Consideration - Lecture notes 3 PDF

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consideration in a contract...

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Along with an intent to create to legal relations and a binding agreement, common law has developed a doctrine of consideration, which is required for there to be a valid contract. It is said that consideration arises from the idea of reciprocity; that in order for a contract to be biding, both parties should provide something in return for something else. The doctrine was well noted in the case of Currie v Misa [1875], where it was 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. Professor Atiyah suggested that the courts never intended to create such a controversial doctrine, though now it exists, a few points must be noted.

Preliminary points Consideration must move from the promisee Firstly, consideration must move from the promisee. That is, it must be provided by one party, but it need not travel to the other party. For example, I could promise to give you my car if you gave £7000 to a charity.

Consideration must be of some value Secondly, the law must recognise consideration as being of some value in the eyes of the law. This may not necessarily be just economic value though. In Hammer v Sidway [1891, America] , good consideration was provided by not drinking or gambling for a certain time period; however in White v Bluett [1853], there was no consideration in not irritating the promisor.

Consideration need not be sufficient Thirdly, although consideration must be of some value, but it need not be sufficient. It is for the parties to ensure that they get a good deal. In Thomas v Thomas, a husband promising his house to his wife on his death bed was not a valid contract, however the wife paying a nominal £1 per year allowed such a contract to be binding (the claim succeeded). In Esso Petroleum v

Customs and Excise Commissioners [1976], giving away world cup coins with every 4 gallons of fuel was ruled to be gratuitous, and as such the coins were not taxable produce; no consideration was provided for their receipt.

A gratuitous promise may be binding if nominal consideration is provided In Chappel v Nestle [1960] , sweet wrappers did constitute contractual consideration for the purchase of a record, meanwhile promising to not pursue a claim for an injunction is good consideration for the promise of another; as was seen in Pitt v PHH Asset Management [1994].

Forbearance to sue can be good consideration From Pitt, we can see that forbearance to sue can be good consideration, apparently such ‘consideration’ is of value. Where the promisee believes that such a claim would succeed, as in Alliance Bank v Broom [1864], this concept is confirmed. Furthermore, where the claim is doubtful, as in Couch v Branch [1980, New Zealand], such consideration is also valid. However, where the promisee knows such a claim would fail, the ‘consideration’ would be classed as blackmail and would not be good consideration.

Past consideration is no consideration A final point is that consideration provided in the past cannot constitute good consideration. In Eastwood v Kenyon [1840], promising to past a guardian back for raising a child is not a binding contract if the promise is made after the daughter has been cared for. Though, if there is an understanding of remuneration prior to the ‘past consideration’, a contract may still be binding. This is shown in buy alprazolam .5 mg [1615]” href=”https://webstroke.co.uk/law/cases/lampley-v-braithwaite-1615″>Lampley v Braithwaite [1615] and Re Casey’s Patents [1892].

Consideration for existing duties We have seen so far what consideration is and when it is sufficient or not, however significant controversy exists over how consideration applies

regarding an existing duty. When parties agree to vary their contract, how can consideration be provided?

Historic cases Firstly, in Stilk v Myrick [1809], 2/12 of a ship’s seaman deserted the ship. The remaining seamen refused to sail the ship home, until the captain promised them equal shares of the deserted wages. It was ruled that the seamen had done nothing in return for such a promise, and as such, it was not enforceable. However, in a similar situation, in Hartley v Ponsonby [1857], where 17/36 seamen were deserters, it was ruled that such a promise by the captain was enforceable; the remaining seamen had to carry out extra performance. Were Myrick’s deserters of no value to the running of the ship then? Furthermore, carrying out an existing duty, such as getting married, provided good consideration as in the case of Shadwell v Shadwell [1860]. In Ward v Byham [1956], a father paying the single mother of his child £1 per week to maintain the child and keep her happy was only a biding promise as consideration was provided by the extra duty of keeping the child happy, as the duty was for the benefit of the promisor. More recently, the court appears to search for artificial consideration to make a promise binding: in North Ocean Shipping v Hyundai Construction [1978], consideration for a $300,000 increase in price was provided by increasing a credit limit. In Moyes v Groves [1982, New Zealand], consideration was found by saying that a contract was abandoned after 3 years, and a new agreement formed where old consideration constituted new consideration.

Current law on ‘existing duty’ consideration In the UK, the current applicable law to finding consideration for varying a contract for the same performance can be found in Williams v Roffey Bros [1990]. Here it was ruled that consideration is provided by a practical benefit to the promisor if the promisee carries out the existing duties: the promisor avoided a penalty clause in a different contract; this was good consideration for paying the promisee more to perform his existing duties after he ran into financial difficulties. The promisee had underquoted the work. This idea has been extended in New Zealand, in Anton’s Trawling Co v Smith [2003, New Zealand], as consideration there can be provided by

either a practical benefit or a voluntary contractual variation. Though this does not apply in the UK.

Consideration for the part payment of debts It used to be the case, as seen by Pinnel’s case [1602] and Foakes v Beer [1884] that the part payment of a debt did not provide satisfaction for the whole repayment of the debt. Even with an agreement to pay less, a debtor could be liable for the full amount. Lord Denning more recently suggested, in D&C Builders v Rees [1966], that a part payment could satisfy the whole; however in Re Selectmove Ltd [1995], the court reverted to the rule in Foakes v Beer [1884] in saying that a part payment of a debt is not satisfactory for the whole debt. The court said that a practical benefit as consideration, as per Williams v Roffey [1990], does not apply to the part payment of debt...