CONSIDERATION
•Law of Contract LW101
•Consideration
•Consideration (1)
•Consideration as a required element for a valid contract
•Exceptions
–Contract made by ‘Deed’
–‘Promissory Estoppel’; Re-negotiation and ‘practical advantage/benefit’ etc.
•Consideration still a requirement for most contracts
•Consideration(1)
•Definition of Consideration
•As a benefit to the promisor or a detriment to the promisee
–Currie v Misa (1875) LR 10 Ex 153, 162
–“A valuable consideration, in the sense of the law, 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 ….” per Lush J
•As the price for which one party buys the other’s promise
–Dunlop Pneumatic Tyre Co v Selfridge & Co [1915] AC 847, 855
–“An act or 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 value is enforceable.” per Lord Dunedin
•Consideration (1)
•Distinction between ‘executed’ consideration and ‘executory’ consideration
–Carlill v Carbolic Smoke Ball Co
•Consideration distinguished from motive for entering into a contract
•Thomas v Thomas (1842) 2 QB 851
–Deceased husband of claimant widow said she should be allowed to live in their house for the rest of her life
–No provision made for this in his will
–Deft/exor made agreement with widow to stay in the house because he wanted to comply with deceased’s intentions
–The agreement required the widow to pay £1 towards annual ground rent
–Deft/exor later tried to eject the widow
–Held: motive is not same thing as consideration; the motive of the deft (pious respect for deceased’s wishes) formed no part of the consideration; however there was consideration in terms of clmt/widow’s promise to pay £1 towards annual ground rent
•Consideration (1)
•Compare: Shadwell v Shadwell (1860) 9 CBNS 159; 142 ER 62
–When clmt got engaged, his uncle promised to pay him £150 per year during uncle’s life and until clmt’s annual salary as a barrister reached 600 guineas
–Some arrears on the payment still left upon uncle’s death and clmt sued the exors for payment
–Held: that the uncle’s promise was supported by consideration and therefore binding and enforceable
–That, though a marriage is in one sense a benefit, going ahead to marry his fiancee was a loss to the clmt as he may have made a material change in his position and incurred pecuniary liabilities
–That the marriage was also a benefit to the uncle derived from the clmt in terms of the uncle’s interest in the settlement of his nephew/clmt
•Consideration (1)
•Compare also Eastwood v Kenyon (1840) 11 Ad & El 438; 113 ER 482
–(especially noting, moral duty, gratuitous promise & ‘past consideration’)
–Guardian of a lady borrowed £140 to spend on her education and improving her prospects
–When she came of age she promised to repay the loan
–When she married, her husband also promised to repay the loan
–Guardian sued the husband for the loan
–Held: the husband’s promise was unenforceable as there was no consideration for it (i.e. ‘past consideration’ is no consideration)
–That a bare promise (nudum pactum) not supported by consideration is not enforceable
–That perhaps the husband had a moral duty to repay the loan but that that moral duty could not be converted into a legal obligation in the absence of consideration
•Consideration (1)
•Good consideration = something of value in the eyes of the law
•Natural love or affection alone not sufficient as consideration; nor e.g. a promise not to bore one’s parents
–White v Bluett (1853) 23 LJ Ex 36
–B gave his father a promissory note for money the father had lent to him
–When father died, exors sued B on the promissory note (PN)
–B argued that father had promised to excuse B from paying the PN if B would stop complaining about the father’s distribution of his property among his children
–Held: that B had not provided any consideration for the father’s promise
–that B had no right to complain about his father’s distribution of the property
–That, accordingly, B’s stopping to complain was not good consideration
•Consideration (1)
•Compare (American case!) Hamer v Sidway (1891) 27 NE 256 (NYCA)
–Uncle promised to pay nephew $5000 if nephew would refrain from ‘drinking liquor, using tobacco, swearing and playing cards or billiards for money’ until he turned 21
–Nephew complied but deft/exor refused to pay
–Held: the nephew was entitled to enforce the promise as he had provided consideration by restricting his lawful freedom of action
•Note: this is an American case given only for comparison and does not represent English law
•Consideration (1)
•Consideration as ‘something of value’; value may be little/trifling
–Chappell & co v Nestlé [1960] AC 87
–N offered gramophone records for sale in return for 1s 6d and 3 wrappers of chocolate bars
–Held: the wrappers, though of trivial economic value, were nevertheless part of the consideration
•Consideration (1)
•Also: Pitt v PHH Asset Mgmt Ltd [1994] 1WLR 327
–Deft/agents advertised cottage for sale at £205,000
–Clmt made bid of £200,000 which defts accepted ‘subject to contract’
