Consideration Flashcards
How does McDermott define consideration and what are the Rules of Consideration?
McDermott (2005): “the mechanism common law uses to distinguish promises that are to be enforced from promises which are not to be enforced”. The price paid for the promise.
The Rules of Consideration: It need not be adequate, but it must be sufficient.
Consideration Need not be Adequate
Chappell v Nestle Ltd [1960]
N offered a record for sale to the public for 3 empty wrappers and 7 pence
C owned the copyright; claimed he wasn’t paid sufficient royalties. Paid a percentage but argued 7 pence wasn’t the ordinary selling price as the wrappers should be part of the consideration
Held the wrappers did form part of the consideration as they had some tangible value; irrelevant
that they had no intrinsic value to the company. Held good consideration.
Consideration must be Sufficient
O’Neill v Murphy [1936] Prayers insufficient
Builder did work on buildings in neighbouring parish in return for prayers being said in his name
Alleged the builder was unduly influenced into doing this by his religious advisor, but the advisor claimed his work was being done on the basis of a contract and consideration was the prayers.
Held prayers are not sufficient consideration (Note this is NI; maybe ROI would be different)
Consideration must be Sufficient - Performance of Existing Public Duty
Collins v Godefroy [1831]
Generally, it is not sufficient unless it is something over and above that public duty:
G promised to pay C 6 guineas if he’d attend court and give evidence for him. However, C was subpoenaed so he was under a legal duty to attend. C sued for the money anyways.
Rejected: insufficient consideration: Did nothing over and above what he was legally bound to do
Consideration must be Sufficient - Performance of Existing Public Duty
Harris v Sheffield United Football Club [1987]
Crowd misbehaviour prevalent. S promised police money to guard their grounds at matches.
S argued police were under legal duty to preserve law and order anyway (crowds misbehaving)
Court rejected this: matches were at a private premises holding a private march and given the strain on
already scarce police resources, these were special services. Money recoverable.
Consideration must be Sufficient - Performance of Existing Contractual Duty
Stilk v Myrick [1809]
2 sailors deserted their crew on way to the Baltic. Capt couldn’t get replacements so promised to divide the wages of the deserters amongst the rest of the crew. Never did, one sailor sued.
Held the men gave no consideration as they only did what they were already bound to do.
Consideration must be Sufficient - Performance of Existing Contractual Duty
North Ocean Shipping v Hyundai [1978]:
Despite criticism in Williams, Stilk was reaffirmed here.
Consideration must be Sufficient - Part-payment of Existing Debt: The Rule in Pinnel’s Case
Pinnel’s case [1602]
Court held a promise by a person to who a debt is owed (creditor) to take a lesser sum from a debtor in full satisfaction of a larger debt will not bind that person.
The promise is unenforceable for lack of consideration. Designed to protect creditors.
Consideration must be Sufficient - Part-payment of Existing Debt: The Rule in Pinnel’s Case
Foakes v Beer [1884]
F owed B £2k + interest. B agreed that if F paid £500 immediately and the balance in instalments, she wouldn’t issue proceedings. But deemed unenforceable for insufficient consideration.
Clark: Harsh and mechanical decision failing to meet commercial expectations and practice.
Consideration must be Sufficient - Part-payment of Existing Debt: The Rule in Pinnel’s Case
Exception: If p-p is at an earlier date, a different location or plus chattel of even nominal value
Ferguson v Davies [1997]
F sued to recover debt originally stated at £500 later increased to £1700. D sent cheque to F for 150 in full and final settlement and sent letters to the court and to F admitting liability for the 150
CA held there was no consideration: D admitted liability for the £150 so could not use this as consideration for F’s alleged agreement to abandon his claim
Consideration must be Sufficient - Part-payment of Existing Debt: The Rule in Pinnel’s Case
Williams v Roffey Bros & Nicholls Ltd [1990] Confusing Decision
R (building contractors) subcontracted W to carry out work on flats for initial fee of £20k.
W got into financial difficulty as a result of both under-pricing the work and failing to supervise their workmen properly. R liable under penalty clause in main contract if not completed on time.
R then promised to pay extra £10,300. But then said there was no consideration for this promise.
Held W was entitled to the money as R received a benefit because it was important to have the work done on time to avoid any penalties and to avoid appointing new carpenters. Test:
A enters into contract with B to do work for B in return for payment by B
At some stage before A has completely performed his obligations under the contract B has reason to doubt whether A will complete his side of the bargain
B thereupon promises A additional payment for A’s promise to perform obligations on time
As a result of giving his promise B obtains in practice a benefit or obviates a disbenefit and
B’s promise is not given as a result of economic duress or fraud on the part of A then
The benefit to B is capable of being consideration for B’s promise so it is legally binding
MUCH criticised decision, especially by Clark: should’ve been promissory estoppel.
Consideration must be Sufficient - Part-payment of Existing Debt: The Rule in Pinnel’s Case
Re Selectmove [1995]: Held the rule in Pinnel’s case is not affected by Williams.
Revenuepetitioned for winding up of S due to taxes owed, but co argued the tax collector met with the co and agreed the co could pay the arrears in installments and relied on Williams for consideration.
Held no: Williams only applies to cases where work was done or goods were supplied. Not for debts.
Consideration must be Sufficient - Part-payment of Existing Debt: The Rule in Pinnel’s Case
Permanent TSB v Walsh [2019]
W had 2 loans with P. At a meeting, P brought a form that W claimed summarised his debt to P
It indicated the amount outstanding on both a/cs was €18k. P claimed it only related to one a/c.
W said told €18k would clear his debt. Rejected: agreement not enforceable as per Pinnel’s
Consideration must be Sufficient - Acts of Forebearance
Hamer v Sidway [1891]
Uncle offered nephew 5k not to drink, smoke or gamble until 21. Refused, so nephew sued.
Uncle argued no consideration, but held as the nephew had given up something he was legally entitled to do, this constituted sufficient consideration.
Consideration must be Sufficient - Acts of Forebearance
O’Keeffe v Ryanair Holdings [2003]
O was the one-millionth passenger to fly with R so they awarded her free flights for life.
When she sued for breach of contract, R claimed there was insufficient consideration – just a gift
Held that by waiving her legal right to anonymity and participating in media campaigns, she
provided sufficient consideration by way of conduct.
