Consideration Flashcards
What is the definition of “consideration”?
The definition was given in:
Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co Ltd (1915)
“An act of forbearance of one party, or the promise thereof of the other is bought, and the promise thus given for value is enforceable”
Simply put, consideration is:
“the price paid for the promise”.
Does consideration need to be adequate or sufficient?
Consideration must be sufficient, but it need not be adequate.
Consideration must be something tangible that the court can see (sufficient), but it need not be the market price (adequate).
Is consideration needed in all contracts?
Consideration is needed in simple contracts.
Consideration is NOT REQUIRED in Deeds.
What are the two types of consideration?
- Executory Consideration
2. Executed Consideration
What is Executory consideration?
Generally Bi-lateral contracts
Executory consideration consists of:
- a promise made in return for a promise.
for example, a contract between a buyer and seller for the future delivery of a car on credit.
What is Executed Consideration?
Generally unilateral contracts
Executed consideration occurs when one party to a contract has performed all that they were required to perform under the contract, leaving the outstanding liability on the other party.
Generally found in unilateral contracts:
e.g. a person finds a lost dog where a reward is offered, all that remains is payment of the reward.
Consideration is required to move from the promisor to the promisee.
A person to whom a promise has been made can enforce it, only if they have provided consideration.
For example, A promises to wash B’s car, and B then promises to pay C £10.
if A washes the car, but B does not then pay C, C has no claim in contract as they did not provide consideration.
Consideration is required to move from the promisor to the promisee.
Which historic case demonstrates this requirement?
Tweddle v Atkinson (1861)
The partners fathers each agreed to pay a sum of money to the new husband after a marriage, and they also agreed that the husband would have the right to sue should either parent fail to pay.
One father died before payment.
The husband sued the executors, however the action failed as the husband had provided no consideration.
What is meant by “adequate” consideration?
Adequate consideration must be something of value.
Love and affection is insufficient.
Thomas v Thomas (1842)
C’s husband expressed wish that when he died, his wife should have sole use of the house.
After death, the executer allowed the use of the house by the wife plus a payment of £1 per annum.
Court held that the husband’s wish for his wife was insufficient consideration, but the payment of £1 was sufficient.
What is the general rule regarding “past consideration”?
Past consideration is no consideration.
In order to succeed, the claimant must prove that their act or promise was given in exchange for the defendant’s promise.
For example:
If X offers Y £25 for a life to the airport, then Y can only enforce that promise if they take X to the airport.
However, if Y offered to take X to the airport and X promises to give Y £25 for the trouble, the consideration is in the past and is not enforceable.
Past Consideration
What happened in the case of Re: McArdle (1951)?
(“home improvements”)
Re: McArdle (1951)
A number of children were entitled to a house under their father’s will once the mother had died.
During the mother’s lifetime, one of the kids (A) lived in the property with her and made various improvements.
On the mother’s death, the kids signed a document stating they should pay A £488 for the improvements.
The executors refused the payment.
A sued, however the action failed because the improvements amounted to past consideration.
What evasions exist to the past consideration rule?
It is implicit that if a person requests a person to provide certain services, they will pay the provider of that service once the job is complete.
For example:
If A asks B to clean his windows, and B does so, it is clear that A is expecting to pay B for cleaning the windows even if no price was mentioned.
If no price was agreed, then s8(2) Sale of Goods Act 1979 provides that a reasonable charge for any service provided is payable.
Evasion to the past consideration rule
Devani v Wells (2019)
(“Estate Agent”)
Devani v Wells (2019)
Estate agent sold properties on behalf of an owner.
Owner claimed no agreement had been made.
Supreme court held there was a contract, but even if not, they would have implied a payment term into any agreement to ensure the agent was paid.
Evasion to past consideration
Originally set out in:
Lampleigh v Braithwaite (1615)
(“Kings Pardon”)
It is common sense that if you ask someone to do some work for you, then that person will expect to be paid when the work is complete.
Braithwaite asked L to obtain a pardon from the King.
If successful, B agreed to pay L £10.
Pardon was granted, but B failed to pay.
Court held that L was entitled to some reward for obtaining the pardon.
Past Consideration Evasion:
Principles were set out in:
Pao On v Lau Yiu Long (1980)
- The past act must have been done at the promisors request.
- The parties must have understood that the past act be remunerated; and
- Payment or benefit conferred must have been legally enforceable had it been promised in advance.