–Next day, 3rd party,Miss Buckle, bid £210,000 and defts withdrew acceptance of Clmt’s bid
–Clmt threatened to apply for an injunction and to tell Miss B that he was withdrawing his offer so she might make a lower bid
–Defts then agreed again to sell the property to clmt for the original £200,000 and not to consider any further offers if clmt agreed to exchange contracts within 2 weeks of receiving the contract
–In breach of that, defts still sold the property to Miss B for £210,000 and clmt sued for damages for breach of contract
–Defts argued that clmt had given no consideration for their promise not to consider any further offers
–Held: that clmt had supplied consideration for the promise
–That although clmt was not likely to succeed with the threatened injunction, the defts had nevertheless been freed from the ‘nuisance value’ of having to defend the claim
–That clmt also provided consideration in terms of his agreeing not to make trouble with Miss B
–Also, that clmt’s agreement to exchange contracts within 2 weeks of receiving a contract was also consideration
•Consideration (1)
•Thus: consideration must be something of ‘sufficient’ value in the eyes of the law
•However, consideration does not have to be ‘adequate’
–“consideration must be sufficient but need not be adequate”
•Some types of consideration are regarded as not sufficient in the eyes of the law
–E.g. White V Bluett (supra)
•Consideration (1)
•Types of ‘consideration’ not regarded as ‘sufficient’
•‘Past’ Consideration (act already carried out or promise already made) is not good consideration
–Roscorla v Thomas (1842) 3 QB 234
–Deft sold a horse to clmt
–After the sale, clmt warranted that the horse was ‘sound and free from any vice’ – which turned out to be untrue
–Held: the warranty that the horse was sound etc was not enforceable because it was made after the sale and that the sale was now ‘past’ consideration for the promise concerning the soundness of the horse
•Consideration (1)
•Also: Re McArdle [1951] Ch 669
–A widow was left the family home in husband’s will
–House was to pass to couple’s five children on widow’s death
–During widow’s life, one child and his wife lived in the house with the mother
–Wife of child paid for improvements to the house
–Other four children signed a document promising to pay the wife of child £488 “in consideration of carrying out … improvements to the property”
–Other four children refused to pay the £488 when the widow died
–Held: that though wording of the document suggested that payment was to be for future work, the facts showed that the payment was to be for something that had already been done
–That it was therefore ‘past’ consideration and the promise of the other four children to pay the £488 was not enforceable
•Note: remember also Eastwood v Kenyon (supra)
•Consideration (1)
•Exceptions to the rule that ‘Past’ Consideration is no consideration
•Act carried out before subsequent promise but at the request of the promisor
–Lampleigh v Braithwait (1615) Hob. 105
–B had been convicted of killing X
–B asked L to obtain King’s pardon for him
–L went to considerable trouble and expense and secured the pardon
–After the pardon was obtained, B promised to pay L £100 but later refused to pay
–Held: B’s promise was enforceable because the action of L, although performed before B’s promise, was at B’s request
•Consideration (1)
•Also: Re Casey’s Patents [1892] 1 Ch 104
–Defts owned some patents which clmt managed for them
–Defts promised in writing to give clmt 1/3 interest in the patents in consideration of clmt’s services as the manager
–Later, defts argued that their promise was not binding being supported only by past consideration
–Held: that the promise was enforceable in that clmt’s services were performed at defts’ request and it was intended that the services were to be paid for
•Note: this case introduced a further pre-condition to the exception i.e. that, additionally to the act being done at promisor’s request, it must have been the parties’ contemplation that the promisee’s action was to be remunerated/paid for in some way
•Consideration (1)
•Also: in Pao on v Lau Yiu Long [1980] AC 614, Lord Scarman said;
–“the mere existence or recital of a prior request is not sufficient in itself to convert what is a prima facie past consideration into sufficient consideration in law”; and also
–“An act done before the giving of a promise to make a payment or to confer some other benefit can sometimes be consideration for the promise. The act must have been done at the promisor’s request: the parties must have understood that the act was to be remunerated either by a payment or the conferment of a benefit: and payment, or the conferment of the benefit, must have been legally enforceable had it been promised in advance.”
•Note: thus introducing a further element that the promised payment or benefit subsequently promised must have been also legally enforceable if it had been given in advance.
