Consideration

Cards (16)

  • consideration rules
    -> in order for contract to be valid, there must be some form of consideration.
    -> where parties of a contract give each other something of value, now or in the future
    • usually the price of goods/ services
    • contracts can be formed without a cash transaction so consideration can take other forms
    currie v mirza -> consideration defined in terms of benefit (gain) and detriment (loss)
    -> both must receive benefit/suffer detriment
    1. consideration must have some value
    -> must have real value but doesn't have to be an exact match in worth
    -> court won't intervene even if its not a great deal/value isn't perfectly equal- courts value freedoms of parties to make their agreements
    -> once agreed upon court expects both sides to stick to it even if one party has a more favourable outcome
    1. consideration must have some value
    -> chappel v nestle - even seemingly insignificant things like chocolate wrappers can be considered as part of the payments in a deal
    -> thomas v thomas - involves the concept that even a small payment, like £1 rent a year can be consideration in a contract
  • 1. consideration must have some value

    • sufficiency means that consideration must be real and have some inherent value, even if value is nominal
    -> white v bluett - no consideration as he had no legal right to complain and natural love and affection were not consideration so he still had to pay the debt
    ->ward v bytham - no legal obligation to keep the child happy so it was consideration
  • 2. consideration must not be past
    -> past consideration is unenforceable- has no value where it has already been done at the time of the agreement-- promise to pay after the agreement = past consideration
    -> roscarla v thomas - sold a horse and later promised it was free from vice- horse was violent -> post sale promise lacked consideration as nothing was given in return
    -> re McArdle - rented a house and performed improvements and defendants promised to pay a sum towards the cost- made promise after the work and had no legal contract
  • past consideration exceptions
    ->where there is an express or implied promise to pay for a particular task
    -> implied understanding the task should be paid for, particularly in commercial agreements
    Re Casey's Patent - claimant worked on patents and was promised a 1/3 share on the patents -> court held the claimant was entitled to the share because it was implied that when he worked on the patent, he would receive some form of payment
  • past consideration exceptions 2 - lampleigh v braithwaite 

    -> after gaining a pardon, promised £100 -> then refused as it was past consideration
    -> court ruled in favour of lampleigh - did a job at request and fee must have been implied
    certain conditions
    • must be a clear request, express or implied to perform a task
    • inherent in the request, must be an implied promise that the promisor will pay the promisee a reasonable sum for completing the task
    • promisee must actually perform the task
    • promisor must then pay promisee for completed performance
  • 3. performing a pre-existing duty cant be consideration for a new contract 

    • They cant use pre existing obligation as consideration for a new agreement as they are already under legal obligation to perform that duty
    stilk v mynch -> existing duties don't count as new consideration
  • 3. performing pre-existing duty cant be consideration for a new contract
    • if an extra element is required for the new payment, there is consideration
    hartley v ponsonby -> promise was enforceable because the increased danger added a new element making it good consideration. glasbrock v glamorgan county council -> ruled in favour of police as they provided more men and a different duty than their normal one, making it good consideration
  • 3. performing a pre-existing duty cant be consideration for a new contract
    • courts will give commercial effect to arrangements that might appear to have no consideration
    • williams v roffley bros and nichols ltd -> paid extra for williams to complete on time but then refused to pay as it was a pre existing duty -> if a party to a contract promises an extra benefit and receives a practical benefit in return, its binding even if the party was already obligated to do the original work
  • 3. performing a pre-exisitng duty cant be consideration for a new contract
    • pre-exisitng duty can't be consideration for a new contract where an act is carried out by someone who is already under legal obligation to do so
    collins v godfrey - fulfilling an exisitng duty like testifying as a witness doesn't count as valid consideration for a new promise
  • 4. consideration may be found where contractual duties are owed to a 3rd person
    • when someone is under contractual duties to a 3rd person, performance of that duty may be good consideration
    shadwell v shadwell - fulfilling an existing duty to a 3rd party can be valid consideration
    scotson v pegg - if someone is already under a contractual duty to a 3rd party, their performance of that duty is valid consideration
  • 5. consideration must move from the promisee
    • promisee and not another party must carry out their part of the agreement -> privity of contract
    tweedle v atkinson- privity of contract, only the person to whom the promise is made can enforce the contract
  • 6. promise to accept part payment of an existing debt in place of the whole debt is not consideration
    • promise to accept less is not consideration in the eyes of the law
    • according to Pinnels case-> the person you owe money to can come back later and demand the rest of money even if they initially agreed to accept less
    • foakes v beer -> a promise to accept part payment of a debt is not legally binding- beer could still demand interest after agreeing to a payment plan
  • 6. part payment of existing debt is not consideration (EXCEPTIONS)
    1. debtor agrees to pay smaller amount on an earlier date, or agrees to pay in a different form--> accord and satisfaction- even if what's offered is less/ paying earlier if both agreed = fair
    2. if someone promises to change deal/ contact and the other person relies on the promise and is negatively affected because of it-> person who made the promise can't change their mind
    promissory estoppel -> Central London property Trust v high trees House
  • 6. part payment of existing debt is not consideration (EXCEPTIONS)
    promissory estoppel
    -> courts reluctant to follow as it suggests consideration is not an essential part of commercial contracts
    • Re selectmove -> promissory estoppel couldn't be applied against a government body seeking the whole debt
    • D + C builders V Rees -> is there is economic duress and the offer isn't fair, it might not be considered a valid compromise