CONSIDERATION
INTRODUCTION
• 1. An agreement is not binding unless it is supported by consideration. Each party
must give something in return for anything that is gained from the other party. In
Dunlop Pneumatic Tyre Co. Ltd. v Selfridge and Company Ltd. (1915), the House
of Lords stated that the plaintiff must show that he or she has brought the
defendant’s promise, by doing, giving, or promising something in return for it. The
HoL als defined consideration as the price for which the promise of another is
brought.
• 2. In Currie v Misa (1875), Lush J stated that “A valuable consideration, in the
sense of 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”.
RULES OF CONSIDERATION
• Consideration must flow from the promise. In other words, “if
a person with whom a contract has been made is to be able
to enforce it consideration must have been given by him to
the promisor” – Dunlop Pneumatic Tyre Co Ltd v Selfridge Ltd
(1915). Thus, while this rule of consideration is distinct and
separate from the doctrine of privity, as upheld in Kepong
Prospecting Ltd v Schmidt (1968), it yields the same result so
as to be closely connected.
• Consideration Must Move From the Promisee But Need Not Move to the Promisor
(Consideration Need Not Benefit The Promisor)
1. In Tanner v Tanner, the court held that the girlfriend did provide consideration even
though it did not directly benefit the boyfriend. It is sufficient that the promisee suffers
some detriment at the promisor’s request, even though this detriment does not give any
benefits to the promisor.
2. In Jones v Padavatton, the court ruled that in this case, the daughter giving up her job
was consideration for her mother to provide an allowance although the consideration
did not directly benefit the mother.
• Tweddle v Atkinson (1861)
• A couple was getting married. The father of the bride entered an
agreement with the father of the groom that they would each pay the
couple a sum of money. The father of the bride died without having
paid. The father of the son also died so was unable to sue on the
agreement. The groom made a claim against the executor of the will.
• Held: The claim failed: The groom was not party to the agreement and
the consideration did not move from him. Therefore he was not
entitled to enforce the contract.
Past Consideration is Not Good
Consideration
• 1. Consideration must be given in exchange for the other
party’s consideration. If an act or a promise is given for other
reasons, it is not a valid consideration. In the case where one
party completes performance before the other offered his
consideration, it is not likely that his earlier performance is
done in return for the other party’s consideration.
• 2. Re McArdle (1951)
• Majorie McArdle carried out certain improvements and repairs on a bungalow. The
bungalow formed part of the estate of her husband’s father who had died leaving the
property to his wife for life and then on trust for Majorie’s husband and his four
siblings. After the work had been carried out the brothers and sisters signed a
document stating in consideration of you carrying out the repairs we agree that the
executors pay you £480 from the proceeds of sale. However, the payment was never
made.
• Held: The promise to make payment came after the consideration had been
performed therefore the promise to make payment was not binding. Past
consideration is not valid.
Exceptions to this rule:
• Lampleigh v Braithwaite (1615)
• Pao On v Lau Yiu Long; must satisfy 3 conditions
-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 some other benefit;and
-payment, or the conferment of a benefit, must have been legally
enforceable had it been promised in advance
Consideration Must be Sufficient, But
Need Not be Adequate
• There is no requirement that the consideration must be
market value, providing something of value is given e.g. £1
given in exchange for a house would be valid. The courts are
not concerned with whether the parties have made a good or
bad bargain:
• Chappel v Nestle (1960)
• Thomas v Thomas
Performance of an Existing Duty
• Where the promisee already owes the promisor a legal duty,
performing that duty should not in itself be a consideration if:
a) The promisee does nothing more than what he is legally
obliged to do;
b) The promisee is not suffering any detriment; and
c) The promisor is only getting a benefit to which he or she is
entitled to.
Existing Public Duties
• 1. Collins v Godefrey (1831)
• The claimant, Collins, had been subpoenaed to attend court as a witness in separate
court case involving the defendant, Godefrey. Godefrey had sued his attorney for
malpractice and Collins was required by the court to attend as an expert witness. In
fact Collins never gave evidence but was required to be on standby for six days in
case he was called. After the trial Collins gave Godefrey an invoice to cover his time
spent at court and demanded payment by the next day. Without giving him the full
day to pay, Collins commenced an action to enforce payment.
• Held: Collins was under a public duty to attend court due to the subpoena. Where
there exists an existing public duty this can not be used as consideration for a new
promise. Godefrey was not required to pay him.
Exceptions to this rule:
• Glasbrook Brothers v Glamorgan City Council (1925)
• The defendant owners of a colliery asked the police to provide protection during
a miner’s strike. The police provided the protection as requested and provided
the manpower as directed by the defendants although they disputed the level of
protection required to keep the peace. At the end of the strike the police
submitted an invoice to cover the extra costs of providing the protection. The
defendants refused to pay arguing that the police were under an existing public
duty to provide protection and keep the peace.
• Held 3:2 decision: In providing additional officers to that required, the police had
gone beyond their existing duty. They were therefore entitled to payment.
• Ward v Byham (1956)
• An unmarried couple had a child together and lived together for five years. The father then
turned the mother out of the house and sent the child to live with a neighbour and the father
paid the neighbour £1 per week. The mother then got a job as a live in house keeper and wished
to have the daughter live with her. The father agreed to allow the daughter live with the mother
and agreed to pay her £1 per week provided she ensured the child was well looked after and
happy. The father made payments but then when the mother remarried he stopped making
payments. The mother brought an action to enforce the agreement. The father argued that the
Mother was under an existing legal duty to look after and maintain the child and therefore was
not providing any consideration for the promise to make payment.
