Consideration

Question 1

Introduction to consideration

Answer 1

The English courts have developed tests to assess the enforceability of agreement. The principal one is the requirement of consideration. The doctrine of consideration requires that both sides to the agreement bring something to the bargain. Consideration is defined in the case of Currie as “a valuable consideration in the sense of the law, may consist either in some right, interest, profit or benefit accruing to the one party or some forbearance, detriment, loss or responsibility given, suffered or undertaken by the other”. Lush J. Sometimes said that consideration requires benefit and detriment.

Question 2

Rules of consideration

Answer 2

1. Past consideration is not good consideration
2. Consideration must move from the promisee
3. Consideration need not be adequate but must be sufficient
4. Performance of existing duties
5. Part payment of debt

Question 3

Past consideration is not good consideration meaning

Answer 3

Consideration must be given at the time of the contract. It is not usually good consideration when it is an act that has taken place prior to the contract.

Question 4

Past consideration is not good consideration recent case and facts

Answer 4

A recent example of this is the case of Re McArdle – in this case, McArdle left a house to his sons and daughters. One of the sons was living in the house and he and his wife carried out various improvements to it. His wife got the siblings to sign a document agreeing to contribute to the costs of the work. However, this payment was never made. The court held that the promise came after the improvements had been completed thus the promise was not binding.

Question 5

Past consideration old case and facts

Answer 5

Thomas. Here the defendant sold the claimant a horse and after the sale was completed, told the claimant that the horse was sound and free from any vice. This wasn’t true and the claimant sued. The court held that the promise was unenforceable because it was made after the sale.

Question 6

Exception to past consideration rule

Answer 6

If this is something which is preceded by a request from the party, it may still be valid

Question 7

Exception to past consideration rule case and facts

Answer 7

Lampleigh, where the defendant had asked the plaintiff to pardon for him in relation to criminal offence he had committed. After the plaintiff had made considerable efforts to do this, the defendant promised him £100 for his trouble. It was held this promise was enforceable. Even though the promise was given after the pardon was granted, the consideration was preceded by a request. Therefore it was valid.

Question 8

Consideration must move from the promisee

Answer 8

Consideration must move from one party to another. If there is a third party that would like to get the benefit without paying any detriment, this is not consideration and would not be supported by the court

Question 9

Consideration must move from the promisee case and facts

Answer 9

Tweedle v Atkinson - A couple were getting married, and both their fathers entered into an agreement that they would give the couple some money. The bride’s father died without paying and the groom’s father later died thus he was unable to sue. The groom tried to bring an action against the executor of the will. The court rules that a promisee cannot bring an action unless the consideration for the promised move from him.

Question 10

Adequacy meaning

Answer 10

Adequacy means that the question of whether what is provided by way of consideration corresponds in value to what it is being given for.

Question 11

Sufficient meaning

Answer 11

The sense that what is being offered in exchange is recognised by the courts as being in law capable of amounting to consideration.

Question 12

Sufficiency case

Answer 12

Thomas – Claimant was a widow. Her husband said she should be allowed to live in the house for the rest of her life and then the property would pass to their sons. The executor agreed she could stay in the house for a rent of £1 per year and if she kept the house in good repair. Executor tries to evict the widow and argued there was lack of consideration for the promise. Court held that this was good consideration, even though the payment of £1 could in now way be regarded as anything approaching a commercial rent for the property.

Question 13

Adequacy case

Answer 13

Chappel v Nestle – Nestle promised to send a record to anyone who sent in a postal order 1s 6d and 3 nestle chocolate wrappers. The copywrite owners wanted more royalties. They had originally agreed consideration of 4d per record based on market-value sales, but Nestle would get more than that. Lord Somerville found: “A contracting party can stipulate for what consideration he chooses. A peppercorn does not cease to be good consideration if it is established that the promisee does not like pepper and will throw away the corn”

Question 14

Performance of existing duties

Answer 14

Existing duties could be legal or contractual.

