Consideration

Question 1

Valuable Consideration

Answer 1

Currie v Misa (1875)

Consideration can be:

• Some right
• Interest
• Profit
• Benefit
• Forbearance
• Detriment
• Loss
• Responsibility given
• Suffered

Question 2

For a promise to be enforcable somethting of value in the eyes of the law must move from the promisee to the promissor.

Consideration needs to be sufficient, but does not have to be adequate

Answer 2

Thomas v Thomas

-> By agreeing to pay rent in return for being allowed to stay in the property, Mrs Thomas had provided consideration, even though it was not economically adequate or anything like a commercial rent for the building. Therefore, the contract was enforceable.

Question 3

Contracting party can stipulate what for consideration he chooses.

A peppercorn for example does not cease to be good consideration if it establishes that the promisee does not like pepper and will throw it away.

Case authority

Answer 3

Chappel & Co v Nestle Co

The House of Lords held that the wrappers did form part of the consideration for the sale of records despite the fact that they had no intrinsic economic value in themselves.

Question 4

Acceptable Consideration

Answer 4

Bainbridge v Firmstone

“The consideration is, that Bainbridge, at Firmstone’s request consented to allow Firmstone to weigh the boilers. I suppose Firmstone thought he had some benefit; at any rate, there is a detriment to Bainbridge from his parting with the possession for even so short a time.”

Question 5

Forbearance to sue someone constitutes consideration

Case Authority

Answer 5

Alliance Bank v Broom (1864)

Question 6

Forbearance must be demonstrated

Answer 6

Collins v Air Jamaica (1995)

Question 7

Cosideration does not have to be adequate

Answer 7

Thomas v Thomas

-> 1 Pound rent was sufficient even when the promise is of much higher value

-

We can see that also on the 1Pound sale cases

-

Haigh v Brooks

Question 8

Sufficiency in consideration

Answer 8

• Courts will not question comparative value of consideration provided
• Courts will not engage in price estimation

(otherise most contract would be subject to review/nullification)

• However sufficiency is required where equitable remedies are sought
• > Equity will not aid a voluntee

Question 9

Generally consideration may not be given in the past

Answer 9

Re McArdle (1951)

A wife and her three grown-up children lived together in a house. The wife of

one of the children did some decorating and later the children promised to pay

her £488 and they signed a document to this effect.

It was held that the promise was unenforceable as all the work had been done

before the promise was made and was therefore past consideration.

Question 10

Exception to the rule that past consideration is not good consideration

Answer 10

Pao On v Lau Yiu Long

Lord Scarman disposed of the question about past consideration, because a promise to perform a pre-existing contractual obligation to a third party can be good consideration, citing Lampleigh v Brathwait. The consideration for the guarantee was the promise to perform according to the other contractual agreement signed by the parties.

On the subject of duress, the Privy Council held that this was simply commercial pressure as per the nature of the market. For economic duress, it must be shown:

the victim’s consent to the contract was not a voluntary act on his part . . . provided always that the basis of such recognition is that it must amount to a coercion of will, which vitiates consent.

Question 11

Past Consideration test in Pao On v Lau Yiu Long

Answer 11

1. Work/Service was rendered at the request of the promisor
2. Understanding that work / service would be paid for
3. Contract would have been enforcable had payment been agreed earlier
   - > Rationale:

Amount of payment is fixed after work is done

Question 12

More Past Consideration Examples

Answer 12

Re Caseys Patents

• Remuneration for help with patent

Roscorla v Thomas

• Subsequent promise about horses condition

Question 13

Consideration must move from the promisee

Answer 13

• Promisee must prove that consideration moved from him/her
• Can not have moved from third party
• Can only sue on contract if oneself provided consideration
• Rule does not apply to joint agreements
• > Coulls v Bagots Executor and Trustee Co Ltd

Question 14

A promise to do something you are already bound to do so is unenforcable (existing contractual obligation)

Answer 14

Stilk v Myrick (1809)

Question 15

Existing obligation rule does not apply where something is done over and above previous contract

Answer 15

Hartley v Ponsonby

Question 16

Existing contractual obligations rule does not apply where the promissor gains a “practical benefit”

Answer 16

Williams v Roffey Bros

Question 17

Existing contractual obligation may be good consideration between A & B where the duty is owed to C

Answer 17

NZ Shipping v AM Satterthwaite & Co Ltd

The Eurymedon

Facts:

The appellants were stevedores engaged as independent contractors to unload machinery from a ship. The contract between the respondent machinery owners and the carriers contained a limitation clause. This said that no servant or agent of the carrier would be liable for any damage unless an action was brought within one year. The stevedores negligently damaged the machinery while unloading it. The respondents brought an action outside the one year limitation period. The appellants claimed the clause prevented the respondents from suing them.

Issues:

The issue was whether the stevedores could take the benefit of the time limit specified in the clause in the agreement between the carrier and the owners. Against this it was argued that under Midland Silicones Ltd v Scruttons Ltd [1962] AC 446 a contract between two parties cannot be sued on by a third person even though the contract is for the third party’s benefit.

Held:

The Privy Council held that the stevedores could rely on the clause. The bill of lading was initially a contract between the owner and the carrier. However, the clause’s wording was designed to cover all the parties involved in the carriage of the goods, including the stevedores. The respondents obtained the benefit of a directly enforceable action against the stevedores. The stevedores gained the benefit of the time limit. The stevedores had done the work in reliance upon this. Therefore, they had supplied sufficient consideration, even though they were only doing what they had already contracted to do with a third party.

Question 18

Existing legal duty may be good consideration

Case Authority

Answer 18

Ward v Byham (1956)
- Well looked after and happy

Question 19

Existing public duty - General rule is that where there is a public duty, performance of that duty can not amount to good consideration

Answer 19

Collins v Godefroy (1831)
- Subpoena

Question 20

Exception to the public duty rule
Addition work / service that goes over and beyond the public duty

Case authority

Answer 20

Glasbrook Bros v Glamorgan County Council (1925)
- Extra police protection

Question 21

Part Payment of debt is generally not good consideration

Answer 21

Pinnels Case (1602)

Foakes v Beer (1884) - Interest installments

Re Selectmove - Tax authority promise

Mannhertz & Mannhertz v Island Life Insurance - Paying off mortgage

Hirachand Punamchand v Temple (1911) Father settles sons debt

-> The Rule in Pinnels Case is an application of the principle of accord (seperate agreement) and satisfaction (seperate consideration)

Question 22

Promissory Estoppel

(Is an equitable doctrine)

Where a party promises not to enforce rights and the other party relies on the promise, the promise can not be revoked, even in the absence of consideration.

Answer 22

Central London Property v High Trees House (1947)

• Promise must have been clear & intended to be binding
• Promise must have been relied on
• Inequitable to revoke promise (DC Builders v Rees 1966)

Question 23

Summary of Consideration

Answer 23

• Only promises that are part of a bargain result in valid contract
• Thomas v Thomas
• Detriment suffices as valid consideration for promises made
• Bainbridge v Firmstone
• Consideration must be measurable in economic/monetary terms
• Chappel v Nestle
• Consideration does not need to be adequate
• Thomas v Thomas
• Past consideration is not good consideration
• Re McArdle
• Exception to past consideration
• Pao An v Lau Yiu Long
• Perfoming existing contractual / legal / public duty does not amount to fresh consideration
• Stylk v Myrick
• Part-payment of debt is not good consideration
• Pinnels Case
• Except Promissory estoppel
• Central London Property v High Trees