Consideration Flashcards
What is consideration, in contract law?
Consideration is the concept of give and take. It reflects the idea that contracts are bargains where both parties gain something and lose something
Note:
Consideration shows intent, but it is possible to have a legally binding contract without consideration. This will only be recognised if the agreement is “under deed”. Else, consideration must exist
What are the 2 types of consideration?
Executed and executory
What is executed consideration?
Where one party has done all that is required of them
What is executory consideration?
Consideration has not yet been carried out. A promise is made for a promise
What are the 6 rules of consideration?
- Consideration must be sufficient but need not be adequate
- Consideration must not be past
- The consideration must move from the promisee
- An existing public duty will not amount to consideration
- An existing contractual duty will not amount to valid consideration
- Part-payment of a debt is not valid consideration for a promise to forego the balance
Define:
Consideration must be sufficient but need not be adequate
What is being supplied as consideration must be of the type that is regarded in law as capable of supporting the contract
There must be economic value, but it is not down to the courts to determine whether this is adequate
There is no requirement that the consideration be of market value
Thomas v Thomas [1842]
Facts: Mrs Thomas’ husband promised her the house they lived in after he died. He didn’t include this in his will and his executors later tried to dispossess her. She was allowed to pay a peppercorn rent of £1
Held: The court held that her promise to pay £1 and keep up the repairs was sufficient consideration, it need not be adequate
White v Bluett [1853]
Facts: A father promised not to make his son repay a debt so long as he promised not to keep boring him with complaints
Held: The court held that consideration was not sufficient, as it had no economic value
Chapple v Nestle Co [1960]
Facts: Nestle ran a sales promotion whereby if a person sent in 3 chocolate bar wrappers and a postal order for a given sum, they would be sent a record. Chappel owned the copyright in one of the records offered and disputed the right of Nestle to sell it for a lesser sum. Nestle said the wrappers were valid consideration
Held: The wrappers did form part of the consideration as they were used to increase sales
Define:
Consideration must not be past
- Consideration will not be given before the agreement. It must come after it
- If consideration is given before the agreement it cannot be proved a bargain actually existed and a contract does not exist
- If D made the promise after consideration was given, it can only be seen as gratitude and does not form part of the contract
Re Mcardle [1951]
Facts: A son and daughter in law carried out repairs on the family home. They expected to be paid.
Held: The act preceded the promise to pay. It was therefore past consideration
Lampleigh v Braithwaite [1851]
Facts: A man who was to be executed begged his friend to obtain the King’s pardon. The friend did so. After, the promisor promised £1000 for doing so, but then refused to pay
Held: Whilst consideration was past. The defendant’s request was regarded as having an implied promise to pay and the subsequent promise merely fixed the amount
Define:
The consideration must move from the promisee
- A party cannot sue on a contract to which he is not a party
- Privity of contract
- A party cannot sue or be sued on a contract unless they have provided consideration
Tweedle v Atkinson [1861]
Facts: Two fathers made a contract that they would each pay their engaged children money. The bride’s father died before the payment and her husband sued
Held: They could not sue as they had not provided consideration
Shanklin Pier v Detel Products Ltd [1951]
Facts: Painters were contracted to paint a pier and were told to use paint from a certain manufacturer. The pier owners had been told the paint was partially resistant to weather and sea erosion and this was not true. The owners had to pay a large sum and so sued the manufacturing company
Held: The owners were successful. Although the manufacturers were not part of the contract, they had made the promise that the paint was resistant to weather and sea erosion
Define:
An existing public duty will not amount to consideration
If a person is legally obliged to carry out an obligation that forms the basis of consideration, the performance of that obligation cannot amount to sufficient consideration
Collins v Godefroy [1831]
Facts: A policeman had been summoned to appear in court. The defendant promised the police officer money if he turned up
Held: The officer was already legally obliged to turn up, so there was no right to payment. There was no consideration
Glassbrook Bros v Glamorgan County Council [1925]
Facts: During a strike, a pit owner asked for extra police protection and promised to pay. He later refused to pay arguing this was the police’s legal duty
Held: The police had provided more officers than they were legally obliged to. There was consideration for the promise
Harris v Sheffield United FC [1987]
Facts: A football club had to pay for special police services under a statute. The club argued they did not need to pay as the police were doing their job
Held: The police had provided special police services and could charge. There was consideration to support the promise
Define:
An existing contractual duty will not amount to consideration
Mere performance of an existing contractual duty cannot amount to sufficient consideration under a fresh contractual agreement
Stilk v Myirick [1809]
Facts: 2 Sailors of 11 deserted. The captain promised to divide their wages amongst the remaining crew but didn’t
Held: The sailors were already under a contractual obligation to work the duration of the voyage. They could not use a promise to perform their existing contractual duty as consideration
Hartley v Ponsonby [1857]
Facts: ver half of a ship’s sailors deserted. The Captain promised to share the wages with the remaining crew if they worked the ship home. He didn’t pay
Held: Because so many crew members had deserted, it was unsafe to continue. The remaining sailors did more than required. So should be paid
What did the case of Pao On v Lau Yiu Long [1980] determine?
There are 4 factors to consider in assessing whether economic duress was present:
- Did the person claiming to be coerced protest?
- Did that person have any other available course of action?
- Were they independently advised?
- After entering into the contract, did they take steps to avoid it?
Williams v Roffey bros [1990]
Facts: Roffey Bros entered a contract to refurbish a block of flats. The contract was subject to a liquidated damages clause if they did not complete in time. They engaged Williams to do the carpentry work for an agreed price. Williams realised he had priced the job too low and would be unable to complete at the originally agreed price. Roffey Bros agreed to give him an additional sum per flat. Williams continued work on the flats but recieved less than promised. He refused to continue unless payment was made. Another carpenter was hired and Williams was not paid the further sums
Held: Roffey bros did have to pay Williams. There was consideration
Define:
Part-payment of a debt is not valid consideration for a promise to forego the balance
Payment of a smaller sum than the debt on the day due can never relieve the liability of the debtor to pay the whole debt
Foakes v Beer [1884]
Facts: Foakes obtained a court judgement against Beer to be paid in instalments. It later appeared that Beer had not paid interest on the debts which meant he had paid less than he owed
Held: There was consideration to support the payment of interest. Part-payment of a debt is never satisfaction for the whole
D&C Builders v Rees [1965]
Facts: Rees forced D&C to accept a cheque for £300 on an agreed price of £482, knowing they were in financial difficulties. D&C sued for balance
Held: There was no sufficient consideration. Part-payment of a debt is never satisfaction for the whole
Central London Property Trust v High Trees House [1947]
Facts: CLPT wrote to the defendant stating that rent would now be payable at the original rate. They also asked for back payments covering the difference during the war period. The parties sought a declaration from the court as to what the HTH’s legal position was
Held: This case establishes the defence of promissory estoppel against contract claims. The rent could go back to its original sum
Combe v Combe [1951]
Facts: The parties were separating. Mr Combe promised to pay Mrs combe £2 a week but didn’t
Held: Mrs Combe had not provided any consideration. Promissory estoppel did not grant a cause of action and so was inapplicable in this case.
