O&A - Consideration

Question 1

What is the concept of consideration?

Answer 1

Each party to a contract must do, or agree to do, something in exchange for the undertaking of the other party.

Question 2

What is consideration, simply put? (1)

Answer 2

Consideration is whatever is asked for or given in exchange for the undertaking of the other party.
‘The price for which the other’s promise is bought’ - Lord Dunedin in Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co Ltd

Question 3

What is the consideration in bilateral contracts?

Answer 3

In bilateral contracts each parties promise provides the consideration for the others.

Question 4

What is the consideration in unilateral contracts?

Answer 4

In unilateral contracts the performance of the offeree provides the consideration for the others promise.

Question 5

Does the motive for engaging in a contract preclude consideration?

Answer 5

No, the motive for engaging in a contract is irrelevant;

1. That what is bargained for does not of itself induce the making of the promise doesn’t prevent consideration
2. That a promise does not of itself induce a return promise or a performance doesn’t prevent consideration

Question 6

What should consideration be distinguished from?

Answer 6

Conditions - consideration and conditions of contract are different things.

Question 7

Which case demonstrates the distinction between the conditions and consideration? (1)

Answer 7

Chappell & Co v Nestle Ltd
Here it was held that a cash payment and chocolate wrappers provided in exchange for a song recoding constituted consideration for the promise rather than a condition of the offer.

Question 8

What is executory consideration?

Answer 8

The exchange of promises to do things in the future - the obligations have yet to fall due.

Question 9

What is executed consideration?

Answer 9

The exchange of a promise that has actually been executed/performed in exchange for a promise to do something in the future.

Question 10

What are the 9 key rules of consideration?

Answer 10

1. Necessity
2. Need not be adequate
3. Cannot be past
4. From promisee-promisor
5. Must be real
6. Not a pre-existing public duty
7. Can be the fulfillment of a pre-existing legal duty to another person
8. Existing duties owed to contract parties
9. Not for part-payment of debt

Question 11

What is the necessity rule of consideration?

Answer 11

Consideration is required for legal enforceability of all agreements unless they’re by ‘deed’ or ‘under seal’ or agreement by ‘speciality’.

Question 12

What is the need not be adequate rule of consideration? (1)

Answer 12

This rule just says that the question is whether consideration exists, not what it is worth
Authority - Chappell & Co v Nestle Ltd.

Question 13

What is the cannot be past rule of consideration? (2)

Answer 13

Acts carried out before a promise is executed cannot be used as consideration for said promise
Authority - Eastwood Case and McArdle Case.

Question 14

What is the exception to the general rule that consideration cannot be past? (1)

Answer 14

Past consideration is valid if it’s contemplated to be enforceable
Authority - Pau On v Lau Yin Long

Question 15

What is the rule that consideration must move from the promisee to the promisor?

Answer 15

This is as straight forward as it sounds - consideration must be passed from the promisee to the promisor.

Question 16

What is the rule that consideration must be real?

Answer 16

There are a number of circumstances in which consideration can be said not to be ‘real’, in such cases there will be said to be no consideration.

Question 17

In what instances will consideration not be ‘real’? (3)

Answer 17

1. Where it's impossible 
Authority - Hall v Casenove
2. Where it's uncontrollable
Authority - Cook v Wright
3. Where there is uncertainty as to what is being promised
Authority - White v Bluett

Question 18

What isn’t real consideration? (1)

Answer 18

‘It is no consideration to refrain from a course of action which it was never intended to pursue’
‘A motive is not the same as consideration’ - Thomas v Thomas

Question 19

What is the rule that consideration cannot be the performance of a pre-existing public duty?

Answer 19

Generally, the performance or promise to perform an existing public duty is not consideration.

Question 20

What is the exception to the general rule against the performance of a pre-existing public duty as consideration? (1)

Answer 20

1. Where an individual does more than is legally required by the pre-existing legal duty this may constitute consideration as they may incur extra benefit or detriment
   Authority - Ward v Byham

Question 21

What is the rule that consideration can be the fulfilment of a pre-existing legal duty to another person? (2)

Answer 21

Consideration can be the fulfilment of a pre-existing legal duty to another person
Authority - Shadwell v Shadwell & New Zealand Shipping Case

Question 22

What is the rule about existing duties to contract parties? (2)

Answer 22

It used to be that there was no consideration if a contract was modified consideration
Authority - Stilek v Myrick
Now the law has moved on to the practical benefit test laid down in Roffey Bros

Question 23

What is the rule that consideration is not the part payment of debt? (2)

Answer 23

Payment of a lower sum to fully satisfy a higher undisputed sum will not be good consideration
Authority - Pinnel’s Case and Foakes v Beer

Question 24

What was the significance of the case of Williams v Roffey Bros?

Answer 24

This case established the idea that a factual benefit sustained from a promise may constitute consideration.

Question 25

What is the nature of the approach taken in the Roffey Bros case and how is it facilitated?

Answer 25

It is a more liberal or generous approach to consideration, partially facilitated by the doctrine of duress which prevents the enforcement of promises made under threats.

Question 26

How must the ‘factual benefit’ referred to in the Roffey Bros case be determined and why?

Answer 26

‘Factual benefit’ must be determined objectively because subjectively it will always be present as the promisor would not contract to do something he didn’t subjectively believe was in his own interests.

Question 27

In which contracts is the ‘factual benefit’ consideration referred to in Roffey Bros applicable? (1)

Answer 27

Generally, it is not applicable to alteration contracts where the promisor promises to accept less, rather, only those to pay more
Authority - Foakes v Beer

Question 28

How else may consideration for alteration promises be provided?

Answer 28

1. Paying a smaller sum in advance at the creditors request
2. Payment of a smaller sum at a different place at the creditors request
3. Payment in kind (a chattel) which is accepted by the creditor

Question 29

What are the advantages of consideration?

Answer 29

1. Evidentiary Function - evidence of existence of contract and its provisions
2. Cautionary Function - protect against ill-considered action
3. Deterrent Function - discourage transactions of doubtful social benefit
4. Channelling/Signalling Function - distinguishes legally enforceable transactions from other types and from tentative exploratory expressions of intent

Question 30

What are the disadvantages of consideration?

Answer 30

1. Isn’t it better to enforce the agreements people want to have enforced?
2. Why is there a reciprocity/exchange requirement?
3. Is a contract really a bargain?
4. Other doctrines are arguably better at policing what should be enforceable contracts - duress, unconscionability etc