Consideration Flashcards
Currie v Misa: what constitutes consideration?
“may consist either in some right, interest, profit, or benefit accruing to one party, or some forbearance, detriment, loss, or responsibility given, suffered, or undertaken by the other.”
Consideration with detriment to the promisee sustained by virtue of the promise case
Allegheny College v Jamestown
Consideration with detriment to the promisee sustained by virtue of the promise is not sufficient.
The promise and the consideration must be the motive each for the other, in whole or at least in part.
If A promises B to make him a gift, consideration may be lacking, though B has renounced other opportunities for betterment in the faith that the promise will be kept.”
A sells to B. B may sell to C but C must follow same terms as A asked of B. C does not. Can A sue C?
Case
Dunlop Pneumatic v Selfridge
No
Only a person who is a party to a contract can sue on it (privity of contract)
Consideration must have been given by A to C or to some other person at C’s request. Here the consideration was to be given by B on their own account, and was not in substance, any more than in form, an allowance made by A.
History
D Ibbetson, A Historical Introduction to the Law of Obligations
“In medieval law informal contracts were enforceable only if they were reciprocal: the debtor must have received something in exchange, quid pro quo…In popular etymology this was the very essence of the idea of contract, actus contra actum”.
A Rationale?
A promises to pay B £100, in return for B promising to pay A £1. Consideration?
Forde v Birmingham City Council
In such a case, there is no contract as “the apparent contract is in reality a gift of £99.”
Promises by Deed
Need no consideration in a deed
The traditional requirements: “signed, sealed, delivered”; the modern equivalent: a deed complying with Law of Property (Miscellaneous Provisions) Act 1989
L Fuller, “Consideration and Form”:
Consideration is functionally equivalent to formality, and so fulfils an evidentiary, cautionary, and channelling function; but
A promise made in a deed is binding even if B is unaware of A’s promise: Macedo v Stroud;
A unilateral, spontaneous mistake by A may suffice to allow A to set aside a deed
A Rationale?
Consideration is a requirement of A’s coming under a contractual duty.
Its justification depends on the nature and operation of such a duty, and of the correlative right of B.
What advantages are gained by B?
I) The existence and terms of A’s duty are interpreted “objectively” (Smith v Hughes);
II) A unilateral mistake of A does not allow A to escape the duty;
III) A comes under an immediate legal duty to honour the agreement – “a contract, subject to the narrow doctrine of frustration, must be performed come what may” (per Hoffmann LJ in Walton v Walton) – A can be compelled to put B in the position that B would have been in had the contract been performed (expectation damages).
The Details
Consideration need not be adequate
Doesn’t need to be of value to the reciever case
Chappell v Nestle Co Ltd per Lord Somervell
“A contracting party can stipulate for what consideration he chooses. A peppercorn does not cease to be good consideration if it is established that the promisee does not like pepper and will throw away the corn.”
Compare with White v Bluett
The Details
Consideration need not be adequate
White v Bluett
A son’s promise to cease complaining to his father would not be consideration for a father’s alleged promise to release his son from a debt
Compare with Chapell v Nestle
The Details
Consideration need not be adequate
Good reason v motive case
Thomas v Thomas
consideration cannot be found whenever there is “a good reason” for A’s promise
A’s desire to comply with the wishes of the deceased X does not constitute consideration for A’s promise to allow B (X’s widow) to live in the house that used to belong to X; but B’s promise to pay £1 per year towards rent and to maintain the property is consideration. Patteson J at 859: “Motive is not the same thing as consideration. Consideration means something which is of some value in the eye of the law, moving from the plaintiff”.
The Details
Consideration need not be adequate
Shadwell v Shadwell (1860)
note the importance of a request
B’s marriage to X seen as requested by A as the price of A’s promise to pay B £150 per year during A’s life; compare Combe v Combe
The Details
Consideration need not be adequate
Combe v Combe per Denning LJ:
“Assuming, however, that she has suffered some detriment by her forbearance, nevertheless, as the forbearance is not at the husband’s request, it is no consideration.”
The Details
Consideration need not be adequate
- Treitel (see E Peel, Treitel’s Law of Contract)
Identifies a category of “invented consideration”: where B’s action is not regarded as the “price for A’s promise” but is nonetheless said to constitute consideration – see eg Shadwell at 174 per Erle CJ: “[B] may have made a most material change in his position”
The Details
Performance of a Pre-Existing Duty
1) A is under a contractual duty to B. A refuses to perform that duty unless C guarantees A against loss A may suffer through performance of the contractual duty to B. C provides the guarantee.
Pao On (see above) per Lord Scarman at 632: “A promise to perform, or the performance of, a pre-existing contractual obligation to a third party can be valid consideration.” – note that, on the facts of the case, no economic duress was exercised by B on A
The Details
Consideration must not be past
Eastwood v Kenyon per Lord Denman CJ:
“In holding this declaration bad because it states no consideration but a past benefit not conferred at the request of the defendant, we conceive that we are justified by the old common law of England”.