• Held: By promising to ensure the child was well looked after and happy she had gone beyond her
existing legal duty and therefore had provided consideration. She was entitled to the payment.
Existing Contractual Duties to the
Promisor
• An existing contractual duty will not amount to valid consideration. If a party has an existing
contractual duty to do an act, this act cannot be used as consideration for a new promise:
• 1. Stilk v Myrick (1809)
• The claimant was a seaman on a voyage from London to the Baltic and back. He was to be
paid £5 per month. During the voyage two of the 12 crew deserted. The captain promised
the remaining crew members that if they worked the ship undermanned as it was back to
London he would divide the wages due to the deserters between them. Theclaimant agreed.
The captain never made the extra payment promised.
• Held: The claimant was under an existing duty to work the ship back to London and
undertook to submit to all the emergencies that entailed. Therefore he had not provided any
consideration for the promise for extra money. Consequently he was entitled to nothing.
• Exceptions to this rule:
- Unless the party goes beyond their existing duty:
• Hartley v Ponsonby (1857)
-Or they prefer a practical advantage:
• Williams Roffery Brothers (1990)
Part Payment of a Debt
• Part payment of a debt is not valid consideration for a promise to release the debt in full, or to
forebear the balance unless at the promisor’s request part payment is made:
• 1. Pinnel’s Case (1602)
• The claimant was owed £8 10 shillings. The defendant paid £5 2 shillings and 2p. The claimant
sued for the amount outstanding.
• Held: The claimant was entitled to the full amount even if they agreed to accept less.
• Part payment of a debt is not valid consideration for a promise to forebear the balance unless at
the promisor’s request part payment is made either:
• a) Before the due date, or
• b) With a chattel, or
• c) To a different destination
• Exceptions to the rule:
• - If the existing contractual duty is owed to a 3rd party this may be used as valid consideration for a
new promise:
• Foakes v Beer (1883)
• Dr Foakes owed Mrs Beer £2,000 after she had obtained judgment against him in an earlier case. Dr
Foakes offered to pay £500 immediately and the rest by instalments, Mrs Beer agreed to this and
agreed she would not seek enforcement of the payment provided he kept up the instalments. No
mention was made in this agreement of interest although judgment debts generally incurred interest.
Dr Foakes paid all the instalments as agreed and Mrs Beer then brought an action for the interest.
• Held: Dr Foakes was liable to pay the interest. The agreement reached amounted to part payment of
a debt and under the rule in Pinnel’s case this was not good consideration for a promise not to
enforce the full amount due.
• - Where part payment is made by a third party:
• Hirachand v Punamchand v Temple (1911)
• The claimants were money lenders in India. They lent money to the defendant Lieutenant Temple who
was an army officer serving in India. The claimants sought return of the money from the claimant but
were unable to get any response so they contacted his father. Some correspondence went between the
claimant and the father’s solicitors. The claimants asked how much the father would be prepared to
pay to settle the son’s accounts. An amount was agreed which was a substantial, amount although not
the full amount due. The claimant promised to send the promissory note relating to the son’s debt to
the father once they received payment. The father paid, but the claimant retained the promissory note
and sued the son to enforce the balance.
• Held: The payment made by the father was sufficient to discharge the full balance. Where the person
making payment in return for discharging the debt owed by another this will amount to good
consideration as the existing duty to make payment was notowed by them but a third party.
PROMISSORY ESTOPPEL
• Promissory estoppel is an equitable doctrine which in some instances
can stop a person going back on a promise which is not supported by
consideration. Requirements of promissory estoppel:
- A pre-existing contract or legal obligation which is then modified
- There must be a clear an unambiguous promise
- Change of position
- It must be inequitable to allow the promisor to go back on their
promise
• Promissory estoppel was developed by an obiter statement by Denning J in Central
London Property Trust v High Trees Ltd. (1947):
• High Trees leased a block of flats from CLP at a ground rent of £2,500. It was a new
block of flats at the time the lease was taken out in 1937. The defendant had
difficulty in getting tenants for all the flats and the ground rent left High Trees with
no profit. In 1940 many of the flats were still unoccupied and with the conditions of
the war prevailing, it did not look as if there was to be any change to this situation in
the near future. CLP agreed to reduce the rent to £1,250 during the war years. The
agreement was put in writing and High Trees paid the reduced rent from 1941. When
the war was over the flats became fully occupied and the claimant sought to return
to the originally agreed rent.
• Held: The rent would be returned to the originally agreed price for the future
only. CLP could not claim back the arrears accrued during the war years. This
case is important as Denning
• J (as he then was) established the doctrine of promissory estoppel. Promissory
estoppel prevented CLP going back on their promise to accept a lower rent
despite the fact that the promise was unsupported by consideration. Denning
J “In my opinion, the time has now come for the validity of such a promise to
be recognised. The logical consequence, no doubt is that a promise to accept
a smaller sum in discharge of a larger sum, if acted upon, is binding
notwithstanding the absence of consideration”.
TUTORIAL
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