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Flashcards in Consideration Deck (32):
1

For promise to be binding must have been -

accepted
given in return for consideration

2

Working definition of consideration?

Price of a promise - what promisor requests in return for promise made.

3

A promise made in response to a promise (i.e. by way of acceptance) ...

will itself constitute consideration.

4

Currie v Misa (1875).

Lush J said that “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”.

I.e. promisor needs to gain benefit, promise needs to sustain detriment.

5

Why benefit/detriment?

Bargain - view of C in C19 and C20 - that courts would not enforce gratuitous promises or gifts, only bargains, accords, exchanges. Each party to gain something, also gives up something for the benefit.

6

Consideration and bargain, CJ Hamson? 1938

Consideration, O and A - indivisible trinity - facets of bargain. Could be explained as acceptance viewed from offeror's side. It is a response to an offer.

7

Thomas v Thomas (1842)

FACTS: - Written agreement between widow and deceased executors provided that cottage would be conveyed to her. "in consideration of such desire" - the cottage was hers, also required Pl to pay £1 annually as ground rent to executors. Agreement not carried out, jury awarded Pl £100 damages for breach. Entitled to recover - agreement was binding and was supported by consideration in form of ground rent.

Patteson J - distinguished between names "consideration" - the cause for gift, and consideration in law" - "of some value, moving from the Pl. Mere respect for memory, wishes of testator, cannot be construed as such."

Distinction between motive and consideration. Law pays no regard to adequacy of consideration.

In a bilateral promise - there are two consideration - one in exchange for other. Consideration makes promise binding, not a contract binding.

8

Consideration must be sufficient, but need not be adequate - why not great?

Adequate and sufficient are synonyms, but adequacy means "equal in value to the performance/promise" and sufficient means "consistent with legal rules".

Courts wont investigate the adequacy of the consideration - would provide uncertainty, and not freedom of contract.

9

Consideration must be of some value to law - Thomas v Thomas. Treital?

Means economic value - even if not precisely quantified. Sentimental motives not enough - T v T desire for her to live in house wasn't enough.

10

Chappell & Co v Nestle Co Ltd [1960]

FACTS: Nestle would give a record to anyone who sent in 1s 6 and 3 wrappers from chocolate. Copyright in Chappell & Co - by statute royalty payable to holder of copyright on "ordinary retail price" of copies made. Ch sought injunction to prevent breach of copyright - 1s 6d wasn't the ordinary retail price, also the value of wrappers. Otherwise wrappers was a qualifying purchase to allow them to take part.

HELD HL - bare majority, the wrappers were part of consideration, although thrown away by Nestle. Could have been the entire consideration.

Lord Reid - although no direct benefit on Nestle point of offer was more sales, also indirect benefit of advert.

Lord Somervell - majority - contracting party can stipulate for what consideration he chooses. A peppercorn does not cease to be good consideration if it is established that X doesn't like pepper.

11

Professor JC Smith - 1979 talks about this radical view:

All that is necessary is def should expressly or impliedly ask for something in return for his promise. Court will not enquire into the adequacy of the consideration. Also walking to York - no one has demonstrated the economic value of walking to York.

12

How can C be anything but in T v T must be of value to the law?

Patteson J - imposes limit on Smith's proposition - value is subjective. Should be capable of being objectively shown as moving from the promise.

13

C in disputed legal claims:

Cook v Wright 1861 -

FACTS: Cl promised to pay money to settle claim. Didn't pay last instalment. Argued Pl gave no consideration in return for promise to pay, since action for contribution did not lie against him. HELD - had received consideration in being spared cost of legal proceedings.

Def was correct that claim would have failed. But public policy interest in upholding agreements to compromise disputed claims, claim can't be valueless unless tried - court won't judge adequacy of consideration. Also can't breach a promise because is technically unsupported by consideration - Pls had detriment in being persuaded not to take action against actual owner, not agent.

Therefore may be alternative advantages to promisor or concomitant disadvantages which rank as consideration. Also may be good reasons to uphold the deal.

14

Wade v Simeon (1846)

FACTS: Pl claimed w sums from def, who promised to pay if would stop legal action. Def failed to py,Pl sued.

HELD: No cause of action, Pl knew this, giving up a claim of bad faith wasn't consideration.

State of mind is important of Cl - could conclude that promising to give up a worthless claim is not good consideration, or is good consideration - but McKendrick argues the need to encourage settlement of claims, but also discourage parties from knowingly brining bad claims to extort settlement on terms.

Like snapping up cases - judicial focus on offerees actual knowledge that offer was mistakenly being made to him - whereas principled test was whether reasonable person in offeree's position would have realised the mistake. C excludes bad faith, like all other dealings courts don't want to support.

