Consideration Flashcards
What counts as consideration?
Consideration must be sufficient but need not be adequate
Must be something “of value”
Hence ‘peppercorn consideration’; money is always sufficient because it has value by definition.
Chappell v Nestle [1960] AC 87 – used chocolate bar wrappers can be good consideration where they are effectively part of the price
Core Rules of consideration
Consideration must move from the promisee
Consideration must in respect of the promise
Past consideration is no consideration
Value ‘in the eye of the law’
Traditional Test
Currie v Misa [1875] LR 10 Ex 153, 162
A valuable consideration, in the sense of the law, may consist in either some right, interest, profit or benefit accruing to one party, or some forebearance, detriment, loss or responsibility given, suffered or undertaken by the other
Things which do not have value in the eye of the law
An undertaking to perform your existing duties owed under the general law - E.G. Ward v Byham [1956] 1 WLR 496 –> (unmarried couple were splitting up & had a child and the father agreed that he would pay the mother a weekly allowance if she looked after child –> (women already had a legal obligation to look after child therefore it wasnt seen as consideration as she was promising to do what she had to under general law –> HOWEVER she still got money as she further made sure the child was happy and had its own decision about its relationship with its father
An undertaking to perform your existing contractual duty owed to the promisor: Stilk v Myrick (1809) 2 Camp 317
Rules governing particular situations
Promises to perform existing contractual duties owed to the promisor (aka contract modification).
Promises to perform existing contractual duties owed to a third party.
Foakes v Beer- A special rule for contracts of debt.
Traditional Approach - Contract Modification
Stilk v Myrick [1809] 2 Camp. 316
Contract to sail to the Baltic and back
After two sailors desert at Cronstadt, captain promises to split their wages between the rest of the crew if they stay and continue with the voyage as promised.
Held: no consideration was provided for the captain’s promise. The plaintiffs had contracted to ‘do all that they could under all the emergencies of the voyage’ and the desertion of two crew members was simply one such ‘emergency’.
Traditional Approach - Contract Modificatio Hartley v Ponsonby [1857] 7 EL & BL 873
Contract to sail from Liverpool to Australia and then elsewhere as directed for a term not exceeding 3 years.
Proper compliment of men for the ship was 36.
On arrival in Australia 17 of the crew refused to work and were sent to prison. It was dangerous to continue the voyage with only 19 men and the remaining crew were therefore legally entitled to stop work. The captain promised the remaining crew additional payment if they kept going.
Held: by agreeing to continue in dangerous conditions, the sailors had exceeded their existing contractual duties and thus provided consideration.
Performance of contractual duties owed to a third party –> Scotson v Peg [1886] 6 H & N 295
Pegg had a contract to buy some coal from the coal merchant which also included delivery for the price that Pegg was paying for the coal
Coal merchant entered a contract with Scotson as he was hired to do the delivering for him
Pegg asks to find out who’s delivering the coal and ends up making an offer to Scotson in order to get the coal sooner and says he will unload the coal at 49 tonnes per day –> Scotson accepts the offer
Scotson fulfils his side of the offer and delivers coals sooner but Pegg doesnt unload the coal at 49 tonnes per day –> SO Scotson sues Pegg for damages for the loss of earnings that he would have made iF Pegg unloaded tonnes as promised
HOWEVER, Scotson didnt provide any consideration as he already had to deliver the coal –> BUT Pegg’s new contract with Scotson = a legal benefit so performance of contractual duties owed to a third person can be good consideration
Summary of Traditional Approach
Performance of existing contractual duties owed to promisor IS NOT good consideration
Promise to do acts which exceed your existing contractual duties owed to the promisor IS good consideration
Promise to perform existing contractual duties owed to a third party IS good consideration (assuming it creates a benefit/detriment on the facts)
Rule in Foakes v Beer –> lesser payment of a debt on the due date even tho agreed between both parties is NOT good consideration for a promise to release the debtor from liability for the rest of the money owed
Willliam v Roffey Bros
Roffey Bros (main contractor) has a contract with client to refurbish a block of flates by a certain dates
Roffey Bros has several other sub-contractors who helped do the work to refurbish the flats for client too
Williams one of the subcontractors were underperforming and thus went to Roffey Bros and wanted to break contract because: 1) they couldnt afford to pay their workers and 2) they were very disorganised and werent supervising workers
So Roffey Bros promised to pay Williams £10000 more if they stayed on site –> incentivised them saying they would £575 for every flat they finished HOWEVER Roffey Bros never paid the money
Williams sued, but Roffey’s said they never had a contract because there was no consideration –> Williams only promised to do their existing contractual obligations even with them still getting paid more
HOWEVER Roffey Bros has practical benefit e.g. by ensuring Williams stayed, they avoided the delay penalty, avoided trouble of hiring other subcontractors to finish work etc.
MWB v Rock Advertising - Facts of case
MWB granted Rock a licence of a larger unit within the serviced office space which they owned and managed.
Rock, a longstanding customer, could not pay the rent and fell into arrears. Under the terms of the licence, this gave MWB a right to lock them out and sue for the full amount owed.
Instead of doing this, MWB’s credit controller agreed that Rock could reschedule the payments, paying lower amounts initially and higher amounts later on so that within 1 year the arrears would be cleared. Rock made the first payment under this agreement.
MWB then sought to renege on the agreement, arguing (inter alia) that it was not supported by consideration.
MWB v Rock Advertising in the Court of Appeal [2017] 1 QB 604
The CA in Re Selectmove correctly found that the benefit deriving from simply receiving the part payment was not in itself a practical benefit in the light of Foakes v Beer.
BUT a practical benefit, over and above the mere receipt of the lesser sum, can be consideration for a promise to accept less than the amount owed. It is no different from a hawk, robe, etc.
Here the practical benefit was “avoiding a void”.