•Consideration
•Consideration (1)
•Consideration as a required element for a valid contract
•Exceptions
–Contract made by ‘Deed’
–‘Promissory Estoppel’; Re-negotiation and ‘practical advantage/benefit’ etc.
•Consideration still a requirement for most contracts
•Consideration(1)
•Definition of Consideration
•As a benefit to the promisor or a detriment to the promisee
–Currie v Misa (1875) LR 10 Ex 153, 162
–“A valuable consideration, in the sense of the law, 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 ….” per Lush J
•As the price for which one party buys the other’s promise
–Dunlop Pneumatic Tyre Co v Selfridge & Co [1915] AC 847, 855
–“An act or 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 value is enforceable.” per Lord Dunedin
•Consideration (1)
•Distinction between ‘executed’ consideration and ‘executory’ consideration
–Carlill v Carbolic Smoke Ball Co
•Consideration distinguished from motive for entering into a contract
•Thomas v Thomas (1842) 2 QB 851
–Deceased husband of claimant widow said she should be allowed to live in their house for the rest of her life
–No provision made for this in his will
–Deft/exor made agreement with widow to stay in the house because he wanted to comply with deceased’s intentions
–The agreement required the widow to pay £1 towards annual ground rent
–Deft/exor later tried to eject the widow
–Held: motive is not same thing as consideration; the motive of the deft (pious respect for deceased’s wishes) formed no part of the consideration; however there was consideration in terms of clmt/widow’s promise to pay £1 towards annual ground rent
•Consideration (1)
•Compare: Shadwell v Shadwell (1860) 9 CBNS 159; 142 ER 62
–When clmt got engaged, his uncle promised to pay him £150 per year during uncle’s life and until clmt’s annual salary as a barrister reached 600 guineas
–Some arrears on the payment still left upon uncle’s death and clmt sued the exors for payment
–Held: that the uncle’s promise was supported by consideration and therefore binding and enforceable
–That, though a marriage is in one sense a benefit, going ahead to marry his fiancee was a loss to the clmt as he may have made a material change in his position and incurred pecuniary liabilities
–That the marriage was also a benefit to the uncle derived from the clmt in terms of the uncle’s interest in the settlement of his nephew/clmt
•Consideration (1)
•Compare also Eastwood v Kenyon (1840) 11 Ad & El 438; 113 ER 482
–(especially noting, moral duty, gratuitous promise & ‘past consideration’)
–Guardian of a lady borrowed £140 to spend on her education and improving her prospects
–When she came of age she promised to repay the loan
–When she married, her husband also promised to repay the loan
–Guardian sued the husband for the loan
–Held: the husband’s promise was unenforceable as there was no consideration for it (i.e. ‘past consideration’ is no consideration)
–That a bare promise (nudum pactum) not supported by consideration is not enforceable
–That perhaps the husband had a moral duty to repay the loan but that that moral duty could not be converted into a legal obligation in the absence of consideration
•Consideration (1)
•Good consideration = something of value in the eyes of the law
•Natural love or affection alone not sufficient as consideration; nor e.g. a promise not to bore one’s parents
–White v Bluett (1853) 23 LJ Ex 36
–B gave his father a promissory note for money the father had lent to him
–When father died, exors sued B on the promissory note (PN)
–B argued that father had promised to excuse B from paying the PN if B would stop complaining about the father’s distribution of his property among his children
–Held: that B had not provided any consideration for the father’s promise
–that B had no right to complain about his father’s distribution of the property
–That, accordingly, B’s stopping to complain was not good consideration
•Consideration (1)
•Compare (American case!) Hamer v Sidway (1891) 27 NE 256 (NYCA)
–Uncle promised to pay nephew $5000 if nephew would refrain from ‘drinking liquor, using tobacco, swearing and playing cards or billiards for money’ until he turned 21
–Nephew complied but deft/exor refused to pay
–Held: the nephew was entitled to enforce the promise as he had provided consideration by restricting his lawful freedom of action
•Note: this is an American case given only for comparison and does not represent English law
•Consideration (1)
•Consideration as ‘something of value’; value may be little/trifling
–Chappell & co v Nestlé [1960] AC 87
–N offered gramophone records for sale in return for 1s 6d and 3 wrappers of chocolate bars
–Held: the wrappers, though of trivial economic value, were nevertheless part of the consideration
•Consideration (1)
•Also: Pitt v PHH Asset Mgmt Ltd [1994] 1WLR 327
–Deft/agents advertised cottage for sale at £205,000
–Clmt made bid of £200,000 which defts accepted ‘subject to contract’
