Consideration

Consideration Notes

Definition of consideration is set out in Currie v Misa-

“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 of responsibility given,
suffered or undertaken by the other”.

This means that there must be a benefit to one party and a detriment to another.

Example of benefit and detriment- Promise not to sue.

An example of the separation of benefit and detriment is where, for a sum of money, one party
agrees not to pursue an action against another. Even if the right to an action against the other is
bound to fail, so long as it is asserted in good faith, the promise not to pursue it is good
consideration for the return promise.

According to Currie v Misa there must either be a benefit to the promisee (person whom the
promise is made to) or a detriment to the promisor (who makes the promise).

“The undertaking not to sue another is a benefit to the promisee, who is then freed from the burden
of having to defend an action, even if that defence would ultimately prevail” (module guide). There
is, however, not a detriment to the promisor.

Where the party knows they don’t have a right to sue and assert that they have a right to sue,
undertaking not to pursue the action is said not to be good consideration. This was established in
the case of cook v wright and confirmed by the Court of Appeal in Simantob v Shavleyan [2019].
This is based on policy grounds to not encourage fraudulent behaviour such as asserting a right to
sue when they know they have no such right.

Consideration must move from the promisee but can move to a third party if it was agreed upon
at the time of the contract.

Tweddle v Atkinson- where the defendant and Tweddle’s father promised to pay him money to
marry the defendant’s daughter. The defendant passed away before he could pay, and claimant
sued his executor. It was held that he couldn’t sue the executor as consideration must move from
the promisee.

Consideration must be ‘sufficient’ but need not be ‘adequate’.

Sufficiency- in law means that what is being supplied as consideration is recognised by the court as
legally capable of supporting the contract. It must be real, tangible and have some value.

Adequacy- there must be some economic value but its not for the courts to decide whether its of
good value or is a bad bargain.

Thomas v Thomas- where paying 1 pound per annum for rent was seen as sufficient consideration to
stay in the house. That fact the 1 pound was not adequate commercial rent was irrelevant.

Chappell v Nestle- where chocolate wrappers were seen as good consideration.

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Where consideration has no economic value, it is not seen as sufficient consideration.

White v Bluett- where the sons promise to not complain about the distribution of his father’s estate
was not sufficient consideration.

“Lord Somervell justifies the courts’ approach to the issue of ‘adequacy’ by reference to ‘freedom of
contract’: ‘A contracting party can stipulate for what consideration he chooses’” (module guide).

Existing obligations as good consideration

i) Obligations imposed by law.

Performance of a pre-existing obligation imposed by the law won’t amount to good consideration.

Collins v Godefrey- where the promise to pay the claimant money to be present at court and give
evidence wasn’t enforceable because the claimant was summoned by court, and he was legally
obliged to come to court and give evidence.

Where the person does more than what is required by the law the promise would be enforceable.

Glasbrook Bros Ltd v Glamorgan [1925]- where during a strike owner of a pit asked the police to
provide extra protection and he would pay them in return. Later he refused to pay saying that police
were doing their duty, it was held that police provided more than what they were obliged to, and
the promise is enforceable.

Section 25 of the Police Act 1996 provides that they cannot charge for performing their duty of
doing what is necessary to prevent crime and can charge for doing something else at the request of
an individual.

ii) Obligations which are owed under a contract with a third party.

A promise to perform an existing obligation owed to a third party can constitute good consideration.
This was confirmed by the privy council Pao on v Lau Yiu Young.

The Eurymedon (1975)- where a promise to unload goods by a firm was good consideration even
though they were already bound by a contract with a third party to unload goods.

iii) Obligations to perform an existing obligation under a contract to the same contracting
party.

Performance of an existing obligation

(Conflict between Stilk v Myrick and Williams v Roffey Bros and Nicholls).

The general rule can be seen in the case of Stilk v Myrick [1809]

The general rule was that performance of an existing contractual duty could never amount to good
consideration (the promise to pay more for an existing duty will not be enforceable)

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Stilk v Myrick- where two sailors out of eleven deserted the ship and the caption offered to pay more
to the remaining sailors to if they took the ship back home. It was held that the promise was not
enforceable because the sailors were bound to take the ship back home ship under their existing
contract.

However, promise to pay extra can be enforceable where the other party has don’t more than what
was required by them under their existing contract.

Hartley v Ponsonby- where 19 out of 36 sailors deserted the ship and the captain promised to pay
them extra money if they took the ship back home. It was held that the promise was enforceable
because the voyage back home was far more dangerous, and the crew had to do more then what
was required by them under their original contract.

The rules set out by Stilk v Myrick are however less certain now because of the Court of Appeal’s
decision in William v Roffey bros.

Williams v Roffey bros and Nicholls [1991]- where the defendants were contracted to build flats and
sub-contracted a carpentry (claimant) for 20,000 pounds. The claimant had under quoted and ran
into financial difficulty and weren’t going to be able to finish the work on time. There was a clause in
the defendant’s contract that if they weren’t able to finish the flats on time, they would have to
pay a penalty. The defendant agreed to pay the carpentry another 10,300 pounds to finish the work
on time. The defendants later refused to pay claiming that the carpentry was only doing what they
were obliged to do under their contract. It was held that even though they were performing an
existing duty under their contract the defendant had obtained a benefit in making this promise
and hence the promise was enforceable. Court of appeal stated that this did not overrule the
principle of Stilk v Myrick.

The problem between the case of Stilk and Williams is that

- Same benefits could have occurred to the captain of the ship

Part Payment of debt.

The general rule was first stated in Pinnel’s case where it was stated that part payment of debt can
never relieve the liability on the debtor to pay the whole debt. However, if something extra is done
for example, paying early, or giving goods rather than money, then the whole debt will be
discharged.

This rule was confirmed by the house of lords in-

Foakes v Beer [1884]- where the claimant promised to forego the interest payable, provided that
defendant pays the judgement debt. After the debt was paid the claimant then asked for interest to
be paid that is payable on judgement debt. It was held that interest was payable, and promise was
unenforceable, following the Pinnel’s case.

This rule applies where the claimant is forced to accept part payment of debt.

D & C builders v Rees- where the builders accepted part payment of debt because they were facing
financial problems and later sued for the rest of the payment. It was held that promise was
unenforceable the full payment of debt was required to be paid.

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Past consideration.

General rule is that consideration must be given after the promise for it to be enforceable. Any
consideration given before the agreement would be considered to have been given in good faith.

Re McArdle [1951]- where a father willed a house to his children after the mother had died. During
the mother’s life, her son and his wife moved into the house and did some repairs. On the mother’s
death the other children signed a document stating that they would pay for the repairs. However,
the repairs weren’t paid for, and the court held that the promise to pay for repairs wasn’t
enforceable because the only consideration they could point out was given before the contract was
formed.

Exception

Lord Scarman laid down three conditions which must be satisfied for past consideration to be
enforceable.

Consideration must not be ‘past’, unless it was requested, was done in the mutual expectation of
payment and is otherwise valid as consideration.

Lampleigh v Braithwaite- Lampleigh was accused of murder and asked Braithwait get a kings’ pardon
which he did at a considerable expense. After he got the kings pardon, he promised to pay 100
pounds to Braithwait but never did. It was held that even though there was no price given before the
agreement, both parties understood there had to be a payment, and the later promise was clear
evidence.