Contract consideration
In contract law consideration is concerned with the bargain of the contract. A contract is based on an exchange of promises. Each party to a contract must be both a promisor and a promisee. They must each receive a benefit and each suffer a detriment. This benefit or detriment is referred to as consideration.
Consideration must be something of value in the eyes of the law - (Thomas v Thomas) (1842) 2 QB 851. This excludes promises of love and affection, gaming and betting etc. A one sided promise which is not supported by consideration is a gift. The law does not enforce gifts unless they are made by deed.
Whilst the common law strictly adheres to the requirement of consideration (although in some instances the courts seem to go to some lengths to invent consideration eg Ward v Byham [1956] 1 WLR 496, Williams v Roffey Bros [1990] 2 WLR 1153) equity will, in some instances, uphold promises which are not supported by consideration through the doctrine of promissory estoppel.
Rules of consideration
There are various rules governing the law of consideration:
1. The consideration must not be past.
2. The consideration must be sufficient but need not be adequate.
3. The consideration must move from the promisee.
4. An existing public duty will not amount to valid consideration.
5. An existing contractual duty will not amount to valid consideration.
6. Part payment of a debt is not valid consideration for a promise to forego the balance.
1. Consideration must not be past:
Re McArdle (1951) Ch 669 Case summary
Past consideration may be valid where it was proceeded by a request:
Lampleigh v Braithwaite [1615] EWHC KB J17 Case summary
2. Consideration must be sufficient but need not be adequate:
There is no requirement that the consideration must be market value, providing something of value is given eg £1 given in exchange for a house would be valid. The courts are not concerned with whether the parties have made a good or bad bargain:
Chappell v Nestle [1960] AC 87 Case summary
3. Consideration must move from the promisee
If a person other than the promisee is to provide the consideration, the promisee can not enforce the agreement:
Tweddle v Atkinson [1861] EWHC QB J57 Case summary
4. An existing public duty will not amount to valid consideration
Where a party has a public duty to act, this can not be used as consideration for a new promise:
Collins v Godefrey (1831) 1 B & Ad 950 Case summary
Unless the promisor goes beyond their duty:
Glasbrook Bros v Glamorgan County Council [1925] AC 270 Case summary
Ward v Byham [1956] 1 WLR 496 Case summary
5. An existing contractual duty will not amount to valid consideration
If a party has an existing contractual duty to do an act, this act can not be used as consideration for a new promise:
Stilk v Myrrick [1809] EWHC KB J58 Case summary
Unless the party goes beyond their existing duty:
Hartley v Ponsonby [1857] 7 EB 872 Case summary
or if they confer a practical advantage:
Williams v Roffey Bros [1990] 2 WLR 1153 Case summary
If the existing contractual duty is owed to a 3rd party this may be used as valid consideration for a new promise:
New Zealand Shipping v Satterthwaite [1975] AC 154 Case summary
Scotson v Pegg [1861] EWHC Exch J2 Case summary
6. Part payment of a Debt
Part payment of a debt is not valid consideration for a promise to release the debt in full:
Pinnel's case 1602 5 Rep, 117 Case summary
Part payment of a debt is not valid consideration for a promise to forebear the balance unless at the promisor's request part payment is made:
a). before the due date
b). with a chattel
c). to a different destination
This rule from Pinnel's case was affirmed by the House of Lords in:
Foakes v Beer (1883-84) L.R. 9 App. Cas. 605 Case summary
Further exceptions to the rule in Pinnel's case:
1. Where part payment is made by a third party:
Hirachand Punamchand v Temple [1911] 2 KB 330 Case summary
2. Promissory estoppel see here