15


Consideration must be requested

Promise not exchanged against consideration because maker derives benefit from making it, or its recipient sustains detriment. Must be requested.

Combe v Combe (1951)

At time of divorce husband promised wife would make annual maintenance payments to her, never did. She could apply to Divorce Court but didn't = sued for arrears of payment - consideration was by promising not to apply to court for maintenance order.

HELD - AC - not consideration, husband didn't ask her not to apply to court. Also the promise would be worthless because couldn't stand against her stat right to apply.

16

But Shadwell v Shadwell (1860)

FACTS: Pl promised annual stipend from uncle until his salary reached 650 guineas. Sued when he stopped after 12 years. HELD: nephew provided consideration by marrying.

Byles J dissented - was no request to marry, "at starting" - referred to beginning of career.

Majority judgement flawed - detriment for consideration is speculative. But that was fine in Nestle re their advantage.

But detriment crystalises to become "in every sense a loss". Trigger is breach of promise in which the consideration is to support - as if consideration comes in every breach of promise.

Earle J bases on reliance, not detriment.

17

Consideration distinguished from conditional gifts -

No deal at all, arrangement gives promiser only gifts.

A gift is not enforceable. May be conditional upon something happening.

Gift may be conditional upon something happening, If so does it move from the promise? If not, is not C.

18

Dickinson v Abel (1969)

FACTS: - was £10K taxable as being paid pursuant to a contract? W said would pay Abel £10,000 if got farm for under £100k.

HELD - gift, Abel not asked to do anything in return for promise of payment. But can sufficient consideration be found in what is done before a promise is made?

19

Consideration must not be past - making of promise and consideration supporting it must constitute a single transaction.

Roscorla v Thomas 1842

FACTS: Pl bought horse from Def. After transaction complete, def promised horse was sound. Untrue. Pl sued for breach of promise - consideration was his purchase of horse.

HELD - failed, promise came after sale, sale price couldn't be consideration for it.

20

Doctrine of Implied Assumpsit:

Exception to Roscorla v Thomas. Sometimes X done before promise made can make the promise bind..

Must find an earlier request for performance, into which promise to pay for performance is implied.

2nd promise then treated as fixing the amount which is payable, pursuant to original implied promise.

Assumpsit - he undertook - the old legal term for a legally binding promise.

21

Lampleigh v Braithwait 1615

FACTS: B asked L to get a pardon. L did, then B promised £100 for services. Court upheld as binding contract - the precedent request for performance coupled itself with later promise of payment to constitute a single transaction.

22

Re Casey’s Patents (1892)

FACTS: C promised 1/3 share of patents "in consideration of your services..." later asked to return them, action brought against him failed. AC - share in patents granted for valid consideration.

Consideration was past - argued Counsel, but Bowen LJ - "must look to see if promise cannot receive proper effect in some other way...even if it were true that a past service cannot support a future promise..."

C can also provide a space for manoeuvre to produce a just result.

23

Pao On v Lau Yiu Long (1980)

FACTS: Complex deal between 2 companies, Pl to receive shares from defs - agreement left pl vulnerable to give up shares for same value if price rose, but also not recover all if fell. Agreed with defs to keep shares if price rose. Consideration was Pl's performance of the main agreement.
Share price slumped, defs later maintained that received no consideration for guarantee given, since was past. Argued that guarantee had been procured by economic duress. PC held - main agreement not fully executed at time the guarantee was given, sufficient consideration. Not voidable for duress.

Scarman - obiter, 3 factors for past consideration to be sufficient on doctrine of implied assumpsit:

"Act must have been done at promisor's request.
Parties must have understood that act was to be remunerated, either by a payment or by conferment of another benefit.
Payment must have been legally enforceable had it been promised in advance.

Was also the performance of an existing agreement = benefit to the promisor in performance where promise is already bound to provide?

24

Pao On - Was also the performance of an existing agreement = benefit to the promisor in performance where promise is already bound to provide?

Duties imposed by general law (not contract) performance is not C

25

Collins v Godefroy (1831

FACTS: Pl attended trial giving evidence on mandatory order to testify (subpoena). Sued for breach of promise by def to pay him one guinea a day for his time and trouble.

HELD: legally imposed duty unsupported by consideration.

Lord Tenterden CJ - practise of paying people to attend trial can't alter the law.

Could be for policy reasons = on what grounds are they really resolved although are put in terms of C?

26

But if does more than statutory duty requires court will find C. Difficult to determine:

Glasbrook Bros Ltd v Glamorgan County Council (1925)

FACTS: Attempt to stop men from working, if so mine would flood. Asked police to install 100 men in case of trouble, police agreed 70 in return for payment and food/accommodation. Force provided, didn't pay, argued no C received for promise to pay, police were doing their legal duty to keep peace. Counterclaim for cost of food and accommodation.

