had obtained judgment against him in an earlier case. Dr Foakes offered to pay £500 immediately and the rest by instalments, Mrs Beer agreed to this and agreed she would not seek enforcement of the payment provided he kept up the instalments. No mention was made in this agreement of interest although judgment debts generally incurred interest. Dr Foakes paid all the instalments as agreed and Mrs Beer then brought an action for the interest. Held: Dr Foakes was liable to pay the interest. The agreement reached amounted to part payment of a debt and under the rule in Pinnel’s case this was not good consideration for a promise not to enforce the full amount due.

Question 35

D & C Builders Ltd v Rees [1966]

Answer 35

The plaintiffs had done building work for the defendant for which they were owed £482. The plaintiffs
pressed for payment for some six months and in fact were in dire financial straits. The defendant’s wife,
knowing of the financial difficulties, offered them £300 in full settlement, adding that if this was not
accepted they would get nothing. The plaintiffs reluctantly agreed to this arrangement but once the
cheque for £300 had cleared they sued for the balance. It was held that their claim would be successful,
the Court of Appeal basing its decision on Pinnel’s case.

Question 36

The exceptions to the rule in Pinnel’s case

Answer 36

(a) the doctrine of promissory estoppel;
(b) cheques;
(c) compositions with creditors.

Question 37

(Promissory estoppel)

Answer 37

The harshness of the application of the rule in Pinnel’s case, as seen in Foakes v Beer, has been substantially mitigated by the modern development of the doctrine of equitable estoppel, now usually referred to as promissory estoppel in this context. The modern doctrine is founded on the following case.Central London Property Trust Ltd v High Trees House Ltd [1947]

Question 38

Central London Property Trust v High Trees House Ltd 1947

Answer 38

In 1937 High Trees House Ltd leased a block of flats at the rate £2,500 per year from Central London Property Trust Ltd. Due to the war, occupancy rates were drastically lower than normal. In January 1940, the parties agreed in writing to reduce the rent by half. Neither
party stipulated the period for which this reduced rent was to apply. High Trees paid the reduced rate for five years as the flats began to fill and by 1945 the flats were full. Central London Property Trust sued for payment of the full rental costs from July 1945 onwards.The court considered Hughes v Metropolitan Railway Co (1877) 2 App Cas 439 which concerned the doctrine of waiver – that is, that parties should be prevented from going
back on a promise to waive certain rights. In this case, Lord Denning held that the full rent was payable from the time that the flats became fully occupied in mid-1945. He also stated obiter that if Central London had tried to claim for the full rent from 1940 onwards, they would not have been able to. They would be estopped (i.e. prevented) from reneging on the promise upon which the defendants had relied as long as the circumstances which
led to that promise continued.

Question 39

Hughes v Metropolitan Railway (1876-77)

Answer 39

The appellant landlord gave his respondent tenant six months’ notice to repair the premises let. Before the notice expired negotiations began between the parties for the sale of the reversion. These negotiations broke down and when the six months’ notice expired the appellants brought an action for ejectment. It was held by the House of Lords that the opening of the negotiations by the appellants amounted to a promise that while they were going on, no action would be taken to enforce the notice.The tenant had done nothing to the premises because of his reliance on this promise, and thus the six
months’ notice ran from the date of the failure of the negotiations and not from the original date of
the service of the notice. The tenant was entitled to have relief from the action to forfeit his lease. Lord
Cairns stated the principle of equitable estoppel in the following terms:It is the first principle upon which all Courts of Equity proceed, that if parties who have entered into definite and distinct terms involving certain legal results – certain penalties or legal forfeiture afterwards by their own act or with their own consent enter upon a course of negotiations which has the effect of leading one of the parties to suppose that the strict legal rights arising under the contract will not be
enforced or will be kept in suspense, or held in abeyance, the person who otherwise might have enforced those rights will not be allowed to enforce them where it would be inequitable having regard

Question 40

A pre-existing contractual relationship

Answer 40

The cases suggest that there must already be a contractual relationship between the parties before
promissory estoppel can be raised.

Question 41

Requirements of a promissory estoppel

Answer 41

1. A pre-existing contractual relationship.
2. Promise.
3. Reliance
4. Inequitable for the promisor to enforce legal rights.
5. Cannot destroy future rights.
6. Cannot create new rights

Question 42

pre-existing contractual relationship.

Answer 42

The cases suggest that there must already be a contractual relationship between the parties before
promissory estoppel can be raised.

Question 43

Promise There must be an obvious promise.

Answer 43

China-Pacific SA v Food Corp of India
The defendants claimed that the content of a letter and remarks during discussion provided grounds for promissory estoppel. The claim was rejected as no unambiguous promise was made.

Question 44

Reliance. The promisee must have acted in reliance on the promise.

Answer 44

Central London Property Trust Ltd v High Trees House

The lessees continued to rent out the flats, rather than trying to sell it to someone else.

Question 45

Inequitable for the promisor to enforce legal rights. It must be inequitable for the promisor to enforce their strict legal rights. The person claiming the promissory estoppel will also fail if acting in such a way.

Answer 45

D&C Builders v Rees
The Rees’s refused to pay the builders the exact amount of cost of work. Lord Denning stated that the Rees’s could not rely on a promissory estoppel because they had taken advantage of the builder’s financial problems and misled the builders about their own financial status. Hence, it would inequitable to allow them to rely on so.

Re Selectmove Ltd
Selectmove tried to rely on equitable estoppel to prevent the Inland Revenue reneging on an agreement for the payment of unpaid tax. The court rejected this, as Selectmove had failed to make certain required payments.

Question 46

Cannot destroy future rights. It cannot destroy future rights.

Answer 46

Tool Metal Manufacturing Co Ltd v Tungsten Electric Co Ltd
During the war, the patent owners agreed to forego their right to compensation. The court held that they could not get back any money that would have been due if the agreement had not been made during the war, but they could revive their legal entitlement to receive the compensation after that period.

Question 47

Cannot create new rights. It cannot be used to create new rights or extend the scope of existing ones, but only to prevent the enforcement of such rights, hence it is ‘a shield not a sword’.

Answer 47

Combe v Combe
Since there was no contract, Mrs. Combe did not have a legal right to the payments her husband promised, even though she had relied on his promise by not applying for a maintenance order.

Baird Textile Holdings Ltd v Marks & Spencer plc
It was argued that Marks & Spencer should be estopped from terminating their business relationship without reasonable notice. But the court pointed out that promissory estoppel could not create a cause of action.

Question 48

Criticisms of consideration

Answer 48

The doctrine of consideration can allow parties make promises that ought morally to be binding, to escape liability. Today, the court sometimes give an artificial interpretation to prevent unjust avoidance of agreement, eg. Shadwell v Shadwell.
Rigid requirement for consideration can mean that parties’ clear intentions are defeated. If there is an obvious agreement between two parties that they intended to be bound by, it seems unnecessary to impose this further requirement.
The doctrine is highly artificial and almost meaningless in many real life situations. A gratuitous promise to give someone something is not binding, no matter how much the other relies on it, unless a ‘peppercorn’ is given in return.