Consideration - key principles Flashcards
What are the 2 ways consideration can be?
1) Executory
2) executed
What is executory consideration?
where contracting parties make promises to each other to perform something in the future after the contract has been formed.
Give an example of executory consideration.
A unilateral contract where the promise of a reward is made and the ‘price paid’ in exchange for that promise is performance of the act stipulated in the offer.
The required act is both the acceptance of the offer (and thus the time when the contract is formed) and the executed consideration.
So it flows from the above that valuable consideration may be something promised or something done.
What are the 4 rules for consideration?
1) Consideration must not be past
2) Consideration must move from the promise
3) Consideration need not be adequate
4) Consideration must be sufficient
What does it mean that consideration must not be past?
Generally - If the act / forbearance has taken place prior to the promise, then it cannot be in exchange for that promise. Consideration must be given in exchange for the promise of the other party.
What is the exception to the general rule that consideration must not be past?
where some prior act/ service was provided by the promisee at the promisor’s request + it was always understood that payment would be made for that act or service.
What are the 3 conditions for the exception to the general rule that ‘consideration must not be past’ be satisfied for it to work?
a) The act must have been done at the promisor’s request.
b) The parties must have understood that the act was to be rewarded by payment/ some other benefit. Can be because it was expressly agreed/ understanding can be implied. The latter is more likely in a commercial context.
c) The payment/ other benefit, must have been legally enforceable had it been promised in advance.
What is the rule for consideration must move from the promisee?
a party who has not provided consideration may not bring an action to enforce a contract.
What is the rule for consideration need not be adequate?
no reason, for example, why a party should not be bound by a promise to sell a new Rolls Royce car for one penny. If the agreement is freely reached, the inadequacy of the price is immaterial.
What is the rule for consideration must be sufficient?
Consideration must have some value ‘in the eyes of the law’. It doesn’t matter how small that value is as long as its worth something.
If a thing of value can be identified, then there will be sufficiency of consideration and the court will not enquire as to its adequacy.
