Consideration Flashcards
What is Consideration
An additional requirement beyond offer and acceptance, certainty of terms and intention to create legal relations
Consists of-
A benefit to the promisor or a detriment to the promisee which…
…is given in return for the promise and which is given or incurred by the person seeking to enforce the promise
Why do we need Consideration
There are various different ideas-
-The presence of an exchange element is a signal that a binding contract is intended by the parties
-Alternatively, some people think promises that are given as part of exchanges are more worthy of legal enforcement
What is the privity rule in consideration
The “privity” rule is the common-law rule that a person is not a party (a “third party”) cannot sue on a contract to which they are not party and have not provided consideration.
What is the leading case in consideration and the privity rule
Dunlop v Selfridge- there was no consideration between dunlop and the defendant as the contract was with the dealer so the case was dismissed
Discuss the potential ways around the privity rule
The privity rule can be circumvented if it is possible to assert that:
* the person to whom the promise is made and who supplies the consideration was agent for the other party;
* there is an implied collateral contract- seperate contract between the promise and the third party
* the promisee can sue on behalf of the third party in respect of the third parties’ losses.
When Can a Third Party Enforce a Contract Under the Contracts (Rights of Third Parties) Act 1999?
(2 key rules)
Key Rules:
- A third party can enforce a contract if:
- The contract expressly states they can (s 1(1)(a)).
- The term confers a benefit on them (s 1(1)(b)), unless the contract says otherwise (s 1(2)). - Consideration is still required, but not necessarily from the third party
Why Must Consideration Be Given in Return for the Promise?
Key Rules:
- The benefit/detriment must be requested by the promisor.
- Past consideration (acts done before the promise) is not valid.
Why Is a Request Important for Consideration?
Case: Combe v Combe – No consideration where a wife refrained from suing her husband without being asked to do so.
Implied Requests – A request can be implied if circumstances suggest the promisor expected something in return.
When can a request be implied?- case
Case: Alliance Bank v Broom
Facts: D promised to provide security for a debt.
Held: Good consideration, as D’s promise impliedly requested C to delay suing for repayment.
Why is past consideration generally not valid?
Case: Roscorla v Thomas
Past payment for a horse could not support a later promise that it was free of defects.
Case: Eastwood v Kenyon
A guardian’s past expenditure could not support a later promise of repayment.
When can past consideration be valid?
Case: Pao On v Lau Yiu Long
Past acts can be consideration if:
- The act was done at the promisor’s request.
- Payment was expected.
- The promise would have been enforceable at the time of the act.
What is an example of valid past consideration
Case: Lampleigh v Brathwaite
C’s effort to obtain a pardon (done at D’s request) was good consideration for a later promise of payment.
What is “valuable consideration” in contract law?
Case: Currie v Misa
Consideration is any benefit to the promisor or detriment to the promisee.
Key Point: Consideration doesn’t have to be adequate—it can be nominal (e.g., £1).
How big a benefit/detriment is required for consideration?
Adequate (equivalent) value is not required; consideration can be nominal.
Why are promises for nominal consideration enforced?
- Market freedom allows individuals to determine value.
- Signals an intention to be legally bound.
What is the principle established in Chappell v Nestlé?
Consideration need not be adequate. Chocolate wrappers were valid consideration.
What was the ruling in Chappell v Nestlé?
Wrappers were part of the consideration, emphasizing freedom to stipulate consideration.
Is mere sentiment or good feeling enough for consideration?
No. Examples:
Bret v JS: Natural affection not sufficient.
White v Bluett: Promise not to complain not sufficient.
The Atlantic Baron: Amiable relations not sufficient.
Can domestic/social undertakings be consideration?
Yes, if onerous enough:
Hamer v Sidaway: Abstinence from vices was valid consideration.
Ward v Byham: Ensuring a child’s well-being was valid.
Is forbearing to enforce a legal right good consideration?
Yes, even if the claim is invalid, as long as it is advanced in good faith (Cook v Wright).
What is the general rule for pre-existing duties under the law?
Pre-existing public duties are not good consideration unless extra effort is provided.
It depends:
a) General duties: Not valid unless doing more than required (Glasbrook Bros).
b) Contractual duties to third parties: Valid (Shadwell v Shadwell; Pao On).
c) Pre-existing duties to the promisor: Often problematic but can be valid in practice.
When is a promise to pay more valid consideration?
Generally invalid (Stilk v Myrick) unless practical benefits arise (Williams v Roffey- Practical benefit (ensuring work completion) can be valid consideration without duress.
What did Williams v Roffey change about consideration?
Courts are now more willing to find consideration to reflect parties’ intentions.
Is part-payment of a debt valid consideration?
No, under Foakes v Beer, part-payment does not discharge the full debt.