Question 15

Legal duty

Answer 15

Where a person is doing something that is a duty imposed on them by law, there is reluctance to allow this to be the basis of consideration

Question 16

Cases for existing legal duty

Answer 16

Collins v Godefroy
Glasbrook Bros
Harris v Sheffield Utd FC

Question 17

Collins v Godefroy

Answer 17

In this case, a promise had been made to pay a witness who was under order to attend court. Godefroy refused to pay Collins and Collins sued. Court held that Collins had provided no consideration for the promise as he was legally obliged to give evidence.

Question 18

Exception to pre-existing legal duty

Answer 18

If what is promised goes beyond the existing duty imposed by law, this will amount to good consideration

Question 19

Glasbrook Bros

Answer 19

Here, in the course of a strike at a coal mine, the owners sought the assistance from the police for 24 hour protection. Police provided they only had resources to make patrols unless the mine gave them money. After the strike the owners of the mine refused to pay as the police already had a duty to protect peoples safety. The court disagreed. They held the police had gone above and beyond what was expected of them therefore this amounted to consideration. The agreement was legally enforceable.

Question 20

Harris v Sheffield Utd FC

Answer 20

this concerned the provision for policing football matches. The provision of officers inside the ground was held to go beyond the chief constables obligation to arrange for the attendance of officers to fulfill the police’s duties to maintain law and order and protect life and property. SUFC could be charged for the contractual agreement to provide special police services.

Question 21

Contractual duty case law

Answer 21

Stilk
Williams v Roffey

Question 22

Stilk

Answer 22

The dispute in this case arose out of a contract between the crew of a ship and its owners. The crew had been employed to sail the ship from London to the Baltic and back. Part way through the voyage, some crew deserted. Captain promised that if the crew sailed the ship back without the missing crew, the wages would be divided among those who remained. When the ship returned, the owners refused to honour this promise. Crew member sued for the recovery of the promised money. It was held that the sailors could not recover. There was no consideration for the promise to pay extra money as the sailors were only doing what they were obliged to do under their existing contract.

Question 23

Exception to contractual duty

Answer 23

Shown in Roffey:

This case concerned a contract to refurbish a block of flats. The defendant was the main contractors for this work and had engaged the plaintiffs as subcontractors to carry out carpentry work. Part way through the contract, the plaintiffs got into financial difficulties. The defendants were worried that the plaintiffs would not complete the work on time or would stop the work altogether. There was a penalty clause in the main contract under which the defendants would have been liable in the event of late completion. Defendants promised to pay the plaintiffs more money for each flat completed. However, it seemed the defendants were going to default on this additional pay therefore the plaintiffs ceased work and subsequently sued for the additional sums. Court of Appeal found the promise to make the extra payments was enforceable. The agreement provided a practical benefit to the defendants in that it meant they were less likely to have to pay under the penalty clause in the main contract, in relation to late performance.

Question 24

Part payment of debt

Answer 24

The traditional common law position on part payment of debts is that this is not good consideration

Question 25

Part payment leading case

Answer 25

The leading case on the matter is Pinnel’s case, as confirmed by the House of Lords in Foakes v Beer. The rule is that part payment of a debt on the date which it is due can never be satisfaction for the full amount owed. The creditor will still be able to recover the balance of the debt. In the case itself, Cole argued that he had paid £5 2s 6d of a debt which was worth £8 6s, and that Pinnel had accepted this as full settlement of the debt. However, the court held this was not good consideration as a lesser sum cannot be satisfaction to the plaintiff for a greater sum.

Question 26

Exception to part payment

Answer 26

However, there are exceptions to this general rule. Part payment may constitute consideration if it provides the creditor with some benefit. If payment is made early, for example. The debt may be discharged. Equally, if the debtor provides goods or services instead of cash this, if accepted by the creditor, will discharge the debt full even if the value of what was supplied is less than the total amount owed. “According to English common law a credit might accept anything in satisfaction of his debt except a less amount of money. He might take a horse, or a canary, or tomtit if he chose, but by a most extraordinary peculiarity of the English common law he could not take less money” Sir George Jessel MR (Couldrey v Bartrum).

Part payment by a third party may also constitute consideration. Temple – the claimants were money lenders in India and lent money to the defendant. They sought return of the money from the defendant but were unable to get a response so they contacted his father. An amount was agreed for the father to settle his son’s accounts. Held: 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 not owed by them.