HL - police succeeded, CC failed.

Why did more than necessary to keep peace? Atkin, AC dissented, if more was done, contract was contrary to public policy, illegal, void.

HL held police could exercise discretion to provide special services - beyond mere duty, so was C.

Many factors in addition to C to condition validity of a contract - here duress, public policy, illegality, bad faith.

27

Denning - found that performance of a general legal duty can be consideration -

Ward v Byham 1956
Mother given £1 a week to look after child. Got remarried, father stopped paying. Claimed as child was illlegit it was by law her obligation to care for the child anyway.

HELD - AC, mother's claim.

Denning - Sufficient consideration to support the promise even though was doing what was legally bound to do. Promise to perform an existing duty, or performance of it, should be good consideration - is a benefit to person to whom is given. He gets the benefit, he should honour his promise.
Reminiscent of C18th notion briefly accepted as good law - Lord Mansfield, tried to establish a promise should bind simply as matter of honesty and rectitude - that were sufficient consideration - the ties of conscience.

Morris LJ - the conditions of the father were fulfilled, so he must pay -

28

Performance of contractual duties already owed to third party as consideration.

Scotson v Pegg 1861 -

FACTS: Pl sued def for breach of promise made "in consideration that the pl would deliver the def the coal." But coal wasn't consideration, because pls were already bound to 3rd party to deliver anyway. Pl succeeded - was beneficial to def to receive coal. Pl might have wanted to breach with 3rd party, detriment of further liability to def.

No added benefit by direct contractual nexus with pl. But similar to Ward v Byham - def should do what promised.

Approved in The Eurymedon (1956) HL

29

New Zealand Shipping Co Ltd v Satterthwaite (The Eurymedon) (1956

FACTS: Bill of lading (contract between consignor and carrier of goods) provided exclusion of liability for carrier unless action brought within year of date of delivery. Extended to carriers servants or agents. Stevedores claimed benefit - any consideration provided? had unloaded the goods but were contractually obliged to do so. PC - were protected by ex clause.

Wilberforce - choice between gratuitous promise and promise for consideration - this contract is commercial, all relations between parties commercial. Paradoxical to describe one set of promises as gratuitous. Lots of difficulty in C - auction, supermarket buys, boarding bus, buying train ticket, tenders for supply of goods, offers of reward, acceptance by post...in application takes a practical approach, forcing facts to fit uneasily into OAC.

Law must find C here.

30

Problem cases:
White v Bluett (1853)

FACTS: W received loan from father. Rather than repay, W gave a promissory note for sum owing. After John's death executor brought action against William on promissory note, and in debt. W pleaded payment not required, no liability on note. W consideration was to stop boring his father with complaints that the other children were treated better - repayment wouldn't be required. HELD - W liable, no contract, no consideration, cant find C in promising something which have no right to do.

Judgment rests on that W had no right to complain. Free to complain if wished, no law to make complaining illegal. Chose to limit his freedom in return for promise -

But W v B didn't want W defence to succeed no good reason to give legal effect to promise.

Now - perhaps no intention to create legal relations, undue influence, or evidence not credible.

31

Lipkin Gorman v Karpnale Ltd (1992)

FACTS: Dishonest solicitor stole £200K from firms client account, used to gamble at Playboy. Firm sought to recover money from club through unjust enrichment - restitutionary action. Club's defence - not unjustly enriched, gave consideration in return for the money - AC HELD defence succeeded, money not recoverable. HL - allowed appeal, obtaining of chips and gambling with them was single transaction, void by s18 Gambling Act 1845, also chips aren't consideration for money handed over by sol.

After Chappell v Nestle - choc wrappers - principle that consideration need not be adequate blocks objection that sum paid for chips was high. But X bought opportunity to gamble, not chips - which was substantial.

Parker LJ - majority of AC - impressed by this. But L Goff in HL - when Cass played a bet received nothing in return which constituted valuable consideration. Contract of gaming was void - binding in honour only. No legal right to claim them - but didn't receive anything as valuable consideration in placing the bet.

Gambling contracts void because of leg, but gambling not illegal. But if were a commercial case?

But if found C couldn't get back stolen money.

32

Atiyah - C means courts reason for enforcing a promise.

Sufficiency of C is really judicial discretion - argued in (“Consideration: A Restatement” in Essays in Contract (1986)

. When the courts found a sufficient reason for enforcing a promise they enforced it; and when they found that for one reason or another it was undesirable to enforce a promise, they did not enforce it.

Cant enforce all promises - consideration as good reason for enforcement of a promise.

Also seen in intention to create legal relations = 100 years ago would have been dealt with in terms of C.

Now C is a technical requirement of law, little to do with justice.

But benefit, detriment, bargain - all form material factors in determining whether is just or desirable to enforce a promise.