S3: Consideration

Question 1

What is consideration ?

Answer 1

‘Some right, interest, profit or benefit occuring to one party, or some forbearance, detriment or loss of responsibility given, suffered or unfertaken by the other’. This was defined by the case of Currie v Misa (1875).

The case of Thomas v Thomas (1842) defines consideration as something of value in the eyes of the law,

Dunlop v Selfridge defines consideration as an ‘act of forbearance of one party or the promise thereof, is the price for which the promise of the other is bought and the promise thus given for the value is enforceable’.

Question 2

What are the rules of consideration ?

Answer 2

1. Consideration need not be adequate but must be sufficient
2. Consideration must move from the promisee
3. An existing public duty can’t amount to consideration
4. An existing contractual duty can’t amount to consideration
5. Consideration must not be past
6. Consideration must be legal and possible

Question 3

What does it mean by consideration need not be aequate but must be sufficient ?

Answer 3

• Something of value must be given
• Courts won’t interfere in a bargain which is freely reached from parties
• It’s immaterial if the price paid for an item is inadequate but it doesn’t make no difference to the existence of a binding contract.

Question 4

What are the key cases for this rule ?

Answer 4

-Chappel v Nestle (1960) – HoL’s held the wrappers did form part of the consideration for the sale of records despite the fact they had no intrinsic economic value in themselves.
-White v Bluett (1853)- Pollock held there was no consideration for the obligation to repay.

Question 5

What does it mean by consideration must move from the promisee ?

Answer 5

-This is where a person can only enforce a promise if he/she provided consideration for that promise as suggested by the case of Price v Easton (1833) or Tweddle v Atkinson (1861)

Question 6

What does it mean by an existing public duty can amount to consideration ? What are the two parts to this rule?

Answer 6

There’s always been difficulty in determining whether a person who does or promises to do what he/she is already bound in law to do thereby provides consideration for a promise made to him.
The two parts to this rule include:
- Contractual duty owed to a third party
- Contractual duty and Part-Payment of Debt

Question 7

What are the key cases for this rule ?

Answer 7

• Collins v Godefroy [1831] where it was held a person can’t recover money promised to him in return for his performance of, or promise to perform a duty imposed by law.
• Brookes v Glamorgan

Question 8

What does it mean by an existing contractual duty can’t amount to consideration ?

Answer 8

This is something your already obliged to do under a contractual agreement. The traditional rule was set in Stilk v Myrick (1880)

Question 9

In which case was the exception found for this rule ?

Answer 9

Hartley v Ponsonby
Both the general rule and the qualification to it were regarded as good law in North Ocean Shipping Co Ltd v Hyundai Construction Co Ltd [1979]
However, in Williams v Roffey Bros & Nicholls (Contractors) [1990] the court took a different approach. The focus here was on a practical benefit.

Question 10

What is contractual duty owed to a third party ?

Answer 10

Where C performs or promises to perform, an obligation already imposed upon him by a contract previously made, BUT the contract is not between himself and D, but between himself and a third party - the question is whether such a promise or performance affords sufficient consideration.

Question 11

What are the key cases for this sub-rule ?

Answer 11

• Scotson v Pegg [1861]
• The Eurymedon [1975]

Question 12

What is contract duty & Part-Payment of Debt ?

Answer 12

Part-payment of a debt can never be satisfied for the whole because there is no consideration.

Question 13

What are the key cases to this sub-rule?

Answer 13

• Pinnel’s Case (1602)- ‘horse, hawk, robe’-have to give something extra (fresh consideration)
• Foakes v Beer (1884)
• MWB Business Exchange Centres v Rock Advertising (2018)

Question 14

What is the exception to this sub-rule ?

Answer 14

Earlier payment, ‘A horse, a hawk or a robe’ (per Lord Coke), payment to a different place (Builders v Rees [1966])

Question 15

What does it mean by consideration must not be past ?

Answer 15

• The consideration for a promise must be given in return for the promise.
• If the act or forbearance alleged to constitute the consideration has already been done before, and independently of, the giving of the promise, it is said to amount to “past consideration”

Question 16

What are the key cases to this rule ?

Answer 16

• Eastwood v Kenyon [1840]
• Roscorla v Thomas [1842]
• Re McArdle [1951]

Question 17

What is the exception to this rule?

Answer 17

There was an understanding that a good or service was to be paid for, but no express agreement had been reached as to the amount payable before the time for performance.

Question 18

Key Cases for this exception

Answer 18

-Lamp leigh v Braithwaite [1615]
-Pau On v Lau Yiu Long

Question 19

What does it mean by consideration must be legal and possible ?

Answer 19

Consideration must be legal - Where the consideration is either contrary to a rule of law or immoral, the courts will not usually allow an action on the contract.

Consideration must be possible- A promise to do something which is physically or scientifically impossible to do cannot be binding and will not constitute consideration. Promises to do something that is obviously impossible will sometimes be regarded as lacking the essential intention to create legal relations.

Question 20

Key Cases for this rule:

Answer 20

Pearce v Brooks [1866]
Everett v Williams [1725]