–Next day, 3rd party,Miss Buckle, bid £210,000 and defts withdrew acceptance of Clmt’s bid
–Clmt threatened to apply for an injunction and to tell Miss B that he was withdrawing his offer so she might make a lower bid
–Defts then agreed again to sell the property to clmt for the original £200,000 and not to consider any further offers if clmt agreed to exchange contracts within 2 weeks of receiving the contract
–In breach of that, defts still sold the property to Miss B for £210,000 and clmt sued for damages for breach of contract
–Defts argued that clmt had given no consideration for their promise not to consider any further offers
–Held: that clmt had supplied consideration for the promise
–That although clmt was not likely to succeed with the threatened injunction, the defts had nevertheless been freed from the ‘nuisance value’ of having to defend the claim
–That clmt also provided consideration in terms of his agreeing not to make trouble with Miss B
–Also, that clmt’s agreement to exchange contracts within 2 weeks of receiving a contract was also consideration
•Consideration (1)
•Thus: consideration must be something of ‘sufficient’ value in the eyes of the law
•However, consideration does not have to be ‘adequate’
–“consideration must be sufficient but need not be adequate”
•Some types of consideration are regarded as not sufficient in the eyes of the law
–E.g. White V Bluett (supra)
•Consideration (1)
•Types of ‘consideration’ not regarded as ‘sufficient’
•‘Past’ Consideration (act already carried out or promise already made) is not good consideration
–Roscorla v Thomas (1842) 3 QB 234
–Deft sold a horse to clmt
–After the sale, clmt warranted that the horse was ‘sound and free from any vice’ – which turned out to be untrue
–Held: the warranty that the horse was sound etc was not enforceable because it was made after the sale and that the sale was now ‘past’ consideration for the promise concerning the soundness of the horse
•Consideration (1)
•Also: Re McArdle [1951] Ch 669
–A widow was left the family home in husband’s will
–House was to pass to couple’s five children on widow’s death
–During widow’s life, one child and his wife lived in the house with the mother
–Wife of child paid for improvements to the house
–Other four children signed a document promising to pay the wife of child £488 “in consideration of carrying out … improvements to the property”
–Other four children refused to pay the £488 when the widow died
–Held: that though wording of the document suggested that payment was to be for future work, the facts showed that the payment was to be for something that had already been done
–That it was therefore ‘past’ consideration and the promise of the other four children to pay the £488 was not enforceable
•Note: remember also Eastwood v Kenyon (supra)
•Consideration (1)
•Exceptions to the rule that ‘Past’ Consideration is no consideration
•Act carried out before subsequent promise but at the request of the promisor
–Lampleigh v Braithwait (1615) Hob. 105
–B had been convicted of killing X
–B asked L to obtain King’s pardon for him
–L went to considerable trouble and expense and secured the pardon
–After the pardon was obtained, B promised to pay L £100 but later refused to pay
–Held: B’s promise was enforceable because the action of L, although performed before B’s promise, was at B’s request
•Consideration (1)
•Also: Re Casey’s Patents [1892] 1 Ch 104
–Defts owned some patents which clmt managed for them
–Defts promised in writing to give clmt 1/3 interest in the patents in consideration of clmt’s services as the manager
–Later, defts argued that their promise was not binding being supported only by past consideration
–Held: that the promise was enforceable in that clmt’s services were performed at defts’ request and it was intended that the services were to be paid for
•Note: this case introduced a further pre-condition to the exception i.e. that, additionally to the act being done at promisor’s request, it must have been the parties’ contemplation that the promisee’s action was to be remunerated/paid for in some way
•Consideration (1)
•Also: in Pao on v Lau Yiu Long [1980] AC 614, Lord Scarman said;
–“the mere existence or recital of a prior request is not sufficient in itself to convert what is a prima facie past consideration into sufficient consideration in law”; and also
–“An act done before the giving of a promise to make a payment or to confer some other benefit can sometimes be consideration for the promise. The act must have been done at the promisor’s request: the parties must have understood that the act was to be remunerated either by a payment or the conferment of a benefit: and payment, or the conferment of the benefit, must have been legally enforceable had it been promised in advance.”
•Note: thus introducing a further element that the promised payment or benefit subsequently promised must have been also legally enforceable if it had been given in advance.
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