Consideration Flashcards
What is consideration?
“Price paid for a persons promise”
A promise is not usually binding unless the promisee has given something in exchange for the promise.
Promisor - person making promise
Promisee - person to whom the promise is made.
If there is no consideration - not enforceable
Consideration must be tangible and not empty or illusory.
What are the two exceptions for consideration?
- Bare gifts
Person agrees to buy a g if t for another person - the intended recipient of gift has not provided any consideration in exchange for that promise - If promise is contained in a Deed
The deed must be signed, witnessed and delivered.
Contract made by a deed does not need consideration as witnessed signature is evidence of their intention to keep promise.
What are the two types of consideration?
- Executed consideration
A party performs their part of the contract at the time of entering (the performance of an act within a unilateral contract) - Executory consideration
Party exchange promises to do something in the future.
Agreement binding one promises exchanged
Consideration can be a mix of both executed and executory.
Past consideration (completed before a promise is made in exchange) does not support a valid contract.
What are the four rules governing consideration?
- Consideration must move from the promise
- Consideration must not be in past
- Need not be adequate
- Consideration must be sufficient
What does “consideration must move from promise” mean?
To sue and enforce promise - claimant must show that they supplied consideration for promise.
Claimant can’t sue if consideration provided by another person - even if the promise was intended for claimants benefit.
CASE: Dunlop v Selfridge
Dunlop unable to sue Selfridge because Dunlop had not provided any consideration for contract between Selfridge and wholesale.
What does “consideration must not be past” mean?
Promises are not valid if made in the past / after the event.
If A promises B for something that B has already done (without prior agreement) - not valid consideration and no obligation to pay.
Past consideration is not the same as executed consideration.
CASE: Roscorla v Thomas
After the sale completed - the seller promised that the horse was “sound and free from vice”
It was untrue but buyer could not sue as buyer’s consideration was past
CASE: Re McArdle
One of the three children paid for works to the house and after the works completed, the other two promised they would contribute.
Held promise unenforceable as it was past consideration.
CASE: NVA Management v Obafemi Martins
Contract to services stated “which you have received”
Held enforceable as it was past consideration.
What is the Doctrine of Implied Assumpsit / Rule of Lampleigh v Braithwait?
It is a major exception to the past consideration rule.
If one party, at the request of the other, performs a service of a kind that is normally paid for, courtly usually assume service was meant to be paid for.
CASE: Lampleigh v Braithwait
B killer someone and asked L to obtain a pardon from the King
L incurred expenses and B promises £100 to L
Court held money was payable because L after at B request.
The original request and subsequent promise were treated as one transaction.
CASE: Pao On v Lau Yiu Long
Confirmed rule applied, provided that:
- act was performed at request of Promisor
- understood between then that some reward expected
- later payment promise, or benefit, was lawful.
What does adequate consideration mean?
Consideration does not need to be economically adequate
Consideration does not need equal value but needs to be sufficient.
CASE: Chappell v Nestle
Held taking chocolate wrappers as part of payment for a record was sufficient consideration.
Even though no value - they represented evidence of purchase.
What does consideration must be sufficient mean?
Maxim is “consideration need only be sufficient and not adequate”
Sufficient consideration - “some value in eyes of the law”
Usually has economic value - but not mandatory.
Issues arise when a promisee is doing something that they are already legally obliged to do as consideration for a new contract.
The general rule is that no consideration required to do something you intend to do anyway.
For example:
1. Existing public duties
2. Existing contractual duties
3. Existing duties to repay debt
4. Existing duties to a third party
What does “existing public duties” mean?
(consideration must be sufficient - general rule)
Consideration can’t consist of doing what the law already requires.
CASE: Collins v Godefroy
Witness promised to attend as they were promised a payment.
However, no obligation to pay him as he had a legal duty to attend.
However, if a person gives something over and above their existing public duty - may be consideration.
CASE: Glasbok v Glamorgan County Council
Owner asked police to attend to protect property and promised to pay.
Later failed to pay as police had a duty to protect property.
Held that police had exceeded their duty and the owner had to pay.
What does “existing contractual duties” mean?
(consideration must be sufficient / general rule)
CASE: Stilk v Myrick
Claimant promised extra pay to Myrick (captain of the ship) if he did extra work.
Contract already obliged them to do extra work for no additional pay.
If extra work is outside contractual duty - the promise to pay for it will be valid.
However, in CASE: Williams v Roffey Bros, held that Williams was entitled to additional payment - even though he was only doing what he was already contractually bound to do.
What does “existing duties to repay debt” mean?
(consideration must be sufficient / general rule)
A promise to pay part of debt can’t normally be sufficient consideration.
If B owes A money and B promises to pay part of money if A promises not to enforce the rest - A’s promise not enforceable at common law.
The originating CASE: Pinnel’s Case
CASE: Pinnel’s Case
(Existing duty to repay debt)
Held part paying debt is not good consideration but if debtor agreed to pay something else or change nature of payment to the advantage of the other party - enforceable.
However, there are four exceptions:
- If third part pays off part debt - the creditor cannot claim rest of money from original contract
- A person who owes money from several people may make a composition agreement with creditors to pay them all a % of total owed. Once agreed, individual creditors cannot go back on agreement
- If amount owed is in dispute - an agreement to accept less than creditor claims is owed may be binding
- If original claim is for an unliquidated amount (sum owned not need decided) - an agreement that settles the amount to be paid will be valid (even if it is for lesser sum)
What does “existing contractual duties to third party” mean?
(consideration must be sufficient / general rule)
Using the performance of a duty owed to a third party under existing contract - good consideration.
CASE: Scotson v Pegg
Original contract between S v X (S to supply and deliver coal on instructions from X)
X sold coal to P and agreement made by which S deliver coal to P
Held agreement between S and P valid
